Spencer Tierney

However, what this disaster has brought to light is that any neobank or other non-bank entity that provides consumer banking has more risks than banks do.

Yeah, certainly. And it can be hard to tell at first. Let's start by defining online banks. An online bank is an actual bank. So it has a license to hold and borrow money, and it has FDIC insurance directly. It's also known as an internet bank or a direct bank.

Yeah, certainly. And it can be hard to tell at first. Let's start by defining online banks. An online bank is an actual bank. So it has a license to hold and borrow money, and it has FDIC insurance directly. It's also known as an internet bank or a direct bank.

Yeah, certainly. And it can be hard to tell at first. Let's start by defining online banks. An online bank is an actual bank. So it has a license to hold and borrow money, and it has FDIC insurance directly. It's also known as an internet bank or a direct bank.

But unlike traditional banks, online banks typically don't have physical locations, and their names might be less familiar to you if you don't spend a lot of time looking at banks online like I do. Now, a neobank is not a bank. It's a financial technology company that partners with a bank to offer digital banking accounts. If neobank isn't a word that you've ever heard before, that's okay.

But unlike traditional banks, online banks typically don't have physical locations, and their names might be less familiar to you if you don't spend a lot of time looking at banks online like I do. Now, a neobank is not a bank. It's a financial technology company that partners with a bank to offer digital banking accounts. If neobank isn't a word that you've ever heard before, that's okay.

But unlike traditional banks, online banks typically don't have physical locations, and their names might be less familiar to you if you don't spend a lot of time looking at banks online like I do. Now, a neobank is not a bank. It's a financial technology company that partners with a bank to offer digital banking accounts. If neobank isn't a word that you've ever heard before, that's okay.

It's not in Merriam-Webster's dictionary either. But the word has gotten traction online since maybe the mid-2010s. Folks might be familiar with some big neobank names like Chime and Greenlight. As consumer-facing tech platforms, neobanks don't hold your money like banks do.

It's not in Merriam-Webster's dictionary either. But the word has gotten traction online since maybe the mid-2010s. Folks might be familiar with some big neobank names like Chime and Greenlight. As consumer-facing tech platforms, neobanks don't hold your money like banks do.

It's not in Merriam-Webster's dictionary either. But the word has gotten traction online since maybe the mid-2010s. Folks might be familiar with some big neobank names like Chime and Greenlight. As consumer-facing tech platforms, neobanks don't hold your money like banks do.

Instead, when you add money to your account, neobanks transfer it to their partner banks for them to hold onto it, usually holding multiple, even thousands, of customers' money in a single account. That's how neobanks checking and savings accounts become FDIC insured. It's a third party arrangement, which doesn't affect your everyday banking.

Instead, when you add money to your account, neobanks transfer it to their partner banks for them to hold onto it, usually holding multiple, even thousands, of customers' money in a single account. That's how neobanks checking and savings accounts become FDIC insured. It's a third party arrangement, which doesn't affect your everyday banking.

Instead, when you add money to your account, neobanks transfer it to their partner banks for them to hold onto it, usually holding multiple, even thousands, of customers' money in a single account. That's how neobanks checking and savings accounts become FDIC insured. It's a third party arrangement, which doesn't affect your everyday banking.

You can use a debit card or transfer money online the same way as you do at a bank. But if a neobank goes bankrupt, you aren't guaranteed to get your money back because FDIC insurance doesn't kick in.

You can use a debit card or transfer money online the same way as you do at a bank. But if a neobank goes bankrupt, you aren't guaranteed to get your money back because FDIC insurance doesn't kick in.

You can use a debit card or transfer money online the same way as you do at a bank. But if a neobank goes bankrupt, you aren't guaranteed to get your money back because FDIC insurance doesn't kick in.

Okay. And that's in contrast to the money that I have in my high yield savings account at an online bank, which, as you mentioned, is FDIC insured. And just so folks know, FDIC insurance covers $250,000 per person, per account type, per FDIC insured bank. But with a neobank, that is not the case.

Okay. And that's in contrast to the money that I have in my high yield savings account at an online bank, which, as you mentioned, is FDIC insured. And just so folks know, FDIC insurance covers $250,000 per person, per account type, per FDIC insured bank. But with a neobank, that is not the case.

Okay. And that's in contrast to the money that I have in my high yield savings account at an online bank, which, as you mentioned, is FDIC insured. And just so folks know, FDIC insurance covers $250,000 per person, per account type, per FDIC insured bank. But with a neobank, that is not the case.

Even though these companies transfer your money to a partner which is actually FDIC insured, your money is not protected if the neobank fails, which is very scary, Spencer.