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Comment by Animats | Hacker News Reader

Remember the Synapse/Yotta/Evolve collapse.[1] That is what happens when a fintech startup has authority to manipulate customer bank accounts but is not financially strong enough to handle problems.

[1] https://apnews.com/article/synapse-evolve-bank-fintech-accou...

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I would argue, the issue is that they had exclusive control over the customers bank accounts. I have no problem with fintech that integrates with existing accounts over the top.

The issue is with fintechs that are not really banks, so they keep your money in a "program bank" where you are not the direct customer. You can't go to the program bank and say Fintech XYZ went belly up and I want my money, because you are not the banks direct customer (even though in some cases your name is legally on the account for FDIC insurance reasons).

Open banking tech is way more about the former than the latter.

To be clear, the Synapse case is not clearly a financial strength issue in the sense that they took risks with customer funds, but rather an extremely serious record keeping/accounting/auditing one. Synapse was supposed to be nothing more than a "dumb pipe" between customers, fintechs, and underlying traditional bank accounts.

That's the problem with those things. Who's responsible for plumbing leaks?

A sizable fraction of what bank employees do involves error conditions and fraud. The happy path has been automated for decades. One of the big discoveries when PayPal started up was that they were not in the money transfer business. They were in the fraud prevention business.

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