How thousands of Americans got caught in fintech’s false promise and lost access to bank accounts

by | Jul 2, 2024 | Financial

Natasha Craft, a 25-year-old FedEx driver from Mishawaka, Indiana. She has been locked out of her Yotta banking account since May 11.Courtesy: Natasha CraftWhen Natasha Craft first got a Yotta banking account in 2021, she loved using it so much she told her friends to sign up.The app made saving money fun and easy, and Craft, a now 25-year-old FedEx driver from Mishawaka, Indiana, was busy getting her financial life in order and planning a wedding. Craft had her wages deposited directly into a Yotta account and used the startup’s debit card to pay for all her expenses.The app — which gamifies personal finance with weekly sweepstakes and other flashy features — even occasionally covered some of her transactions.”There were times I would go buy something and get that purchase for free,” Craft told CNBC.Today, her entire life savings — $7,006 — is locked up in a complicated dispute playing out in bankruptcy court, online forums like Reddit and regulatory channels. And Yotta, an array of other startups and their banks have been caught in a moment of reckoning for the fintech industry.For customers, fintech promised the best of both worlds: The innovation, ease of use and fun of the newest apps combined with the safety of government-backed accounts held at real banks.The startups prominently displayed protections afforded by the Federal Deposit Insurance Corp., lending credibility to their novel offerings. After all, since its 1934 inception, no depositor “has ever lost a penny of FDIC-insured deposits,” according to the agency’s website.But the widening fallout over the collapse of a fintech middleman called Synapse has revealed that promise of safety as a mirage.Starting May 11, more than 100,000 Americans with $265 million in deposits were locked out of their accounts. Roughly 85,000 of those customers were at Yotta alone, according to the startup’s co-founder Adam Moelis.CNBC reached out to fintech customers whose lives have been upended by the S …

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[mwai_chat context=”Let’s have a discussion about this article:nnNatasha Craft, a 25-year-old FedEx driver from Mishawaka, Indiana. She has been locked out of her Yotta banking account since May 11.Courtesy: Natasha CraftWhen Natasha Craft first got a Yotta banking account in 2021, she loved using it so much she told her friends to sign up.The app made saving money fun and easy, and Craft, a now 25-year-old FedEx driver from Mishawaka, Indiana, was busy getting her financial life in order and planning a wedding. Craft had her wages deposited directly into a Yotta account and used the startup’s debit card to pay for all her expenses.The app — which gamifies personal finance with weekly sweepstakes and other flashy features — even occasionally covered some of her transactions.”There were times I would go buy something and get that purchase for free,” Craft told CNBC.Today, her entire life savings — $7,006 — is locked up in a complicated dispute playing out in bankruptcy court, online forums like Reddit and regulatory channels. And Yotta, an array of other startups and their banks have been caught in a moment of reckoning for the fintech industry.For customers, fintech promised the best of both worlds: The innovation, ease of use and fun of the newest apps combined with the safety of government-backed accounts held at real banks.The startups prominently displayed protections afforded by the Federal Deposit Insurance Corp., lending credibility to their novel offerings. After all, since its 1934 inception, no depositor “has ever lost a penny of FDIC-insured deposits,” according to the agency’s website.But the widening fallout over the collapse of a fintech middleman called Synapse has revealed that promise of safety as a mirage.Starting May 11, more than 100,000 Americans with $265 million in deposits were locked out of their accounts. Roughly 85,000 of those customers were at Yotta alone, according to the startup’s co-founder Adam Moelis.CNBC reached out to fintech customers whose lives have been upended by the S …nnDiscussion:nn” ai_name=”RocketNews AI: ” start_sentence=”Can I tell you more about this article?” text_input_placeholder=”Type ‘Yes'”]
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