In the long past, societies were cashless, with bartering and trading of goods and services in place of currency.

Subsequently, other items were used in the same way we use money. Pieces of leather, fur, or precious metals and jewels were exchanged, with the wealthy accumulating more of these possessions.

Then came coins and the money we know today – with even our grandparents sharing stories of how they kept wads of cash under their mattress or in another hard-to-reach area for safekeeping.

Nowadays though, our societies are becoming increasingly cashless once more, with online and digital banking, contactless cards and mobile pay systems replacing the coins and notes which once kept our pockets heavy and our purses jangling.

But did you ever stop to think about how problematic entirely digital banking and money exchange really is?

Not only does it disenfranchising some people, including the homeless and the elderly, there are also security risks inherent in managing our money in this way, with identity theft, surveillance, and data breaches all more of a danger in a system that is vulnerable to cybercrime.

This became immediately apparent to customers of savings startups Yotta and Juno, when they saw their savings plummet to zero overnight in May last year.

The first sign of something being wrong was when they found themselves locked out of their banking apps, with little communication as to what was going on.

As CNBC reported, the middleman financial tech company Synapse had collapsed, taking thousands of Americans’ hard-saved cash with it.

And according to the report, the customers still don’t have access to their accounts, with their cash vanishing into the tech abyss.

Given that customers surveyed by CNBC had lost between $7,000 to close to $300,000, it’s understandable that these financially-responsible Americans have been lost devastated and incensed about what has happened to their cash.

And for good reason. Kayla Morris, a retired teacher from Texas, had saved hundreds of thousands of dollars from the sale of her home, and locked it away in the savings account for safekeeping.

But now the issue has gone to court, and compensation has been offered to the customers, the situation is worse than ever, as Morris explained to CNBC:

“We were informed last Monday that Evolve was only going to pay us $500 out of that $280,000. It’s just devastating.”

In total, according to CNBC, $64.9 million is owed, but only $11.8 million is being offered in return.

How can so much money go missing overnight?

Well in part, it’s because Yotta and Juno aren’t really banks at all. In fact, they were just saving accounts backed up by financial tech companies like Synapse, which linked them to other companies who provided funds. But when Synapse’s financial backers pulled out, they went into bankruptcy, taking around $96 million of customer cash along with it.

It seems unusual that so much money can just disappear, but that’s how the financial world works. Even banks are constantly lending and exchanging with your cash – but big banks are able to do this and still give you immediate access to your money because of how many funds they have in reserve.

But when, for whatever reason, a bank or financial service provider goes under, their lack of hold on your cash becomes immediately apparent.

And the sad thing for customers of savings startups is that, unlike traditional banks, the funds aren’t guaranteed by the US government, nor are they regulated to the same extent.

So why do people use fintech accounts like Yotta and Juno?

Well mostly because their interest rates are way better than traditional banks, offering the opportunity for their savings to grow at a faster rate.

This seems like a financially responsible choice – and it would be, so long as the middlemen firms that support the savings startups actually hold strong.

And for many of the customers, their judgement was sound: they were merely misled.

According to CNBC, Synapse contracts received by customers of the savings accounts reassured them that their money was insured up to the FDIC up to $250,000.

So it’s no wonder that the savers were so aghast to learn that this was not, in fact, the case with the FDIC explaining that it cannot guarantee the return of money since it’s insurance does not cover savings startups like these.

But with the court case ongoing, the FDIC unable to act and the bankrupt fintech company refusing to do so, the broke clients are left in financial dire straits and with one key question in mind.

Where is their money now?

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