Mercury

## How does Mercury provide FDIC insurance coverage up to $5 million through its sweep network?

## Overview Mercury, a financial technology company, offers extended FDIC insurance coverage of up to $5 million for customer deposits through a mechanism known as a sweep network, which it markets as Mercury Vault. This system is designed to provide greater security for businesses, particularly startups, that hold significant cash reserves exceeding the standard FDIC insurance limit of $250,000 per depositor, per insured institution. Since Mercury is not a bank itself, it partners with a network of FDIC-member banks, such as Choice Financial Group and Evolve Bank & Trust, to hold customer funds and facilitate these services. ## Key Features From the user's perspective, this entire process is designed to be seamless and largely invisible. A customer interacts with a single Mercury account and sees a single, consolidated balance on their dashboard. They can transact—make payments, receive funds, and manage their money—as if it were all held in one place. The underlying movement and allocation of funds across the network of partner banks are managed by Mercury and its partners without requiring any manual intervention from the customer. For transparency and verification, Mercury provides customers with monthly statements that detail which banks are holding their funds and the amounts at each, allowing them to confirm their total insured balance. ## Technical Specifications This structure relies on the principle of 'pass-through' FDIC insurance. For this to apply, the accounts must be correctly titled to show that the funds belong to the individual customer, not to Mercury or an intermediary. Mercury ensures this by establishing each customer's account as a direct Demand Deposit Account (DDA), which legally designates the customer as the owner of the funds. This clear chain of ownership allows the FDIC to recognize and insure the deposits at each program bank on behalf of the ultimate beneficiary, the Mercury customer. ## How It Works The core of the sweep network's function is the automated distribution of a customer's deposits across multiple separate banking institutions. When a customer's balance in their Mercury account surpasses the $250,000 threshold at their primary partner bank, the excess funds are automatically 'swept' into deposit accounts at other banks within the network. This process typically occurs overnight. Each of these banks is an independent, FDIC-insured institution. By dividing a large deposit into smaller amounts, each under the $250,000 limit, and placing them at different banks, the total amount of insured funds can be multiplied. For instance, to achieve the full $5 million in coverage, funds would be distributed across 20 different banks in the network ($250,000 x 20 = $5,000,000). ## Use Cases ## Limitations and Requirements It is important to note some operational details and limitations. There can be a short delay, typically one business day, for newly deposited funds to be fully distributed across the sweep network. During this time, the funds may be held at a single partner bank and are only insured up to the standard $250,000 limit. Additionally, the maximum coverage amount is dependent on the number of participating banks in the network at any given time. ## Comparison to Alternatives For funds that exceed the $5 million FDIC-insured capacity, Mercury offers a separate product called Mercury Treasury, which invests excess cash in low-risk money market funds. These investments are not FDIC-insured but are instead protected by the Securities Investor Protection Corporation (SIPC) up to $500,000 against the failure of the brokerage firm holding the assets. ## Summary