Neobank fintechs, which facilitate branchless banking services and accounts through smartphone applications, are rushing to assure customers that their deposits are safe following the implosion of SVB and Signature Bank.
Coinbase and Paxos have $240M and $250M, respectively, in deposits with their partner bank Signature Bank. Both assured clients that their funds are safe as they "hold private deposit insurance well in excess of our cash balance."
Neobanks do not have an official bank charter and have to rely on partner banks to hold customers' deposits.
- The downfall of SVB has exposed the risks of dealing with banking-as-a-service fintech.
- Other banking partners are facing the contagion from the implosion, with several banks witnessing stock plunges of nearly 50%.
- Neobank platforms Revolut, Brex, and Chime have Metropolitan Commercial Bank, Fifth Third Bancorp, and Bancorp, respectively, as banking partners.
- Brex has partnered with nine banks to hold accounts with less than $2.5M in deposits.
- For accounts over $2.5M, the neobank uses money-market funds.
