Technology is changing the way people and businesses interact with the traditional banking system. Financial technology companies (fintech) can provide convenient access to many banking services. These companies also can blur the lines between banks and non-banks. Today, banks are offering mobile banking services, internet-based banks, and even banks that launch digital-only brands separate from their brand. Additionally, fintech companies may be offering accounts that aren’t FDIC-insured.
FDIC-Insured Banks
FDIC-insured banks must indicate they have this insurance in their advertisements and at teller windows. This insurance provides up to $250,000 insurance for each depositor in the event that the bank closes. This means your funds are protected, even if the bank runs into financial difficulties.
Some FDIC-insured banks are internet-based and have no physical branches. All banking is performed via computer, mobile device, or Automated Teller Machine (ATM). You can typically still call to speak with a bank staff employee.
Banks with physical branches, colloquially called “brick and mortar” banks, may offer more services such as money orders, notarizing documents, and safe deposit boxes. Most of these banks will also have online and mobile banking capabilities.
Non-bank Companies
Fintechs and other non-bank companies can offer a wide variety of financial products and services. These include deposit products that are FDIC-insured. Some companies may act as “deposit brokers.” In other cases, they have contractual agreements with FDIC-insured banks to ensure their customers’ funds are safe.
It’s important to note that non-bank companies are never FDIC-insured. Even if they partner with an FDIC-insured bank, the funds sent to a non-bank company are not FDIC-insured until the company deposits the funds into the FDIC-insured bank. You must read through the terms and conditions to understand how the company will protect your funds and how they will be used. You can also call the fintech company directly to ask when the funds will be deposited in to an FDIC-insured bank, how it will happen, and the specific FDIC-insured bank or banks the company uses.
Understanding the differences between FDIC-insured banks and fintech or other non-bank companies will help determine what’s best for your banking needs. Some fintechs and non-banks may appear to be banks because they offer similar products or use words like “banking” in their descriptions. Remember that FDIC only covers banks and not fintechs or non-bank companies.
Online banking services can experience glitches, whether from FDIC-insured banks or fintechs and non-banks. These can cause slow response times, site crashes, or error messages when trying to access your accounts or other mobile banking services. Contact the banks or companies directly to resolve these issues.
If you have deposit insurance questions and wish to speak to a deposit insurance specialist, call 1-877-ASK-FDIC (1-877-275-3342) or go to the FDIC Information and Support Center.
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