The Hidden Risks of Fintech Companies Providing Banking-Like Products

While the failures of traditional financial technology firms have not received as much media attention as those of crypto companies, they pose a hidden risk to customers who may not recognize the risks and consequences of failure. The recent bankruptcy of Synapse Financial Technologies has left customers unable to access their funds, highlighting the need for investors to fully understand the risks before investing in cryptocurrency. Fintech firms, which rely on partner banks for services such as holding customer deposits, are potentially exposed as banks in the US withdraw from partner banking. To ensure customer safety, joint ventures between banks and fintech companies are necessary, with banks taking the lead in managing and ensuring compliance.