In May 2024, the Synapse collapse froze $160 million in customer funds across multiple FinTech programs. Despite representations regarding daily access and FDIC insurance coverage, reconciliation failures exposed ownership gaps that prevented customers from accessing their deposits and raised questions about the status of those funds. The repercussions extended beyond FinTech operators to include their partner banks. In June 2024, Evolve Bank & Trust entered into a cease-and-desist order with the Federal Reserve for BSA/AML and risk management failures in its FinTech partnerships, exposing operational gaps in sponsor-bank oversight.
In response to these incidents, there has been increased scrutiny of Bank-FinTech partnerships and the underlying infrastructure that supports them. For FinTech operators and their bank partners, the question is, how to build programs that satisfy the overlapping needs of independent stakeholders? Investors increasingly examine sponsor-bank relationships and contingency planning. Customers seek greater transparency into where their funds reside and how they are protected. At the same time, regulators have expanded their supervisory focus, while banks balance growth through FinTech partnerships against rising infrastructure and compliance costs.
Recognizing that risks to the banking system extend beyond depository institutions, the Office of the Comptroller of the Currency (OCC)’s 2023 Third-Party Risk Management guidance noted that regulators expect FinTechs to share accountability for deposit safety with their sponsor banks.
Deposit Structure Is Product Infrastructure
Bank deposits, by design, are relatively simple products; however, the operational processes and infrastructure required to enable FinTechs to offer these products to their customers can be complex. While the FinTech may own the customer relationship, each of their deposits reside on a sponsor bank’s balance sheet and, therefore, pass through a series of compliance and operational steps that occur behind the scenes to deliver this capability seamlessly. Given this reality, close coordination is required between the parties to establish and maintain system integrations, conduct daily reconciliation, provide access to data for risk management, compliance, and reporting to a range of stakeholders.
Due to this interdependency, offering deposit products through a partner model poses unique design challenges and risks. If, for example, a sponsor bank faces enforcement action or exits a program, a FinTech’s operations can be severely impacted. Conversely, if a FinTech decided to change partner banks, the losing bank could experience significant deposit outflows.
In addition, in the event of a bank failure and liquidation of a partner bank, FinTechs would need to deliver complete customer records to file an FDIC deposit insurance claim if those records were not fully disclosed to the bank and, under the FDIC’s proposed Part 375 recordkeeping requirements, banks would have to produce complete and accurate depositor records within hours of a failure. FinTechs need the right infrastructure in place, along with the right policies, procedures, and reporting templates in production, to support these evolving requirements as part of the overall product design.
Thinking Long-Term: The Importance of Scalability and Resiliency
When FinTechs rely on a single sponsor bank, they concentrate operational risk over time. From an insurance perspective, customer balances are limited to the standard deposit insurance amount of $250,000 per depositor, per ownership category, at a single institution. Balances in excess of that limit remain uninsured and are exposed to the credit risk of the receiving bank.
As programs grow, sponsor banks also may face internal capacity constraints driven by supervisory expectations, balance sheet considerations, or changes in strategic priorities. These constraints can directly translate into counterparty risk for FinTechs, including growth caps, pricing pressure, or program pauses driven by sponsor bank balance sheet limitations rather than end customer demand.
More critically, if a sponsor bank pauses its programs, faces an enforcement action that limits growth, or exits Banking-as-a-Service (BaaS) altogether, FinTech operations can become constrained, restricted from opening new accounts, or, in extreme cases, required to close existing accounts.
From the FinTech’s perspective, these outcomes reflect not only operational disruption, but also loss of control over product continuity when deposit capacity is concentrated at a single institution.
Given that securing and onboarding a new sponsor bank can take six to twelve months, an interruption of this nature can materially disrupt a FinTech’s business. Risks that may be manageable at an early stage can become acute as programs mature, customer balances grow, and regulatory scrutiny increases.
As a result, long-term scalability and resiliency have become central considerations in how banks, investors, and regulators evaluate the durability of Bank-FinTech partnerships.
Insured Deposit Networks: A Complement to BaaS-FinTech Partnerships
As Bank-FinTech programs have scaled, insured deposit networks have emerged as one operating model used to address insurance concentration and sponsor bank capacity constraints that can otherwise limit program growth or continuity. These networks distribute a customer’s funds across multiple receiving banks in order to provide the customer with access to expanded FDIC insurance on the customer’s funds up to the relevant network’s program limit, while allowing the customer to maintain its primary banking relationship through the sponsor bank and FinTech interface.
Under this structure, customer balances are allocated in increments of up to $250,000 per customer identifier (e.g., TIN), per receiving institution, subject to the program terms. This approach enables access to expanded deposit insurance coverage while allowing sponsor banks to retain oversight of reconciliation, reporting, and compliance functions.
The Demand Deposit Marketplace® (DDM®) program, administered by R&T Deposit Solutions, is one example of this operating model. Through the DDM program, eligible customer funds are distributed across a network of participating receiving institutions, providing access to higher levels of FDIC deposit insurance coverage to the depositor on its funds, subject to program limits and applicable regulations.1
For sponsor banks, insured deposit networks can help manage deposit concentrations and internal thresholds without altering the end customer experience. For FinTech partners, these structures shift deposit placement and insurance mechanics to the bank and network level, reducing dependency on a single sponsor bank’s balance sheet decisions while allowing FinTech teams to remain focused on product functionality and customer engagement.
Importantly, while insured deposit networks complement partner banking and can mitigate certain risks, they do not replace the need for strong governance, accurate recordkeeping, or daily reconciliation at the program level. As with any deposit structure, the effectiveness of these programs depends on maintaining clear ownership records, timely data exchange, and sponsor bank oversight aligned with supervisory expectations.
Transparency and Control
The Synapse collapse revealed a critical weakness: while deposits were described as “FDIC insured,” reconciliation failures made proving ownership difficult or impossible. Access to deposit insurance depends on maintaining accurate, transparent, complete, and immediately verifiable records.
Regulators have flagged imprecise or misleading insurance representations as a material risk, particularly when pass-through deposit insurance structures are not clearly documented or understood. Programs that use standardized, examiner-aligned disclosure language can reduce regulatory risk for both the FinTech and its bank partner and provide clear and accurate terms and conditions to their customers.
Operationally, transparency requires consistent reconciliation between the FinTech’s internal ledger and the sponsor bank’s custodial and core systems. Automated data exchange and record-ready reporting support examiner access to depositor records, facilitate supervisory reviews, and enable investor due diligence.
As scrutiny of third-party relationships has increased, examiner reviews have focused on whether transparency is treated as an infrastructure requirement rather than a disclosure or marketing consideration.
Market and Regulatory Shifts
The partner banking model is not going away, though the operating environment has changed. Regulatory expectations have evolved, prompting sponsor banks to tighten underwriting and require infrastructure upgrades that align with examiner priorities. In many respects, the cumulative body of consent orders and regulatory guidance has clarified supervisory expectations for evaluating and overseeing partner programs.
While these frameworks are extremely helpful, other market forces are at play, presenting new challenges. Investors increasingly evaluate FinTech partner relationships and supporting deposit architecture during due diligence. Customers ask more detailed questions about how their funds are protected and how ownership is established. Regulators, while primarily focused on banks, also expect FinTechs to share accountability for deposit safety. As a result, deposit infrastructure has moved from a back-office concern to a more visible factor in program evaluations, and due to differences in the commitment of resources and expertise, the competitive gap is widening. Another recent shift that could further expand the competitive gap is the trend of FinTechs seeking to become banks themselves. With the recent conditional approvals of several FinTech applications for national bank charters, the range of operating models has expanded.
As we enter 2026, the regulatory environment is also shifting. For example, H.R. 6955, the Main Street Capital Access Act, if approved in its current form, would revise reciprocal deposit rules that, under current rules limits the non-brokered treatment of reciprocal deposits to the lesser of 20% of liabilities or $5 Billion. By eliminating the $5 Billion cap and introducing a tiered exemption framework between 20% and 50%, the new rules would significantly raise the thresholds available to well-capitalized institutions, which could affect how qualifying sponsor banks evaluate reciprocal deposit capacity and regulatory treatment.
For FinTechs, these developments have increased the importance of understanding sponsor-bank concentration risk, reconciliation practices, and the mechanics of deposit protection. As Part 375 recordkeeping expectations and legislative proposals such as H.R. 6955 progress, the operational distinction between manual, batch-based programs and automated, networked deposit architectures will become central to sponsor-bank selection, investor due diligence, and depositor confidence.
These distinctions increasingly influence how FinTechs assess sponsor bank risk, including exposure to balance sheet constraints that can affect pricing flexibility and long-term program viability.
As Bank–FinTech programs continue to mature, insured deposit networks such as the Demand Deposit Marketplace® (DDM®) program administered by R&T can play a vital supporting role by helping sponsor banks and their FinTech partners manage insurance concentration, operational complexity, and long-term durability within existing regulatory frameworks.