The Federal Deposit Insurance Corporation (FDIC) has proposed a significant rule that compels banks to maintain detailed records of fintech customers' data, CNBC reported. This initiative follows the collapse of tech firm Synapse, which left thousands of users locked out of their accounts, many of them customers of fintech apps.

Ensuring Customer Protection

The proposal aims to prevent a repeat of this situation by ensuring banks, rather than fintech companies, keep track of ownership records and account balances.

The FDIC's rule primarily targets the type of pooled accounts often used by fintech apps. In these setups, many customers' funds are combined into a single large account, with the fintech Fintech Financial Technology (fintech) is defined as ay technology that is geared towards automating and enhancing the delivery and application of financial services. The origin of the term fintechs can be traced back to the 1990s where it was primarily used as a back-end system technology for renowned financial institutions. However, it has since grown outside the business sector with an increased focus upon consumer services.What Purpose Do Fintechs Serve?The main purpose of fintechs would be to suppl Financial Technology (fintech) is defined as ay technology that is geared towards automating and enhancing the delivery and application of financial services. The origin of the term fintechs can be traced back to the 1990s where it was primarily used as a back-end system technology for renowned financial institutions. However, it has since grown outside the business sector with an increased focus upon consumer services.What Purpose Do Fintechs Serve?The main purpose of fintechs would be to suppl Read this Term provider or a third party responsible for maintaining ledgers of who owns what. When the records are incomplete or inaccurate, customers are exposed to significant risks, as seen in the Synapse incident. For months, affected users have reportedly been unable to access their funds.

The new rule aims to close this gap by making banks responsible for maintaining the records of fintech customers, ensuring that in the event of a failure, it's clear who owns what. The regulator mentioned that enhanced record-keeping would also make it easier for bankruptcy Bankruptcy Bankruptcy or insolvency constitutes a legal term and refers to being unable to repay debts. A business and a person can declare bankruptcy. When a person or company claims bankruptcy, it is described as a voluntary bankruptcy, and when your debtors force you into bankruptcy, it is referred to as involuntary. A voluntary bankruptcy occurs when the debtor or borrower, the party that owes the money files with the courts. Involuntary bankruptcy happens when your credits file a petition with the co Bankruptcy or insolvency constitutes a legal term and refers to being unable to repay debts. A business and a person can declare bankruptcy. When a person or company claims bankruptcy, it is described as a voluntary bankruptcy, and when your debtors force you into bankruptcy, it is referred to as involuntary. A voluntary bankruptcy occurs when the debtor or borrower, the party that owes the money files with the courts. Involuntary bankruptcy happens when your credits file a petition with the co Read this Term courts to determine payouts in cases like Synapse.

The FDIC explained that better records would allow them to pay depositors more quickly in case of a bank failure by meeting the requirements for “pass-through insurance.”

This would represent a significant change in responsibility, shifting the burden of record-keeping from fintech firms to their banking partners, who are already FDIC-insured and more closely regulated. If approved, the rule would undergo a 60-day public comment period, during which industry participants could provide feedback.

Heightened Compliance Measures

In addition to the new record-keeping rule, the FDIC also issued a statement on its policy toward bank mergers. This new stance promises to heighten scrutiny, especially for mergers that would result in banks with assets exceeding $100 billion.

Fintech companies, which often operate in grey regulatory areas, could face increased scrutiny in their relationships with traditional banks. As the proposal moves toward a vote by the FDIC board of governors, fintech firms and their partner banks will likely need to rethink their data management practices. The rule represents a fundamental shift in how financial partnerships will operate.