Bank Insurance Crisis with Online-Only Lenders
The promise of bank insurance is being tested by the crisis surrounding online-only lenders with millions of dollars in deposits. Customer accounts have been frozen, and depositors are unsure if they will get their money back.
Key Points
- Online-only lenders offer higher interest rates and lower fees
- Startups collect customer money and pass it through financial technology intermediaries to traditional banks
- Bankruptcy of Synapse Technology led to account freezes for customers of online lenders
- FDIC insurance does not cover customers of online lenders directly in this case
Cons
- Customer accounts frozen, preventing access to funds
- Depositors unsure if they will get their money back
- Lack of clarity on where the money has gone