When a Fintech Checking Account Goes Bad

It goes really bad

Andy Spears
3 min readMar 6

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Photo by Joshua Hoehne on Unsplash

Seems easy, right?

You have your job direct deposit your money into an account you can easily access on your phone.

Everything integrates with your online/app-based payment system.

Sure, it’s not FDIC-insured -but, well, that’s an antiquated system based on Depression-era worries.

Umm.

Well, Jason Mikula over at Fintech Business Weekly has some … news.

It’s not good.

Sure, you might lose out if you park your cash at a Big 5 bank — I mean, it’s not like they treat you well or pay decent interest.

But there are plenty of smaller banks and credit unions that treat customers well, pay decent interest rates, AND are insured by the FDIC or NCUA.

Anyway, here’s a story of fintech checking gone wrong.

Nonbank fintech account: Eco.

Facts from Jason: Not good.

Here we go:

Eco was offering 2.5%-5% interest on checking accounts IF you used Direct Deposit. That is, Eco got your cash right away and you got a damn good interest rate considering that pre-2021, inflation was basically zero and banks were paying almost nothing on deposit accounts.

From Mikula:

Funds held as USDC aren’t actually FDIC insured and Eco’s current user agreement warns that “Eco does not control the issuance, redemption, or backing of USDC and cannot guarantee that 1 USDC will always be exchangeable for 1 U.S. Dollar.

Over time, Eco adjusted its messaging regarding deposit insurance, telling users Eco’s offering was constructed in such a way that FDIC insurance wasn’t needed and that, in fact, most consumers “don’t actually need” FDIC insurance — even publishing a blog post on the topic, which has since been scrubbed from its site.

So, yeah, Eco was investing in an unproven Cryptocurrency. But, well, ok.

It could work out.

Except, well, it didn’t:

So, Eco was telling customers it was earning yield to pay the rates on deposit accounts from investments in…

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Andy Spears

Writer and policy advocate living in Nashville, TN —Public Policy Ph.D. — writes on education policy, consumer affairs, and more . . .