Robinhood’s stumble is a wake-up call
For nearly 90 years, U.S. deposit accounts have been the gold standard for security, safety and soundness. Strong regulations to ensure banks have a solid foundation serve as the first line of defense, but the Federal Deposit Insurance Corp. plays an important role as a backstop protecting consumers’ deposits.
American families and businesses are used to the protections offered by the FDIC and have come to expect them. They know their paychecks and other deposits are protected.
That is why the Consumer Bankers Association and its member institutions have been growing increasingly concerned as new nonbank financial institutions enter the deposit space. It is not out of a fear of competition — after all there are more than 5,000 banks across the country, so competition is something banks are well prepared for and accustomed to. What is a concern, however, is the differences in protections these accounts offer consumers.