Some FinTechs are safer than banks 🏦; Are in-car payments the future? 🚘 💳; Bitcoin to hit $1 million in 3 months? 👀
FinTech is Eating the World, 21 March
Hey Everyone,
Good morning! Due to technical problems, yesterday’s issue is coming out late but it’s absolutely worth the wait. Today we’re looking at FinTechs that are safer than banks (still few understand this), in-car payments that could be the future (& one firm that has a solid strategy for it), and question whether Bitcoin can hit $1 million in 3 months (AI has a solid commentary on this too!). Let’s jump straight into the burning stuff 🌶
Some FinTechs are safer than banks 🏦
Learning from SVB collapse💡If there’s one thing we all can learn from the collapse of Silicon Valley Bank is that risk management is still widely ignored. More importantly, proper diversification is crucial and that applies not only to banks (=SVB) but also to their customers, whether startups or big corporates.
In fact, what it has also shown us is that banks might not be the best place to keep your money. And this is where FinTechs come for help.
More on this 👉 Unlike FDIC-insured financial institutions (FIs) that can use clients’ deposits to generate revenue (which thus exposes clients to the possible loss of funds in the case of insolvency) FinTechs that have an electronic money institution (EMI) license have the mandate to protect customer funds. This is commonly known as “safeguarding.” Here’s how it differs from fractional banking:
As a result, customer funds are kept separate from the institution’s, and EMIs are only permitted to access those funds when executing clients’ instructions regarding a payment service or the issuance of e-money.
More importantly, there is no limit as to how much can be recovered in the case of a financial crisis. This could have been a key benefit EMIs would have given to SVB customers, many of whom had millions deposited in their accounts.
Why is this important? Well, US customers with deposits at SVB couldn’t count on recovering more than $250,000, the maximum covered by Federal Deposit Insurance Corp. (FDIC) insurance. Other countries have even smaller limits.
✈️ THE TAKEAWAY
Safer than banks 🏦 While the common misconception that the safest place to keep your money at the bank is still there, the collapse of SVB should be a good wake-up call from this dream. It’s not only crucial to diversify your banking partners, but it’s highly advisable to consider working with EMIs that unlike FDIC-insured banks are mandated to protect customer funds and safeguard them. Not only does this keep your funds safe but more importantly there is no limit on how much can be recovered in the case of a financial crisis with safeguarding, offering a key benefit over traditional insurance solutions. Giannis learned this before everyone else:
