Fintech
Synapse’s collapse raises questions about a popular fintech business model
Over the past decade, dozens of financial technology companies have linked up with small and midsize banks across the country. The idea: The fintechs would create smart smartphone apps and offer new, useful services to lure customers, and the banks would hold onto the deposits, generating lucrative transaction fees. Notably, the deal allowed the fintechs to push for protection from the Federal Deposit Insurance Corp.
But now, as millions of dollars in deposits remain frozen months after the collapse of a company called Synapse Financial Technologies, that supposed FDIC protection has become clearer. And those partnerships are facing tough questions.