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jackmol
  |     |   35 posts since 2022

The SaveBetter platform features a curated selection of high-yielding products offered by banks in their network. Does anyone feel there is a risk to using a financial technology company that provides access to savings products from banks that are insured by the FDIC? Money is placed in a custodial account at an FDIC insured bank and not directly in the depositor's name at the selected bank(s).

Any thoughts would be helpful. Thank you.

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Answers
FirstNation
  |     |   85 posts since 2021
Did you notice the following comment in the first link? That sort of stuff is so typical of fintechs (whatever that is).

Here's the comment that put me off this stuff (besides the fact that there's little or no regulation of fintechs).

BANKGUY1964 | Mar 31, 2021 | Comment #4
I opened an account at Ponce bank, but it ended up being at Savebetter.com (I guess for the .5%). Online signup never told me this during the signup process. After setup, my bank had rejected a subsequent transfer from them (something about it looking suspicious, though that reaction was a little too dramatic for my taste), but instead of the money being returned to Ponce, it has vanished. It has been over a month. Ponce refers me to Savebetter (hell if I know why if they have the money), who seems unable to find the money or correct the situation. The only saving grace is that it was a small sum (I was testing this type of savebetter banking model), and I am writing off my loss to experience. Their customer service is atrocious and unprofessional for a financial company.
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jackmol
  |     |   35 posts since 2022
In BANKGUY's situation, he didn't realize he was a customer of SaveBetter.com and had no direct relationship with Ponce Bank. His funds were in a custodial account. It's alarming that when he contacted SaveBetter.com they allegedly could not locate the money and correct the matter.
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Choice
  |     |   937 posts since 2020
Money is not in my name…who is the custodian? And the authority is?  What does the FDIC say about this?
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jackmol
  |     |   35 posts since 2022
From SaveBetter.com website (re: Custodian):

Each customer authorizes the Custodian Bank to hold the customer’s funds in a custodial capacity in order to facilitate the customer’s deposits to and withdrawals from deposit accounts at various Product Banks that the customer requests through SaveBetter.com. The Custodian Bank does not establish the terms of the deposit accounts, or offer the deposit accounts to customers, and provides no advice to customers about deposit accounts. Central Bank of Kansas City, Member FDIC, d.b.a. Central Payments is the Service Bank. Custodian services are provided by Lewis and Clark Bank.
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jackmol
  |     |   35 posts since 2022
I submitted the following to the FDIC on www.fdic.gov and received an email that a response will be forthcoming within 14 calendar days:

SaveBetter.com (managed by Deposit Solutions LLC, a New York based company that is part of the large German financial technology company, Raisin GmbH) offers savers a platform to open deposit products at several partner banks under just one account.

Multiple FDIC-member banks partner with Deposit Solutions to be included at SaveBetter.com.

When customers make deposits and withdrawals, the funds are transmitted through a custodian bank, which is also an FDIC member.

SaveBetter.com states customers’ funds are held in a custodial account with the bank that is providing the selected savings product(s).

QUESTION: Are custodial accounts at FDIC-member banks indeed covered by FDIC insurance?
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jackmol
  |     |   35 posts since 2022
On April 25, 2022, I received the following reply from the FDIC to my question (see prior post):

Thank you for contacting the Federal Deposit Insurance Corporation (FDIC). Your recent inquiry asked the following question:

"SaveBetter.com (managed by Deposit Solutions LLC, a New York based company that is part of the large German financial technology company, Raisin GmbH) offers savers a platform to open deposit products at several partner banks under just one account. Multiple FDIC-member banks partner with Deposit Solutions to be included at SaveBetter.com. When customers make deposits and withdrawals, the funds are transmitted through a custodian bank, which is also an FDIC member.SaveBetter.com states customers’ funds are held in a custodial account with the bank that is providing the selected savings product(s). QUESTION: Are custodial accounts at FDIC-member bank indeed covered by FDIC insurance?"

SaveBetter.com is not an FDIC-insured institution. The funds you access via SaveBetter.com would only be insured if they are actually deposited into and remain on deposit at one of the partner FDIC-insured banks, and assuming the recordkeeping requirements for fiduciary accounts are met. Those rules require that:

1) The fiduciary nature of the account be disclosed in the account records, usually in the account title, and
2) The identities and interests of the client(s) must be ascertainable either from the records of the institution or, more usually, from the records of the agent/fiduciary, maintained in good faith and in the ordinary course of business.

If all of these requirements are met, the deposits held by the agent (e.g. SaveBetter.com) are added together with any other funds the client (you) own(s) in the same right and capacity at the insured institution, either directly or through another agent, and insured to the same extent as if the deposits had been placed directly by you. For example, if an agent deposits funds in a client’s name alone into the same bank where the client already has funds on deposit in his/her name alone, those funds would NOT be insured separately. Rather they would be added together and insured up to a combined maximum of $250,000.

Please note that FDIC insurance protects your deposits in the unlikely event the insured bank fails. Because SaveBetter.com is not an FDIC insured institution, any transaction, performance, or other issues with SaveBetter.com would not be subject to FDIC jurisdiction.

If you wish to learn more about FDIC deposit insurance coverage, please visit the Deposit Insurance page on our website where you will find our brochure, "Your Insured Deposits" which explains in detail all of the deposit insurance ownership categories.

You can also visit EDIE, our electronic estimator, where you can calculate the insurance coverage of your accounts. These and other deposit insurance resources can be accessed directly by clicking the following link:
http://www.fdic.gov/deposit.

I hope this information is helpful. If you have further questions, please contact us at 1-877-275-3342 or visit the FDIC's Information and Support Center located at https://ask.fdic.gov/fdicinformationandsupportcenter/s/.

Sincerely,

Deposit Insurance Unit
National Center for Consumer and Depositor Assistance
Federal Deposit Insurance Corporation
Telephone: 877-ASK-FDIC (877-275-3342)

Please note that our response to your deposit insurance coverage inquiry is based strictly on the information provided, and any change or omission in the facts or failure to comply with FDIC's deposit insurance requirements could change the deposit insurance coverage discussed in this response.
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happyharold4
  |     |   388 posts since 2022
May be FDIC insured but I wouldn't take the risk. I just opened and closed a sampler account as I was completely dis-satisfied. No owner name on the account, not even an account # issued and no place to put a beneficiary. Way too flaky for me. I'm out and glad I am.
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chill08
  |     |   96 posts since 2022
I basically did the same today. I realized I didn’t fully understand the concept. Where and who has my money…yikes. Got cold feet and terminated after a few hours.
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FindSave
  |     |   15 posts since 2022
Reading this thread, and I think bailing out is a good move. I have a feeling they are playing with your moiney in the stock market. My theory is that they made deals with a few banks and will give them a cut of profits if the banks give them opportunity to play in the market. . Hoping earnings will beat interest rates and they'll profit while still technically kmeepoing the money in FDIC banks. You can find just as good or better rates without the confusion of where your money actually is located. As I type there's a 4.01% Money Market, 3.83% savings and all are going up. IMO, good move. Anything that isn't crystal clear in it's language involving your savings is suspicious to me, even if it's legal.
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chill08
  |     |   96 posts since 2022
When I don't understand the concept and can't explain it to someone else, that should have been a clear signal for me to pass. I think I was intoxicated by 5%.........
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Choice
  |     |   937 posts since 2020
The FDIC is well known to "protect" its assets (like any insurance company), not yours! Ergo if they are called upon does one think that it is in the game to protects "its" assets or you? Chances are you "could" be out of luck...get them to admit you are covered or move on! or?
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jackmol
  |     |   35 posts since 2022
Found an article from 2021 by Ken Tumin that addresses my question. Here is the link:

https://www.depositaccounts.com/blog/2021/02/fintech-launches-savebetter-online-savings-marketplace.html
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jackmol
  |     |   35 posts since 2022
SaveBetter update in April 2022, again by Ken Tumin. Here is the link:

https://www.depositaccounts.com/banks/ponce-de-leon-federal-bank/offers/
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