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Comment by blakeburnette | Hacker News Reader

Mercury itself is not FDIC insured. If Mercury collapses, your money is not insured. If Evolve collapses, your money is insured. That's the official stance.

The majority of the banking industry is built on Cobol. Open Banking is the only real path forward. The issue of the US vs EU open-banking is the number of community banks.

The, unfortunate, most reliable banks from a technology/data perspective are ones that are large enough to be loathsome to deal with. Think JP Morgan, BoA.

Even banks of that size, Comerica, have had massive ledgering issues recently, so they are not immune.

Some reputable players in the BaaS industry are Unit, JP Morgan, Jack Henry, Moov(Massive plug for them), VGS (works with Visa and MC btw). If your neo-bank works with them, I would trust my money there. I do trust my money with one of those partners.

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> Mercury itself is not FDIC insured. If Mercury collapses, your money is not insured.

How is it not false advertising on the part of Mercury to describe their accounts as FDIC-insured if this is the case?

The real question for these third party services is whether each customer has a separate bank account. If there's one bank account per customer, and the third party service goes down, accessing the money probably isn't too bad. You can deal with the bank. They have regulators and obligations. If it's one consolidated account, then it probably takes a bankruptcy court to untangle the mess.

Regarding FBOs, that is exactly what is happening with Synapse/Evolve. Customer funds and corporate funds were all comingled and reconciled across an inaccurate ledger held within an FBO. Whether the inaccuracies belong to the bank, or to Synapse is where the debate lies. What is also incredibly suspect in this case is that Mercury was able to transfer (IIRC) 49 million USD of money from Synapse's established FBO with Evolve to Evolve directly (under the ownership of Mercury). The ability for Mercury to have moved these funds is a massive red flag.

Regarding regulators and obligation -- in any of these relationships the bank is ultimately responsible/liable for any AML/TFL, money, etc... irregularities. A BaaS provider can effectively do everything wrong to the point its underlying bank is shut down, and switch to a different partner bank.

> Regarding FBOs, that is exactly what is happening with Synapse/Evolve. Customer funds and corporate funds were all comingled and reconciled across an inaccurate ledger held within an FBO.

Ugh. The bankruptcy court has to bring in forensic auditors, they try to reconstruct who owns what, and it takes a long time to sort things out. The bank's responsibility is only to have the total amount on deposit available to the bankruptcy court.

This is a really good argument for not using such a service.

This gets into the nuances of fintech, BaaS and neo-banking. A consumer cannot reasonably be expected to understand these. The industry and regulators have effectively stated as such. Your money is, indeed, technically FDIC insured to 250k. It is not insured against the collapse of an intermediary party such as Mercury. FDIC insurance ONLY covers the collapse of a chartered US bank.

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