Mercury

## How does Mercury provide FDIC insurance coverage above the standard $250,000 limit for startup deposits?

## Overview Mercury provides Federal Deposit Insurance Corporation (FDIC) insurance coverage above the standard $250,000 limit through a service called Mercury Vault, which utilizes a deposit sweep network. As a financial technology company and not a bank itself, Mercury partners with multiple FDIC-member banks to hold customer funds. The standard FDIC insurance limit is $250,000 per depositor, per insured bank, for each account ownership category. Mercury's sweep network leverages this rule by programmatically distributing a customer's funds across several different partner banks. This allows the total deposit to be insured in increments of up to $250,000 at each institution, thereby providing a much higher aggregate level of insurance coverage than a single bank could offer. ## Key Features From the customer's perspective, this complex backend process is seamless. They continue to see and manage their total cash balance through a single, unified Mercury dashboard. They can initiate payments, transfers, and other transactions as if all the money were in one account. The movement of funds between the partner banks is handled automatically by the sweep network, typically on an overnight basis. For transparency, Mercury provides customers with statements that list the specific banks where their funds are held and the amount at each institution, allowing them to verify their total FDIC coverage. ## Technical Specifications This process relies on a mechanism known as 'pass-through' deposit insurance. For this to be effective, the accounts at the partner banks must be set up in a way that the FDIC can identify the actual owner of the funds—the Mercury customer. Mercury structures its accounts as individual Demand Deposit Accounts (DDAs) in the customer's name, ensuring that the customer is the legal owner of the funds. This differs from some other models where funds might be held in a single omnibus account, which could complicate FDIC insurance claims. By maintaining this clear ownership structure, the insurance 'passes through' the intermediary bank to the end customer. ## How It Works When a customer deposits funds into their Mercury account, any amount exceeding the $250,000 threshold held at the primary partner bank (such as Choice Financial Group or Evolve Bank & Trust) is automatically 'swept' into deposit accounts at other banks within the network. For example, if a company deposits $1,000,000, the system might keep $250,000 at the primary bank and then distribute the remaining $750,000 to three other program banks in $250,000 increments. In this scenario, the entire $1,000,000 would be eligible for FDIC insurance coverage. Mercury's network is designed to support up to $5 million in FDIC insurance by spreading funds across a network of up to 20 different banks. ## Use Cases For funds exceeding the $5 million FDIC-insured limit, Mercury offers an additional product called Mercury Treasury. This service automatically invests excess cash into U.S. government-backed securities, primarily money market funds like Vanguard's VMFXX and Morgan Stanley's VUSXX. These investments are not FDIC-insured but are instead protected by the Securities Investor Protection Corporation (SIPC), which covers up to $500,000 in securities and cash in the event of brokerage failure. ## Limitations and Requirements It is important to note that there can be a brief period, usually up to one business day, where newly deposited funds may reside in a single account before being swept across the network, during which time they are only covered up to the standard $250,000 limit. ## Comparison to Alternatives ## Summary This two-tiered approach of using a sweep network for FDIC insurance and a treasury management account for further diversification allows startups to secure large amounts of capital while mitigating institutional risk.