FDIC Intensifies Scrutiny of ‘For Benefit Of’ Accounts in Bank-FinTech Partnerships

The Federal Deposit Insurance Corporation (FDIC) is sharpening its oversight of how banks and FinTechs manage customer deposits, with particular focus on “for benefit of” (FBO) accounts — pooled accounts that allow FinTechs to hold funds on behalf of end users without taking legal ownership.

According to multiple reports, the FDIC is weighing new regulatory proposals that would require banks to establish detailed ledgers to track FBO accounts more transparently. These ledgers would ensure that banks can accurately identify who the ultimate depositors are and how much money belongs to each customer. A key measure under discussion would mandate daily reconciliation of third-party data, a step designed to prevent disruptions like those seen during the collapse of Synapse earlier this year, when thousands of customers found their funds frozen.

FDIC Chairman Martin Gruenberg, speaking at a press briefing on second-quarter banking performance, stopped short of confirming a specific rulemaking timeline. Still, he underscored that the Synapse failure highlighted the systemic risks in current practices. “The Synapse failure really illustrated the risks to banks and depositors when banks rely on third parties to be the conduit for deposits,” Gruenberg said, adding that robust record-keeping is essential to determine deposit insurance coverage and maintain depositor protection.

Why FBO Accounts Matter
FBO accounts play a critical role in the FinTech ecosystem. By holding customer funds within insured banks while allowing FinTechs to manage payments and transfers, these accounts underpin regulatory compliance, operational integrity and customer trust. However, because deposit insurance applies to the bank relationship and not directly to the end customer, a lack of transparency can make it difficult to determine who is covered in the event of a bank failure.

The FDIC’s renewed focus comes amid a broader push by regulators to assess the risks of bank-FinTech partnerships. In July, the FDIC, the Federal Reserve Board, and the Office of the Comptroller of the Currency issued a Request for Information (RFI) on bank-FinTech arrangements, seeking industry input on structures, risks, and safeguards.

Yet, the consultation process has already drawn criticism. Banking trade groups including the Bank Policy Institute and the Financial Technology Council argued in a letter that the 60-day comment period was too short, urging regulators to extend the deadline by an additional 30 days. “The financial system is at a pivotal time in its evolution, and it would not be prudent to rush the RFI process unnecessarily,” the groups wrote.

The Bigger Picture
The FDIC’s closer look at FBO accounts signals that regulation of bank-FinTech relationships is no longer a distant possibility but an imminent reality. With FinTech partnerships now a central part of consumer and business banking, regulators appear determined to close gaps in deposit protection and operational transparency before another crisis shakes confidence.

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