Uh-oh, this really shakes my confidence in fintech neobanks like Mercury, Wise, Revolut and the lot.

Neobanks and other third parties can legitimately have pass through FDIC insurance: https://www.fdic.gov/financial-institution-employees-guide-d...

The problem is that the FDIC isn’t stepping in because they claim they can only do so when there is a bank failure, not a failure at the third party. So they’re claiming that clients of the third party have to go through the bankruptcy proceedings, rather than just getting covered by the FDIC, whereas most clients are expecting the FDIC to protect funds in all situations not just a “bank failure”: https://www.fdic.gov/consumer-resource-center/2024-06/bankin...

Another problem is that in some of these setups, the third parties are not managing separate accounts for each client at the underlying bank. So the underlying bank is not maintaining records that track each client’s separate funds. To me that seems odd and I would expect neobanks to track those numbers themselves but also for the underlying bank to do so. The FDIC is working on making that a hard requirement: https://www.fdic.gov/news/press-releases/2024/fdic-proposes-...

indeed, I just closed my transferwise / wise account. Great service in the past, but suddenly felt less comfortable.

A simple transfer between own accounts, marketed as a few clicks and a selfie, turned into bio-metric face scan, no thanks! Plus they are pushing the app to the point of making it difficult to use a desktop browser. Who in their right mind demands a webcam live session to scan two sides of an ID card. Oh and they got pushy to allow the bio-metric scan to be done by a third party, as if!

The closing account dark patterns were hilarious! 'are you sure', 'you'll be missing out on great rates...', 'let us connect you to...', 'are you really sure, you wont be able to open a new account', 'well we cant actually close your account for 6 years...'

At least I got a nice webgl rendered rotating texture mapped tick to show I'd achieved something by about step 8.

It's worth noting that cash held in a Fidelity brokerage account is handled the same way, by being "swept" into a bank account held by Fidelity at an actual bank so Fidelity can claim it's FDIC insured. I guess if Fidelity folds there would be bigger problems than where the cash balance is, though...

Because Wise ends up operating in many jurisdictions like the EU they seem fairly heavily regulated. Their banking partners are also ones like GS and JPM, not necessarily built on a house of cards. They were also the cheapest/most effective way to move a large sum of money when I bought a place in the EU a couple of years ago.

With that said, I'm not sure I would have Wise as my only bank.

Mercury gives you DDA accounts at partner banks, we don't pool your money in a giant FBO account like Synapse. We also have a lot of Haskell nerds making sure our ledger is sound.

(not speaking on behalf of my employer)

I've toyed with a couple neobanks and eventually decided the uncertainty and risk was not worth it. I'll gladly stick with Chase and AmEx.

Revolut are a real bank, at least in Europe, and all funds in it are protected by the relevant country's banking fund.