I write about fintech and fintech banking apps a lot, so I sometimes get asked what I think about these companies and how safe they are, especially given some of the negative news that’s happened with some of them in the past year.
As a bit of background, most of the fintech banks you see out there (sometimes called “neobanks) aren’t actually banks. Rather, they’re technology apps that partner with licensed banks to hold your funds. These funds are held in custodial accounts, which are financial accounts set up for the benefit of a beneficiary (in this case, the customer).
At the outset, it’s important to note that having your funds held in a custodial account isn’t inherently unsafe. So long as there is proper record keeping, the funds held in custodial accounts have the same protections as any regular, FDIC-insured bank account. Issues can arise, however, when there’s improper record keeping or other issues with the intermediaries that most of these fintech companies work with.
The big example came this past year when customers of fintech apps Yotta and Juno found themselves unable to withdraw their funds from these apps. This is going to probably be an oversimplification of what happened, but the gist is that a company called Synapse declared bankruptcy. Synapse acted as the intermediary between Yotta/Juno and the FDIC-insured banks that held the funds, but because Synapse didn’t do proper recordkeeping and doesn’t have the ability to reconcile the funds due to their bankruptcy, the partner banks that hold the funds have no way of differentiating the funds that are in these custodial accounts. In other words, the money is still in these FDIC-insured banks, but there appears to be no way for the bank to figure out whose funds belong to whom.
This Synapse bankruptcy has led to Yotta and Juno customers getting their funds frozen, leading to people being unable to access their funds. To date, there are still millions of dollars in funds unaccounted for, with no clear timeline for when or if customers will get access to their money. As you can expect, lawsuits have been filed, but even with all the news and legal action, it may be years before customers are made whole, if ever.
FDIC insurance is supposed to protect consumers from financial issues like this, but what happened here with these fintech apps is something that FDIC insurance wasn’t made to address. So given this, it’s worth asking whether it’s safe to even use these fintech banking apps. My general thought is this – with established fintech companies, I’m fairly confident that my funds will remain secure and accessible. That being said, there are legitimate concerns with these fintech companies, so this is what I do on my end.
I’m Still Using Some Fintech Apps, But I’m Aware Of The Potential Risks
Interestingly enough, when looking at my money system, it turns out that most of my money is held in traditional banking products, rather than with fintech apps.
Here’s a look at what I use for all of my main financial accounts:
- Checking Account: Ally
- Short-Term and Medium-Term Savings: Ally, Marcus by Goldman Sachs, Discover
- Investments: Vanguard, Fidelity, Minnesota Deferred Compensation Plan, M1 Finance
- Emergency Funds: Raisin, DCU, H-E-B Debit
- Business Checking: Found, Novo
Banks like Ally, Marcus by Goldman Sachs, and Discover are traditional banking products, with the main difference being they’re entirely online. This is fine for me, as I never need to go into a physical bank branch. If I ever do need to go into a physical bank branch, I can usually do so since I typically will have a brick-and-mortar bank account open, since I’m usually opening new accounts for bank bonuses (see The Ultimate Guide to Bank Account Bonuses).
Meanwhile, the fintech banking apps I use include Raisin, Found, and Novo. M1 Finance is also a fintech investment app, but it’s an SEC-registered broker-dealer, so I have zero concerns about the investments I hold there.
Found and Novo are both fintechs that provide business checking accounts. They make it clear on their websites that they are not banks.
- Found states the following in their fine-print: “Found is a financial technology company, not a bank. Banking services are provided by Piermont Bank, Member FDIC. The funds in your account are FDIC-insured up to $250,000 per depositor for each account ownership category
- Novo states the following in their fine-print: “Novo Platform Inc. (“Novo”) is a fintech, not a bank. Banking services provided by Middlesex Federal Savings, F.A., Member FDIC.”
Just from that language, you can see there must be some more risk as compared to using a traditional bank. My rationale for being okay with that risk is two-fold. First, both Found and Novo partner with a single bank for their bank accounts, and they make it clear throughout their websites that your funds are FDIC-insured. My hope is that this clear relationship between these companies and their sponsor banks will mean that the funds are accurately accounted for.
The second, more important reason I use these accounts is that I find the traditional business checking products to be so poor that I think it’s worth the added risk of using a fintech banking product here. I’ve found that most of the traditional business checking account options are horrible, especially for gig workers and small businesses. My main issues with most of these traditional business checking accounts are that they typically require a minimum balance, or worse yet, they nickel and dime you by charging fees for everything. Many of these products also have terrible online interfaces. Given this, I’m willing to opt for what I think are better products.
I’ve also gone through one of these fintech checking accounts shutting down. Years ago, I used a fintech called Azlo, which I used as my primary business checking account for this blog. The app was shut down in 2021 and I was able to move all my funds to Novo without any issues.
As for Raisin, I’m okay using it for my emergency fund because of the good rates I’m getting. Raisin is also well established in Europe, which tends to have strong banking regulations and makes me feel more comfortable that they are doing things correctly here. And finally, on their website, Raisin makes it clear that any funds in the Raisin platform are held in custodial accounts (“When a customer makes a deposit through the Raisin platform into a savings product offered by a given financial institution, the funds move from the customer’s external bank account (also referred to as their reference account) to a custodial account held by one of Raisin’s partner custodial banks at the financial institution offering the savings product.”), but more importantly, they say that your funds are linked to your ID and differentiated from other funds (Raisin says this on their website: “Your money is linked to your unique Raisin ID at all times, ensuring that your savings are always differentiated from other customers’ funds.”).
This is important, as differentiating your funds with proper record keeping ensures that your custodial accounts are FDIC-insured and that pass-through insurance applies. So, given that Raisin seemingly makes it clear that they do this, I’m a bit more comfortable with keeping significant funds in Raisin.
If You Want To Be Safe, Stick To Traditional Banks
I’ve laid out my position on some of these fintech apps and why I use them, and while I’m comfortable with my funds being in these fintech apps, I know that not everyone is going to have that same comfort level.
If you’re concerned about these fintech apps (which is very fair), my advice is to stick with traditional banking products. That being said, I wouldn’t use traditional brick-and-mortar banks because I find most of them have terrible banking products.
Instead, I’d recommend online-only banks like Ally. Remember that traditional banking products do not need to have physical locations. Online banks like Ally or SoFi are bank holding companies and are covered by the same FDIC insurance as any brick-and-mortar bank.
When it comes to checking and savings accounts, I always recommend Ally. I think they are the best overall bank account, and they offer good rates on their high-yield savings account. For banking stuff, you could do everything with just Ally and you’d be fine and could take comfort in knowing all your money is secure.
Final Thoughts
In general, I think most established fintech companies are probably fine, but I cannot say for certain that there is zero risk with using them.
Certain fintech products make sense to me (mainly the business checking fintech products and Raisin). That being said, I don’t think it’s necessary to use any of these if you aren’t comfortable with them. For savings accounts, there are plenty out there that offer good rates without a ton of hassle. High-yield savings accounts from banks like Ally, Discover, or Marcus by Goldman Sachs are the ones I usually recommend, but there are more niche options as well that offer higher interest rates.
For business checking accounts, American Express seems to have one that I think is pretty good. It has no fees or minimum balance requirements, which means it meets the no-fee and no minimum balance requirement that I have when it comes to any bank account. And since American Express is a bank holding company, your funds are fully insured with no risk of any kind.
The main thing is to understand what you are doing and do what you are comfortable with. I’m primarily using traditional banks, but I do have a few fintech companies that I use for various reasons. It’s what I’m comfortable with, but works for me might not be what works for you.
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More Recommended Ebike/Scooters
Check out these other ebikes and scooters I've reviewed:
- Urban Arrow Ebike – Last year, I made one of the largest purchases I’ve ever made – I bought a $9,000 electric cargo bike from Urban Arrow. In my Urban Arrow review, I will discuss what it is and why I decided to buy this bike, as well as discuss how impactful a bike like this can be on your journey to financial independence.
- Troxus Explorer Step-Thru Ebike – The Troxus Explorer Step-Thru is a fat-tire ebike that I’ve had the pleasure of riding for a while now. It has amazing power, great looks, and awesome range. If you’re looking for a great fat-tire ebike that offers a lot for the price, the Troxus Explorer Step-Thru is definitely one for you to consider. Check out my Troxus Explorer Step-Thru Review.
- Hovsco HovBeta Ebike – The HovBeta is a folding ebike with great specs and a lot of interesting features, and importantly, it’s sold at a good price point. I’ve had a blast commuting with it and using it to do deliveries with DoorDash, Uber Eats, and Grubhub. Check out my Hovsco HovBeta Ebike Review.
- Vanpowers Manidae Ebike – The Vanpowers Manidae is a fat tire ebike that I’ve been riding as my primary winter commuting bike and have also been using it to do food delivery with apps like DoorDash, Uber Eats, and Grubhub. After clocking in a decent number of miles with this ebike, I wanted to write a post sharing what my experience with the Vanpowers Manidae ebike has been like. Check out my Vanpowers Manidae Review.
- Sohamo S3 Step-Thru Folding EBike Review – A Great Value Folding Ebike – The Sohamo S3 Step-Thru Folding Ebike is an entry-level folding ebike that offers a lot of value for the price point. I’ve been riding the Sohamo S3 for a while now, putting the bike through its paces, and I have to say, this bike has exceeded all of my expectations. Check out my Sohamo Review.
- KBO Flip Ebike – The KBO Flip is an excellent bike. I’ve had a great time riding it and think it’s a versatile bike that can be used for a lot of purposes and can fit a variety of lifestyles. It’s worked out great for me as a general commuter bike and as a food delivery bike. Check out my KBO Flip Review.
- Hiboy P7 Commuter Ebike – The Hiboy P7 is an excellent electric commuter bike that’s offered at an affordable price point. The range and speed of this bike are both very good, so you won’t have any trouble getting anywhere you need to go with it. As a food delivery vehicle, this is also good – with how much range it offers, you’ll be able to work all day on a single charge. Check out my Hiboy P7 Commuter Electric Bike Review.
- Himiway Escape Ebike – The Himiway Escape is an interesting bike for anyone looking for a moped-style ebike. If you’re a gig economy worker, the Himiway Escape is particularly interesting and it’s possible to think of it as an investment, especially if you can opt to do deliveries with the Himiway versus using a car. It’s not cheap, but you can definitely make your money back when you compare the mileage you’ll put on your car versus using an ebike. Check out my Himiway Escape Bike Review.
- Espin Sport Ebike – The Espin Sport is a good ebike for someone who is looking for an ebike that feels and rides more like a regular bike. There are many ebikes that are really only bikes in name. In reality, they’re basically electric mopeds. The Espin Sport, by contrast, is a bike you could probably ride without the battery and you’d feel like you’re just riding a regular bike. Check out my Espin Sport Review.
- Varla Eagle One Scooter – The Varla Eagle One is an excellent scooter that can make sense for a lot of people. It can work as a primary mode of transportation. You can use it to work on gig economy apps like DoorDash, Uber Eats, and Grubhub. And it can also be a recreational vehicle if you’d prefer to use it for that. Check out my Varla Eagle One Review.
- Varla Falcon Scooter – The Varla Falcon is an excellent scooter that offers a good amount of power at a lower price point compared to more powerful scooters. It’s not exactly an entry-level scooter, nor is it a high-powered scooter. I think it fits somewhere in-between those two categories – an intermediate scooter if I had to give it a category. Check out my Varla Falcon Review.
- Hiboy S2 Scooter – The Hiboy S2 is an excellent entry-level commuter scooter that's perfect for someone looking to save some money in transportation costs and improve their commute. Check out my Hiboy S2 Review.
- Hiboy S2R Scooter – The Hiboy S2R is one of the more interesting electric scooters I’ve been able to test out. It’s not a high-powered scooter, but for an everyday transport option, it’s very useful, especially given some of the unique features that it has. Indeed, for the price, the Hiboy S2R might be the best value scooter I’ve used. Check out my Hiboy S2R Review.
- Fucare H3 Scooter – The Fucare H3 is a fun scooter and I’ve enjoyed testing it out. For a daily commuter or quick trips or errands, the Fucare H3 is probably the scooter I’ll use. It’s portable and easy to maneuver, so it’s just easier to take on the road when I need it. Check out my Fucare H3 Scooter Review.
More Recommended Investing App Bonuses
For additional investing app bonuses, be sure to check out the ones below:
- M1 Finance ($100) – This is a great robo-advisor that has no fees and allows you to create a customized portfolio based on your risk tolerance. You also get $100 for opening an account. Check out my M1 Finance Referral Bonus – Step-By-Step Guide.
- SoFi Invest ($25) – SoFi Invest is an easy brokerage account bonus that you can earn with just a few minutes of work. Use my SoFi Invest referral link, fund your SoFi Invest brokerage account with just $10 and you’ll get $25 of free stock. I also have a step-by-step guide for the SoFi Invest referral bonus.
- Webull (20 free stock shares) – Webull's current promotion gives you 20 free shares valued between $3-$3,000 each if you open an account using my referral link. Here’s a guide I wrote about how to earn your free shares using Webull.
- Moomoo (15 free stocks) – Moomoo is a free investing app currently offering 2 different referral bonuses if you open an account using a referral link. Read my Moomoo referral bonus guide for more information.
- Robinhood (1 free stock) – Robinhood gives you a free stock valued between $2.50-$225 if you open an account using my referral link.
- Public (1 free stock) - Public gives you a free stock valued between $3-$70 if you open an account using my referral link.
More Recommended Bank Account Bonuses
If you’re looking for more easy bank bonuses, check out the below options. These bonuses are all easy to earn and have no fees or minimum balance requirements to worry about.
- Upgrade ($200) – Upgrade is a free checking account that’s currently offering a $200 referral bonus if you open an account and complete a direct deposit. These bonus terms are easy to meet, so it’s well worth doing this bonus as soon as you can. Here’s a post I wrote with more details: Upgrade $200 Referral Bonus – Step By Step Directions.
- Ally Bank ($100) – Of all the banks out there, Ally is, without a doubt, my favorite. At the moment, Ally is offering $100 to customers who open an eligible Ally account and meet the requirements. Here are the step-by-step directions to earn your Ally Bank referral bonus.
- Fairwinds Credit Union ($175) – Fairwinds Credit Union is offering a referral bonus for users that sign up using a referral link. Fairwinds has no fees or minimum balance, so this is a particularly easy bonus to earn. Since this is a smaller credit union, my gut instinct tells me this offer won’t be around long, so if you’re in a position to meet the bonus requirements, grab this bonus before it’s gone. Here is my step-by-step guide on how to earn your Fairwinds Credit Union bonus.
- Chime ($100) - Chime is a free bank account that offers a referral bonus if you use a referral link and complete a direct deposit of $200 or more. In practice, any ACH transfer into this account triggers the bonus. This bonus is easy to earn and posts instantly, so you’ll know if you met the requirements as soon as you move money into the account. I wrote a step-by-step guide on how to earn your Chime referral bonus that I recommend you check out.
- US Bank Business ($900) – This is a fairly easy bank bonus to earn, since there are no direct deposit requirements. In addition, you can open the Silver Business Checking account, which comes with no monthly fees. Check out how to earn this big bonus here.
- GO2Bank ($50) - GO2Bank is an easy bank bonus that I recommend people take advantage of if they have an easy way of meeting the direct deposit requirement. I like that it’s easy to open the account and that the bonus pays out quickly. Check out my step-by-step guide on how to earn your GO2Bank $50 referral bonus.
- Current ($50) – Current is a free fintech bank that’s offering new users a $50 referral bonus after signing up for an account using a referral link. Current is an easy bonus to earn and also gives you access to three savings accounts that pay you 4% interest on up to $2,000. That means you can put away up to $6,000 earning 4% interest. That’s very good and makes Current an account I recommend to everyone. Check out my step-by-step guide on how to earn your Current Bank bonus.
- Novo Bank ($40) - Novo bank is a free business checking account that’s currently offering a $40 bonus if you open a Novo business checking account using a referral link. In addition to being a good bank bonus, Novo is also a good business checking account. It has no monthly fees or minimum balance requirements and operates a good app and website. Indeed, it’s the business checking account I currently use for this blog. Check out my post on how to easily open a Novo account.
- Varo ($25) – Varo is a free fintech banking app similar to Chime or Current. It’s currently offering a $25 bonus to new users that open a new Varo account with a referral link. The bonus for this bank is very easy to meet, all you need to do is spend $20 within 30 days of opening your Varo account. Check out my step-by-step guide to learn how to earn this bonus.
Kevin is an attorney and the blogger behind Financial Panther, a blog about personal finance, travel hacking, and side hustling using the gig economy. He paid off $87,000 worth of student loans in just 2.5 years by choosing not to live like a big shot lawyer.
Kevin is passionate about earning money using the gig economy and you can see all the ways he makes extra income every month in his side hustle reports.
Kevin is also big on using the latest fintech apps to improve his finances. Some of Kevin's favorite fintech apps include:
- SoFi Money. A really good checking account with absolutely no fees. You'll get a $25 referral bonus if you open a SoFi Money account with a referral link, and an additional $300 if you complete a direct deposit.
- 5% Savings Accounts. I'm currently getting 5.24% interest on my savings through a company called Raisin. Opening a Raisin account takes minutes to complete, it's free, and all of your funds are FDIC-insured. I explain how it works, why I'm now using it to store my emergency fund and any other cash savings I have, and why I recommend everyone check it out in this review.
- US Bank Business. US Bank is currently offering new business customers a $900 signup bonus after opening a new account and meeting certain requirements.
- M1 Finance. This is a great robo-advisor that has no fees and allows you to create a customized portfolio based on your risk tolerance. You also get $100 for opening an account.
- Empower. One of best free apps you can use to monitor your portfolio and track your net worth. This is one of the apps I use to track my financial accounts.
Feel free to send Kevin a message here.
I have my main checking and savings in sofi and have been very pleased with their app. They are also a bank like Ally, so I feel my money is secure. I also use capital one checking and savings for my reselling side hustle.
Glad that works out for you. I use Discover savings account for my rental income, so the rent I collect and all the expenses I pay for the rental come out of that account.
Wow I hadn’t heard about Yotta. I had up to 15k in my account at one point and slowly withdrew it all in 2022/2023 due to hardship/re-prioritization. Thank goodness, I would be freaked if my funds were frozen!
I am pleased to say that I never recommended Yotta because it sounded totally scammy (it has a weird sweepstakes component of it that I didn’t understand). They reached out to a lot of bloggers asking people to promote them, but I didn’t like what it sounded like.