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I don't see anything in the FAQ about Digit being FDIC-insured so that when they go bankrupt or get hacked, I'll have some chance of getting my money back. Thi

I don't see anything in the FAQ about Digit being FDIC-insured so that when they go bankrupt or get hacked, I'll have some chance of getting my money back. This: https://help.digit.co/hc/en-us/articles/203931308-What-happens-to-my-funds-if-Digit-goes-out-of-business- https://help.digit.co/hc/en-us/articles/203931308-What-happe... might be the least reassuring response possible to that question. And it's explicitly contradicted by this response: https://help.digit.co/hc/en-us/articles/217382378-How-does-Digit-make-money- https://help.digit.co/hc/en-us/articles/217382378-How-does-D... > Today, we make money like a traditional bank does, by accruing interest on the savings we hold for you. If Digit is making interest on (my) money, then said funds are probably in a commercial bank account in Digit's name somewhere. If said funds are in a commercial bank account in Digit's name somewhere, bankruptcy is going to FREEZE those funds. They aren't going to be transferred back to me. And Digit's investors are going to have every reason to argue that said funds SHOULD be available to pay off Digit's debts. Don't use this.

kchoudhu 11y ago
They're probably striping cash across multiple banks in order to maximize FDIC coverage. If the money is lost from the backend, they'll be made whole. The rest of their business model reeks, though.
- deleted 11y ago
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Johnie 11y ago
Digit takes advantage of FDIC pass through insurance. Your money is separate from Digit's money. If Digit goes bankrupt, your money still belongs to you, not to Digit's investors. Disclaimer: I don't work for Digit, but have been doing a lot of research in this area.
neffy 11y ago
Indeed. Plus a traditional bank makes money from the interest paid on its loans, and then pays interest on its savings.
- Johnie 11y ago
  You'd be surprised how broken/misallocated the consumer deposit market is. Because of current market conditions, it is costing the large banks money to hold your money. There is excess deposits beyond what they are able/want to lend out. Some banks are actively trying to shed deposits by charging fees and other methods [1]. For large depositors, some of these banks are actually charging the customers to hold their money [2] On the other hand, smaller commercial lending banks are having a hard time attracting deposits. [1] https://www.pwc.com/us/en/financial-services/publications/viewpoints/assets/fs-viewpoint-driving-deposit-value-in-excess-liquidity.pdf https://www.pwc.com/us/en/financial-services/publications/vi... [2] http://www.wsj.com/articles/big-banks-to-americas-companies-we-dont-want-your-cash-1445161083 http://www.wsj.com/articles/big-banks-to-americas-companies-...

kchoudhu 11y ago

They're probably striping cash across multiple banks in order to maximize FDIC coverage. If the money is lost from the backend, they'll be made whole. The rest of their business model reeks, though.

deleted 11y ago
[deleted]

Johnie 11y ago

Digit takes advantage of FDIC pass through insurance. Your money is separate from Digit's money. If Digit goes bankrupt, your money still belongs to you, not to Digit's investors. Disclaimer: I don't work for Digit, but have been doing a lot of research in this area.

neffy 11y ago

Indeed. Plus a traditional bank makes money from the interest paid on its loans, and then pays interest on its savings.

Johnie 11y ago
You'd be surprised how broken/misallocated the consumer deposit market is. Because of current market conditions, it is costing the large banks money to hold your money. There is excess deposits beyond what they are able/want to lend out. Some banks are actively trying to shed deposits by charging fees and other methods [1]. For large depositors, some of these banks are actually charging the customers to hold their money [2] On the other hand, smaller commercial lending banks are having a hard time attracting deposits. [1] https://www.pwc.com/us/en/financial-services/publications/viewpoints/assets/fs-viewpoint-driving-deposit-value-in-excess-liquidity.pdf https://www.pwc.com/us/en/financial-services/publications/vi... [2] http://www.wsj.com/articles/big-banks-to-americas-companies-we-dont-want-your-cash-1445161083 http://www.wsj.com/articles/big-banks-to-americas-companies-...