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Modular banking is the practice of diversifying funds across multiple banking institutions in order to fortify wallet balances and mitigate risks. Rather than consolidating all funds in a single bank account, distributing wallet balances among different banks provides an added layer of security and protects investor funds above the FDIC maximum and against any singular bank default.

Upright utilizes a modular banking partner to help protect balances of our passive real estate investors within the Upright wallet, as well as investments that have not yet been disbursed to our borrowers. Our partner deposits those funds into multiple banks throughout the U.S. — all up to the FDIC-insured coverage limit — to ensure that all our capital is protected against any banking failure.

Benefits of Modular Banking

  1. Risk Mitigation: Modular banking mitigates risk by diversifying balances across multiple banks. By distributing funds, investment dollars have reduced exposure to any single financial institution, thereby lowering the potential impact of adverse events such as bank failures or financial instability. This approach safeguards investor funds and provides a safety net, ensuring that a significant portion of capital and wallet balances remain protected and accessible.

  2. Enhanced Security: Utilizing modular banking enhances the overall security of investor funds. In the event of a security breach or fraud, having capital spread across various accounts in various insured institutions reduces the risk of substantial losses. It adds an extra layer of protection, safeguarding assets.

  3. Investor Confidence: Implementing modular banking fosters investor confidence. By proactively diversifying funds across multiple banks, Upright demonstrates a commitment to risk management and the security of investor assets.

  4. Regulatory Compliance: Adopting modular banking practices aligns with regulatory compliance obligations. Companies are often required to maintain certain levels of capital adequacy and risk management measures. By diversifying wallet balances, capital, and other funds through modular banking, companies demonstrate their commitment to fulfilling these regulatory requirements, which can contribute to a positive corporate reputation and mitigate potential legal or compliance risks.

Understanding FDIC insurance 

FDIC (Federal Deposit Insurance Corporation) insurance is a program in the United States that provides deposit insurance for money held in banks. It’s designed to protect depositors and promote stability in the banking system. 

The FDIC provides insurance coverage of $250,000 per depositor, per insured bank (standard coverage as of 2021). In our case, and the case of modular banking, we utilize multiple FDIC-insured banks, each holding up to $250,000 of investment funds to ensure as much of our capital is insured against bank failure as possible at all times. If all of our capital was in one bank, we would only be insured up to $250,000, putting us at huge risk.

Most banks in the U.S. are FDIC-insured, including commercial banks, savings banks, and savings associations. FDIC insurance also covers a variety of deposit accounts, including checking, savings, money market, and CDs, as well as individual accounts, joint, IRAs, etc. It does not cover investment products like stocks or bonds, in the same way as investments on our Platform are not insured by the FDIC or guaranteed a return. However, the money you invest with us to originate loans is insured.

Overall, FDIC insurance provides an important safety net for depositors in the United States, ensuring that even if a bank fails, depositors' funds up to the coverage limit are protected. 

Modular banking, when applied to protect wallet balances between investments, safeguards investor funds and mitigates investment risks. By diversifying wallet balances across multiple banking institutions, companies can effectively manage risks, enhance security, boost investor confidence, optimize liquidity, and ensure regulatory compliance. Embracing the power of modular banking enables companies to fortify their financial infrastructure, protect investor assets, and establish a solid foundation for sustainable growth.

Invest confidently with us today on our Platform, or contact our Investor Relations team at Today

Upright is a financial technology company, not a Bank. 

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