This past May, I wrote a Smart About Money column about the failure of “banking-as-a-startup” fin-tech Synapse and how Synapse customers who thought their money was FDIC-insured learned that was not the case.
A reader asked, “What’s a fin-tech?” The words are short for financial technology and – according to IBM – a fin-tech company’s “core capability is the development and/or delivery of fin-tech products and services.” Popular apps like Venmo are one kind of fin-tech.
Is a bank a fin-tech? Banks use technology but the term fin-tech is generally used to describe new-ish publicly-held companies whose game plan is often to hit financial targets so they’ll be bought out.
Unlike banks, fin-techs are basically unregulated with limited oversight. Is that good, or bad? As Synapse’s customers discovered, usually it’s fine until something goes wrong.
Another reader wrote in saying they had some money in a fin-tech wealth management platform and wondered if their money there was safe.
I was not familiar with the company they mentioned. But that person raised a very significant issue that most people consider no matter where their money is. They want to know, “Is my money safe?”
All banks in the United States have FDIC deposit insurance. The FDIC points out on their web site that – since the FDIC was created almost a hundred years ago in 1933 – no one has lost a penny of their FDIC-insured deposits.
The Massachusetts legislature established the Deposit Insurance Fund (DIF) which started insuring deposits in 1934. The DIF insures all deposits above the FDIC limits at member banks. Depositors in Massachusetts are lucky to have the option to essentially know their deposits are covered by the FDIC with above & beyond coverage from the DIF.
Fin-techs do not have FDIC deposit insurance – though some partner with banks that do because the fin-techs are well-aware that customers look for the FDIC logo.
Through bank partnerships, some fin-techs offer super-high “FDIC coverage” amounts – into the millions – by sweeping depositors’ money into FDIC-insured banks. The fine-print (which they know most people don’t read) and disclaimers are often daunting with phrases like “Depositors are responsible for verifying.” It can get complicated.
And as the Tennessee Valley Federal Credit Union pointed out about the collapse of Synapse, there is sometimes a “troubling reality” with fin-techs. Specifically, having a bank partner does not necessarily guarantee that customers’ money is FDIC-insured the way customers think it is. Seeing an FDIC logo is not enough.
Everyone has their own risk tolerance. You need to know yours and be guided by it – even (and especially) if others are comfortable with much more risk or much less risk than you.
If a company is paying a better rate of interest or offering extraordinary benefits or returns, it’s up to you to confirm why they’re doing that and how they can afford to do it. There could be undisclosed risks or not clearly explained risks, especially today with fin-techs. Not always, but often enough.
If you’re not sure, your best move may be to consult with a trusted independent local financial advisor – someone who can help you assess all the risks and also help you be sure you’re comfortable with those risks.
There’s always some risk. And it’s perfectly okay to take risks, even large ones. People do that all the time. The key thing is to do the due diligence so you fully understand the deal you’re being offered including the downsides, especially for funds you can’t easily afford to lose.
From the “Smart About Money” Canton Citizen column published on August 7 2025.
Nick Maffeo is the President & CEO of Canton Co-operative Bank – right next to the Post Office – in Canton.
Have a question? Email to info@cantoncoopbank.com.