I wonder why no one has said it yet but Mercury will come out the biggest winner from this mess. I can't estimate how the traffic from SVB > Mercury has been but I saw a post by Arc.tech saying they'd received hundreds of millions in deposits between 8 - 10 March.
Given Mercury was a more popular contender, I'm going to bet they had an inflow of basically double-digit billions.
But mass inflows of deposits are exactly how SVB got into the situation it's in now. You have to pay interest on the deposits. I'd much rather go to a truly "too big to fail" bank that can easily cover the deposit interest with a diverse line of business.
I don't think Mercury pays any interest on their regular checking or savings accounts.
They offer treasury accounts that you can move money to and buy securities if you want yield.
So I don't think they have too much risk as far as interest on deposits. But what worries me, as a small business owner that has been using and loving Mercury for a few years now is that they offer free domestic and international wire transfers and I worry that they might start charging for that. It is the first bank I have had that did free international wires and I actually use that frequently. My last bank charged $85 and I literally had to fax a signed form to them to get it done.
The thing I don't know is if there is a per transaction fee that the banks pay. I assumed that there is and that Mercury was just eating the cost as a marketing expense.
Do they pay anything at all for business accounts? It wasn't even legal to provide interest checking and savings to business accounts for a few years after dodd-frank. I haven't seen a lot of bank jump to offer it.
> mass inflows of deposits are exactly how SVB got into the situation it's in now
It gave them the opportunity to make the mistakes they made. It didn't cause them. If you have more deposits than you can responsibly invest, you cut your rates until you can.
Mercury just announced a new cash management / CDARS account to provide up to $3mm of FDIC coverage through 12 partner banks, with plans for potentially more. I would hope the lesson from SVB's collapse is don't put your eggs all in one basket, not put them in the biggest basket you can find.
(That said, said service to split your eggs up doesn't need to be Mercury - they're just the VC-backed startup darling here. There's plenty of other banks that offer these services.).
Because (apparently; I'm just reading from their web site) they deposit your funds into 12 separate accounts at 12 separate FDIC banks so you are insured up to $3M and a single-bank failure can at worst take 1/12 of your deposits.
Seems like services like this should be more popular.
The problem here is one of fiscal immaturity at startups. SVB offered ICS accounts but from what I'm seeing few startups put their money into them. My bet is that startups mature enough to have a proper CFO weren't as impacted by this mess.
from what I've read, they're a standard practice in traditional finance/risk management circles? it's what makes the whole situation with SVB so much more mind-bending. this isn't some new technology that's never existed before. why were VCs insisting that money had to be held at SVB, knowing that by doing so, they'd put their funded companies above FDIC insurance thresholds?
Am I the only one wondering why they're allowed to circumvent the $250K cap like this?
Presumably there's a cap for a reason, and presumably it's to protect ordinary Americans who rarely have $250K in assets, and not rich people who can literally afford to lose that much and still be rich.
No, this is exactly what's supposed to happen. The FDIC wants large depositors to spread their deposits over many banks as this reduces overall risk. The limit is not about protecting "ordinary Americans" over "rich people".
Based on the description of what they do, how is that circumventing? You can do the same thing they're doing by depositing into multiple banks too. The only difference is that Mercury is the custodian, and doing it for you
does that mean that every time you purchase a coffee, 13 transactions take place to keep the distribution balanced?
otherwise 1/12th of your deposits would be the /best case scenario/ not the worst case.. it comes down to the details of how they balance the balances.
Mercury isn't really a bank. They are a nice, new UI that uses real banks behind the scenes. The main bank they use is Evolve bank and trust and has been around since 1987. But as of last year, they just had around $1B in assets under management.
Brex and Gusto have been nagging us to setup a new bank account, but is this urgently necessary if SVB ACH is operating normally now? What are other people doing?
We'll obviously open a new account eventually but it doesn't seem urgent?
If I was a founder in the US right now I'd be opening at least 1 other bank account today and getting at least half my funds into that account. I would also never operate without at least 2 bank accounts.
Operating a business and having employees is a huge responsibility. If people are depending on you to manage the risk of your business so they can buy groceries it's important to take that as seriously as you can.
We are taking the responsibility seriously. We have payday on Wednesday and ACH configured with Gusto. They told us to send them a wire by 11am Wednesday, but this was prior to last night's announcement. So I'm wondering if this has changed.
It's likely not possible to open an account at another bank, wire all our money from SVB to there, and then wire the money to Gusto by 11am on Wednesday. So in the interest of ensuring employees are paid, the fastest option will likely be using SVB.
You're right that operating with two bank accounts now sounds like a good idea. We actually have that already because our structure involves a US parent corporation and a UK subsidiary, but the second bank account is in the UK (thankfully not with SVB UK, although ironically that's because we dragged our feet on moving to it).
I didn't mean to imply you aren't taking it seriously. Just pointing out what I'd be doing today.
Glad to hear you're focusing on getting that money flowing through to your employees.
Sorry you're in this situation. I know how frustrating it can be when you have to enter a reactive state that takes your attention away from your core mission.
Does Gusto/Workday make pulling from multiple banks transparent? Seems like a value add for them to add in a way to seamlessly pull evenly from multiple accounts, and doesn't immediately strike me as overly difficult from a technical perspective.
Hi there, co-founder of Gusto here. To clarify — If you have not yet updated your bank account on file to another (see article), you will have to wire funds to Gusto in order to make payroll on time. Log in to the app, run payroll, and you’ll get a prompt with more details and the specific cut-off, but it’s usually 10am PST in the morning of payroll.
In terms, of getting a new bank set up, I’ve seen people open bank accounts same-day with Mercury (online) or Chase (walking into a branch). Wiring funds from SVB to one of these banks should take <24hr to complete.
But yes, you CAN initiate a wire transfer from SVB if you prefer to do that. Note that some SVB customers are seeing issues with the portal right now (probably given high traffic).
Great to hear from you! Thanks for the information. I'm a bit confused though. We have an ACH auto-pay schedule configured to take payment tonight (for payday on Wednesday). I thought ACH from SVB is still working. Is Gusto choosing not to process those payments? And if so, do you plan to eventually resume processing ACH payments from SVB?
Since the ACH payment is scheduled for tonight, we were planning on seeing if it fails, and if it does, sending the wire tomorrow so it arrives by 11am on Wednesday as required.
Thanks for the reply. That's right, if you use SVB you have the fund payroll through a wire transfer. The wire can come from any account (including an SVB account). ACH won't work.
Thanks. It would be nice if the dashboard reflected that instead of showing the ACH payment as scheduled for tonight, but of course I understand we're all working with little time or information. Also maybe you could update your FAQ to explain that Gusto will not attempt to process any ACH payments from SVB, despite them operating normally from the SVB side. At the moment the document only implies this and you need to read between the lines to understand why a wire is necessary.
I also agree with the other commenter downthread that this is adding an unnecessary layer of complexity, but I understand why you might be doing it to avoid overdrawing an account that has been emptied. Still, I'm not sure this default opt-out is the best solution - maybe it would be better to ask those who did move money out of SVB to cancel their ACH schedule, rather than unilaterally ceasing ACH processing and asking those who didn't move money out of SVB to change their method of payment.
Thanks for your responsiveness. We'll try initiating the wire, although we aren't able to log into SVB at all right now (503 errors and redirects back to login screen). I sure wish we could use ACH, since I assume it'd be more reliable for Gusto to download some ACH transactions from an SFTP server once, rather than sending every customer to SVB to attempt a wire transfer...
Always have a backup. I have 2 corporate bank accounts (at least). Neither of them are SVB. Chase is solid. Avoid shiny objects. Startups have enough risk in their daily existence, the last thing you need is to introduce unnecessary risk. Be a revolutionary where it matters. Be boring, steady, and predictable everywhere else.
Personally, I'd stay with a "boring" bank for at least one account. You can always open more than one account. Don't put all your eggs in one basket. Brex sure, but they could be a flash in the pan. Have "boring" banks as a backup. I bank with Chase and a local FCU in addition to anything else.
You should read carefully for anything where you put your hard-earned money.
"Brex Cash is not a bank account; it is a cash management account offered by Brex Treasury (a FINRA-registered broker-dealer) that functions very much like a business bank account.
You can use your Brex Cash account to securely deposit checks (including via mobile app); send and receive payments via ACH, check, and wire—even internationally; and manage spend for your company’s different users.
Brex Cash also allows you to choose how your money is stored. You can elect to keep your deposits at a Brex partner bank, and if you do, you’ll be eligible for FDIC insurance up to $2,250,000 in total. The other option is to invest your deposits into a government money market mutual fund. You can also use any combination of these two options.
No matter how you choose to store your funds, your Brex account gives you unlimited corporate credit cards for secure, convenient spending. The cards are automatically paid daily like a debit card—while giving you cash back on every purchase and building your business credit.
Note: Unlike debit cards, Brex cards cannot be used to make cash deposits or ATM withdrawals."
Your FDIC insurance and exposure is entirely up to you at Brex.
I would think twice about them after they unceremoniously cut off a bunch of their customers, followed by the higher ups responding to the outrage with lame PR corpspeak
It is not urgent. All depositors assets, uninsured & insured, are being backstopped by the Treasury. No need to worry if your assets are being held by the FDIC receivership. Now, if your assets are at First Republic, there might be some concern, but I believe that the Treasury has sent a strong signal that depositors will be made whole.
You're right, "sent a strong signal" is deliberately ambiguous, in the sense that there has not been a declared policy shift of the FDIC to protect uninsured deposits. However, given that SVB and Signature were not previously declared Systematically Important Banks, yet all of their depositors were made whole, should give depositors confidence that that the Federal Government will see they are protected.
Now, whether the FDIC should make this a declared policy position remains to be seen, but I believe that would require congressional action.
Website is a bit flakey under load, but that's going so subside after today.
I would recommend not YOLOing your money into multiple accounts today - rushed decisions are what got us here. If your immediate payroll issue is sorted, spend today and tomorrow working on a diversification and treasury plan with your team, then execute that over the next week or two. At this point, poorly configured wire transfers and scams are much more of a risk than your SVB balance going away.
I am going to run payroll from my personal checking account because gusto wants a different bank to SVB. I will then wire funds from SVB to my personal account. Then I will find a new business banking provider.
Why the hell would they want a different bank than the one being run by the US government?
The whole point of the herculean effort of a all-deposits-protected federal takeover is to prevent disruption of this kind by providing the firmest possible guarantees.
Hi there, co-founder of Gusto here. Running payroll from your personal account won't work. It has to be a business account. Please see below a msg I wrote earlier in the thread about some advice on how to get that done on time --
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To clarify — If you have not yet updated your bank account on file to another (see article), you will have to wire funds to Gusto in order to make payroll on time. Log in to the app, run payroll, and you’ll get a prompt with more details and the specific cut-off, but it’s usually 10am PST in the morning of payroll.
In terms, of getting a new bank set up, I’ve seen people open bank accounts same-day with Mercury (online) or Chase (walking into a branch). Wiring funds from SVB to one of these banks should take <24hr to complete.
But yes, you CAN initiate a wire transfer from SVB if you prefer to do that. Note that some SVB customers are seeing issues with the portal right now (probably given high traffic).
The DINB, as I understand it, is now closed and all assets moved to a new entity called Silicon Valley Bank, NA which is a “bridge bank” operated by the FDIC and should operate like any other bank does. Until another bank buys it.
It's quite bizarre and I'm also wondering this. I have no idea if it's possible to deposit into SVB. But they claim that the bank is operating normally.
Given Mercury was a more popular contender, I'm going to bet they had an inflow of basically double-digit billions.