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Comment by mrkurt | Hacker News Reader

We use Mercury, they're a frontend though. They're not a bank. Our checking/savings are with Choice Financial, and swept into at least four of these banks: https://co-mercury-prod.s3.amazonaws.com/legal/Choice+-+Depo...

We use their Treasury account type for most of our cash. It's split between Morgan Stanley and Vanguard funds.

Now, if Mercury fails it's going to be a pain in the ass to get at the money in these backer accounts. So we keep what we need for 2 months of operations with another bank. We were using SVB for this, now we have to find a new emergency backup bank.

Brex and Ramp are similar to Mercury.

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also use mercury for the same reason. they are a tech company that provides a good interface to baking services at a wholesale price, which is very different than trying to be a bank. for actual banking i see know reason to use anyone other than jpm chase.

they work with tiny regional banks that act as a white label service

if one or more of those tiny regional banks fail in the same way SVB did I don’t see why there wouldn’t be an issue as a customer of Mercury

it’s also unknown what percentage of these banks’ total deposits are Mercury deposits now. if it’s a lot then you have the same risk of a bank run on the Mercury side disproportionately impacting the solvency of the underlying bank

they can fail all they want as long as you have less than 250K deposited. if you are using mercury as a transaction agent then you have no risk. you keep your deposits at a tbtf bank, then automate your transactions to run through mercury, so you pay lower transaction fees.

that was also true of SVB

no, it was very different at SVB. SVB was loaning money to startups on the basis of exclusivity contracts where those startups were required to hold the money in SVB accounts, so they were basically paying SVB to create the illusion of having liquidity. that is a whole different game.

that is true for some customers not all and not the primary reason why it failed.

and the problem is you know nothing about the financial health of the small banks that are white label providers so how can you say you’re confident in the management of these individual banks that Mercury is contracting with? you don’t know anything about them.

they are guaranteed by the FDIC up to 250K, and mercury has set up their systems to spread deposits across multiple banks, to increase the amount guaranteed.

so, if mercury has a 1M FDIC guaranteed, then you can move 1M per day through their systems with 100% guarantee, but the risk that a bank fails on one particular day is very small, so maybe you can move 10M a day through them, with effectively no risk.

10M a day is 3.5B a year. very few companies are doing transactions on that level, so mercury scales up very well.

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