Pass-through deposit insurance
Pass-through deposit insurance is FDIC coverage that extends through a custodial account to the underlying owners of the funds. When a third party places customer funds at an insured bank and the FDIC’s requirements are met, each customer’s funds may be insured up to $250,000 per depositor, per insured bank, per ownership category, subject to satisfaction of conditions for pass-through deposit insurance.
By Nikhil Srinivasan, Founder & CEOLast updated July 2026
The conditions are where structures succeed or fail: account records must disclose the custodial relationship, and records — at the bank or the custodian — must identify each owner and their balance. FDIC insurance covers the failure of the insured bank; it does not protect against the failure of a nonbank platform, and when a custodian’s ownership records are incomplete, tracing whose money is whose is exactly where customers get hurt.
Infinite’s account structure is built for this test: funds sit in accounts at chartered, FDIC-insured partner banks, and every customer gets a unique, individually titled demand deposit account rather than a sub-ledger entry in a pooled account — so ownership lives in account records, not in a platform’s spreadsheet.
Frequently asked questions
What conditions must be met for pass-through deposit insurance?
Account records must disclose the custodial relationship, and records — at the bank or the custodian — must identify each owner and their balance. When those records are incomplete, coverage analysis breaks down.
Do FBO accounts have pass-through FDIC insurance?
Yes, when the FDIC’s conditions are met. An FBO ("for benefit of") account pools many customers’ funds in one custodial account, and coverage passes through only if records identify each owner and their balance. The 2024 Synapse collapse showed what happens when those records are incomplete — customers wait while ownership gets reconstructed.
Does FDIC insurance protect against a fintech’s failure?
No. FDIC insurance covers the failure of the insured bank; it does not protect against the failure or insolvency of a nonbank platform. That distinction is why account structure and ownership records matter. Regulatory disclosure
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