Comment by vel0city

> they split the accounts to keep up with the limit

You're right about that, they (and other fintechs) have tons of accounts split across a ton of tiny little banks. All of those accounts and banks are FDIC insured.

But, those aren't the end client's accounts. They're shared pools of money from all the clients. When Alice and Bob both give the fintech $100, the fintech may split up that total $200 across dozens of different accounts. When Alice wants $20 back, it might not even come from accounts where her initial $100 landed, that money probably got sent to Charlie when he wanted his $1,000 back.

The fintech's money was FDIC insured. If any of those banks failed, all the fintech's deposits would be guaranteed. But if the fintech mismanaged their client funds and suddenly their outstanding balances in their client databases are larger than the sum of all the balances of all their hundreds of FDIC bank accounts, their clients are SOL.