F.D.I.C. Says Banks Need to Keep a Record of Their Fintech Customers

Banks holding customer funds for money management apps should keep track of customers’ identities and balances, the agency says.

When a banking software company collapsed this spring, thousands of people keeping cash in online money management apps found themselves cut off from their own money for months. On Tuesday, the Federal Deposit Insurance Corporation proposed new rules designed to prevent that from happening again.

Customers often choose to put money they would otherwise hold in a bank checking account into an online app. Some apps offer higher interest rates on deposits than traditional banks do, while others offer customers new saving and investing plans or small loans ahead of their paydays.

But money that customers send to online financial companies almost always ends up in a brick-and-mortar bank — and sometimes it is pooled into a single account. Customers often do not know which bank has their money.

Banks are under no obligation to keep track of the identity of fintech customers. The federal bank regulator’s proposal would require the banks to pay more attention.

Traditional banks holding funds for fintech customers would have to know each person’s identity and keep daily tabs on their balances. They would have to make sure that, no matter what happened to the other companies in the chain linking customers to their funds, the banks had a record of those funds and could share their identities and balances with regulators.

This change would also help if a bank at the end of one of those long chains of software companies were to fail, the regulators said on Tuesday. At present, it is hard for the F.D.I.C. to determine whose money is covered by the $250,000 deposit insurance guarantee.

Senior F.D.I.C. officials said in a briefing held for journalists on Tuesday that while they had been contemplating such rules for years, the collapse this spring of Synapse Financial Technologies, which operated banking software for online lenders, provided a good real-world example of how customers could be harmed.

When Synapse filed for bankruptcy and shut down its services, it said it had only $2 million in cash on hand. But customers who had funds at the online lenders Synapse supported were collectively cut off from $300 million of their own money. The F.D.I.C. said it had received more than 1,000 customer complaints related to Synapse since May.

The banks that take deposits from fintech customers are often small institutions trying to grow. Their managers could complain about having to meet new record-keeping requirements. Regulators said on Tuesday that any new requirements would apply narrowly to banks taking the kinds of deposits that could get lost in a chain of software companies.

There are other methods smaller banks use to swap deposits and increase their customers’ deposit insurance coverage that would not be affected by the new proposal, the regulators said.

The proposal made Tuesday was the first step toward putting the new rules in place. Regulators now want banks and other members of the public to provide feedback to help shape it.

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