To be clear, the Synapse case is not clearly a financial strength issue in the sense that they took risks with customer funds, but rather an extremely serious record keeping/accounting/auditing one. Synapse was supposed to be nothing more than a "dumb pipe" between customers, fintechs, and underlying traditional bank accounts.
That's the problem with those things. Who's responsible for plumbing leaks?
A sizable fraction of what bank employees do involves error conditions and fraud. The happy path has been automated for decades. One of the big discoveries when PayPal started up was that they were not in the money transfer business. They were in the fraud prevention business.
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To be clear, the Synapse case is not clearly a financial strength issue in the sense that they took risks with customer funds, but rather an extremely serious record keeping/accounting/auditing one. Synapse was supposed to be nothing more than a "dumb pipe" between customers, fintechs, and underlying traditional bank accounts.
That's the problem with those things. Who's responsible for plumbing leaks?
A sizable fraction of what bank employees do involves error conditions and fraud. The happy path has been automated for decades. One of the big discoveries when PayPal started up was that they were not in the money transfer business. They were in the fraud prevention business.