Brex

## How does Brex provide FDIC insurance coverage for business deposits compared to standard fintech wallets?

## Overview Brex provides Federal Deposit Insurance Corporation (FDIC) insurance coverage for business deposits through a multi-bank sweep program, which offers significantly more protection than the coverage available through many standard fintech wallets. This program, known as the 'Brex business account FDIC Sweep Program,' is designed to extend deposit protection well beyond the standard $250,000 limit per depositor, per insured bank. As of March 2023, Brex offers aggregate FDIC coverage of up to $6 million. This enhanced coverage is achieved by distributing, or 'sweeping,' a customer's uninvested funds across a large network of participating 'Program Banks.' Each bank in this network provides FDIC insurance up to the standard maximum limit, allowing the total coverage to be multiplied across the network. ## How It Works The mechanism for this sweep program involves several steps. When a business deposits funds into its Brex business account, the uninvested cash is first aggregated at a 'Clearing Bank,' identified as Column, N.A. From there, the funds are transferred to a settlement account at a third-party service provider before being systematically distributed into omnibus accounts at the various Program Banks in the network. This network consists of approximately 20 or more institutions. The entire sweep process typically takes up to two business days to complete. This multi-bank strategy stands in stark contrast to many standard fintech wallets that often partner with a single bank, thereby limiting their FDIC coverage to the standard $250,000 per depositor. ## Key Features There are specific conditions and limitations that apply to Brex's FDIC insurance coverage. The full $6 million in aggregate coverage is only effective once the funds have been successfully swept and deposited into the Program Banks. While funds are in transit—held at the Clearing Bank or in the settlement account—they are insured only up to the standard $250,000 in aggregate. This timing is a critical detail for businesses managing large balances. Furthermore, the coverage limit applies per depositor, which is defined by the Employer Identification Number (EIN), not per account. Opening multiple Brex accounts under the same EIN will not increase the total aggregate coverage limit. Customers are also responsible for monitoring their total deposits across all financial institutions. If a customer holds funds directly at one of Brex's Program Banks in an account outside of the Brex platform, those external balances will count toward the $250,000 FDIC limit at that specific institution. ## Technical Specifications It is also essential to distinguish between the types of protection offered for different assets within the Brex ecosystem. Funds held in the Brex business account and participating in the cash sweep program (referred to as 'Vault') are eligible for FDIC insurance. However, funds that are invested in securities, such as the Dreyfus Government Cash Management money market fund (DGVXX) through the 'Brex Treasury' service, are not FDIC-insured. Instead, these securities investments are protected by the Securities Investor Protection Corporation (SIPC). SIPC protection covers up to $500,000 in total value per customer, which includes a $250,000 limit for cash held in a brokerage account. This distinction is crucial for customers to understand the different risk profiles and protection schemes for their cash deposits versus their investments. ## Use Cases For transparency, Brex maintains and provides a 'Program Banks List' on its website, which is updated periodically. This list allows customers to see which institutions are holding their swept funds. Notable banks in the network have included Axos Bank, East West Bank, and UMB Bank. Customers have the option to opt out of having their funds placed at specific banks within the network by providing written notice. However, exercising this option may reduce their total available FDIC coverage, as it limits the number of banks across which their deposits can be distributed. ## Summary In conclusion, Brex's approach to deposit insurance utilizes a multi-bank sweep network to provide up to $6 million in aggregate FDIC coverage, a substantial increase over the $250,000 limit typical of single-bank fintech solutions. This is achieved by distributing funds across more than 20 partner banks. Businesses using this service must be aware that full coverage is contingent on the completion of the sweep process and that they are responsible for monitoring their total deposits at each program bank. Additionally, cash deposits (Vault) are FDIC-insured, while investments (Treasury) are SIPC-protected, a key difference in the type of protection provided.