The FDIC's Proposed "Synapse" Rule Affects Deposit Accounts Opened By Fintech Custodians

On September 17th, the Federal Deposit Insurance Corporation ("FDIC") issued a  proposed rule entitled “Recordkeeping for Custodial Accounts” with comments due sixty days from the date of publication in the Federal Register (it has not yet been published). The rule impacts a variety of custodial accounts and has the potential to significantly impact prepaid cards, payment apps and fintech-related deposit offerings because the banks holding the funds in custody will now need to impose additional requirements and policies on these kinds of accounts. As it is, fintechs can find it challenging and expensive to find a bank willing to maintain these kinds of accounts for them. This rule could make that particular pain point much worse.