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Comment by gnicholas | Hacker News Reader

But if the money is deposited in an FDIC-insured account and is stolen (by an external hacker or Mercury) isn't it insured against that loss?

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No. The depositor has a relationship with Mercury. Mercury has relationships (directly or indirectly) with FDIC insured banks.

Even if one could prove a direct link between the depositor and the FDIC insured bank (making the insurance relevant), the depositor has given Mercury the right to move money in and out of the FDIC insured accounts.

Even if one could prove the money was illegally taken, FDIC insurance is for bank failure. Not for theft.

So then Mercury waving a big flag about how accounts are FDIC-insured is more about them being made whole if one of the banks they contract with goes under, not about ensuring that their customers are ultimately made whole?

The big risk is that Mercury goes out of business. This leaves the bank with money in Mercury accounts but no way to get back to customers. The funds may be considered to be the companies in bankruptcy, when means that customers would have to wait and may not get back all their money.

That’s not really how it works. The keyword to google is “fbo”.

Mercury accounts are DDAs, not FBOs.

The thing you need to Google is "Reg E", which the partner bank (and through them, the fintech program) need to follow. This covers things like losses through card fraud.

In my experience building a fintech on Evolve this description of the relationship is incorrect. My customers have accounts at Evolve directly and are FDIC insured.

As to what that insurance covers that is indeed a different question.

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