Banks, Fintechs Balk at Scope of FDIC’s Post-Synapse Proposal

US banking and fintech trade groups called on the Federal Deposit Insurance Corp. to broaden exemptions in a proposal that would require banks to closely monitor accounts managed by fintech partners—or withdraw the plan altogether.

The FDIC released its proposal in September in the wake of banking-as-as-service provider Synapse Financial Technologies Inc.’s calamitous bankruptcy.

Andreessen Horowitz-backed Synapse served as a go-between for fintechs such as Yotta Technologies Inc. and traditional lenders such as Evolve Bank & Trust, providing ledgering and other compliance services. When Synapse failed, banks couldn’t account for fintech user accounts, and many customers were locked out ...