How to Keep Your Money Safe if Your Online Lender Is Not a Bank

If it looks like a bank, advertises like a bank and accepts money like a bank — it still might not be a bank.

That is the lesson being meted out in painful fashion to tens of thousands of depositors who entrusted their savings to online-only lenders. They have names like Juno, Yieldstreet and Yotta and advertise accounts that pay high interest rates and offer protection from the Federal Deposit Insurance Corporation, the U.S. regulator entrusted with rescuing failed banks.

Those features made them and other popular banking start-ups with similar branding — such as Betterment, Chime and Wealthfront — sound an awful lot like banks. But to the surprise of many depositors, these companies merely collect money and funnel it through intermediaries to banks.

This may have seemed like a rather academic point before this year when the collapse of Synapse Financial Technologies — a software provider that sat in the middle of this chain — put into sharp relief the risk that customers face when using these new lenders, rather than depositing money directly into a traditional bank. Because Synapse was not a bank, the F.D.I.C. insurance did not automatically apply, and now nearly $100 million of deposits have been frozen or lost.