![]() Rather than managing bank accounts and relationships with 14 banks themselves, businesses can offload this responsibility to the companies mentioned above. Sweep networks allow companies to build redundancy into their deposits, which negates any chance of a single point of failure like SVB. So if there is a widespread crisis (think 2007-2008), there is very little chance these distributed risk strategies will help. The catch? Redundancies cannot help with system-wide failure. This product is built on a network of 400 banks, where money can reside insured and earn interest at the same time. Rho: With its Treasury Management Account, the commercial startup offers up to $75 million in FDIC deposit insurance.StoneCastle: For banks in its FICA network, the company offers up to $25 million in FDIC insurance.In the 1990s, it paid out more than $50 million to protect more than 6,500 depositors in 19 failed member banks. Note that the DIF is not a government owned organization but an industry sponsored insurance company. Depositors Insurance Fund: This network can help banks protect deposits beyond the FDIC insurance limit.Wintrust’s MaxSafe: Similarly with a network of 15 community banks, MaxSafe allows FDIC insurance of up to $3.75 million.Mercury clients can omit a particular bank(s) when it comes to their deposits, but this may impact the total amount of insurance that is available to them. Their bank partner network includes Goldman Sachs and Capital One, with 12 banks in total. At the moment its network can offer up to a $5 million FDIC insured deposit limit. It works with two partner banks, Evolve Bank & Trust and Choice Financial Group. Mercury: Mercury is a next generation neobank that competes with SVB for venture-backed startups’ banking business.Similar options for companies and banks alike to get more of their deposits insured: IntraFI is a popular sweep network, with a network of 3000 banks across the country, where companies can store their money in demand deposit accounts, money market deposit accounts, or CDs. ![]() Source: Tearsheet Who's who of sweep networks: Instead it can depend on the sweep network chosen to handle the banking relationships in the background. However, this doesn't mean that the company then has to liaison with 4 different institutions. This insures 100% of the money whereas depositing it all in one bank would have only gotten 25% insurance coverage. The solution is the single point of failure issue that occurred with SVB and allows companies to split their deposits across a network of partner banks.įor example, if a company has $1 million dollars, it can divide its deposits to four partner banks, with each split being equal to the FDIC insured limit of $250,000. That pickle can sometimes be the size of the SVB debacle.Īs the dust settles on Silicon Valley Bank’s 48 hour downfall, many fintechs are crawling out of the woodwork offering solutions that can help companies avoid losing their funds to an unforeseen bank run. FinTech and banks typically have a lot more money in their bank accounts than the $250,000 insurance limit set by the FDIC. ![]()
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