A bank holds the cash; the app shows it. Who is on the account and how the FDIC sees it is what you must get right.
Embedded banking means a software platform offers bank accounts or account-like balances inside its own product, while a partner bank holds the deposits. The platform owns the screens and the customer relationship. The bank and its technology provider hold the money, keep the records and set the rules. The account structure behind the product decides who the bank sees as owner and how FDIC insurance applies.
Two account structures
Stripe’s Treasury documentation describes the two structures most US embedded banking products use. A financial account is backed either by a demand deposit account (DDA) opened directly with Stripe’s banking partner, or by a for-benefit-of (FBO) arrangement that Stripe administers.
| Direct account (DDA) | Pooled account (FBO) | |
|---|---|---|
| Name in Stripe’s Dashboard | Checking account | Business account |
| Account holder in the bank’s records | The business itself | Funds held for the benefit of Stripe customers |
| Who keeps each customer’s balance | The bank | Stripe, reconciled against the bank balance |
| FDIC treatment Stripe describes | Can be eligible for ordinary deposit insurance | Can be eligible for pass-through insurance |
Stripe adds that account labels do not by themselves decide legal rights or insurance eligibility; the agreements and disclosures name the bank, the legal account holder and the terms. The FBO model is explained in more detail in fbo account.
How pass-through insurance works
The FDIC insures deposits placed by a third party “as if” the owner had opened the account, but only when three conditions hold:
- The funds are in fact owned by the principal, not by the third party that opened the account.
- The bank’s account records show the agency nature of the account, for example “XYZ for the benefit of (FBO) customers.”
- The records of the bank, the third party or another party show who the principals are and how much each owns.
The FDIC checks these conditions when a bank fails, not when the account is opened. If they are not met, the deposits are insured to the named owner, usually the third party, and added to its other deposits at the same bank. That can leave customer money uninsured. Standard coverage is $250,000 per depositor, per insured bank, for each ownership category, and it protects only against the failure of the insured bank. Stripe states it is not an FDIC-insured depository institution and names Fifth Third Bank, N.A. as the bank where its pass-through-eligible funds are held.
What a platform must build
Stripe’s Treasury for platforms lets Connect platforms offer funds storage, bill pay and cash-flow tools to eligible connected accounts. Stripe lists it in public preview in the UK and in private preview in the US and other countries, with access requested through its sales team. Its US marketing guide sets out the prerequisites before a platform onboards anyone:
- An application flow with the required disclosures, agreements and KYC fields, approved by Stripe Compliance.
- Planned fees and credits submitted to Stripe.
- Marketing pages and user interfaces approved by Stripe Compliance, with required disclosures.
- Customer service channels that take complaints and disputes.
- A way to send Stripe-generated money transmission receipts.
- Records of customer consent, marketing materials, communications and any statements.
The wording rules are strict. Stripe tells platforms not to call these accounts “bank accounts,” “deposit accounts,” “checking accounts” or “savings accounts,” because Stripe is not a bank. Insurance claims must use “eligible,” such as “eligible for FDIC pass-through insurance,” and never “FDIC insured.”
Choosing a structure
A direct account gives the clearest ownership record, because the bank lists the business as the account holder. In a pooled FBO account, the provider keeps the sub-ledger that pass-through insurance depends on: Stripe says it records each business’s share and reconciles it against the funds at the bank. A platform should know which structure its provider uses, and read the agreement that names the bank and the legal account holder.
For the wider model, see what is embedded finance and embedded finance vs banking as a service. Account numbers assigned per customer inside a pooled account are covered in virtual accounts.
