Story as old as time. Fintechs may be cheaper or have a cooler app, but if you ever stray off the happy path, you can kiss your account and/or money goodbye.
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Been party to more than a couple situations with large banks who decided that you violated some hidden AML related policy and with zero recourse. You are lucky to even get your money out of those accounts without lengthy litigation.
Might happen more with fintech, but traditional banking does not remotely make you immune to this. Start doing anything interesting not “normal” and you’ll find out the hard way.
I agree in the sense of FDIC insurance and being nominally operating under the banking regulatory system - but those typically offer exactly zero protection to a whole category of not-crimes.
A bank can decide you are suspicious and simply freeze your accounts indefinitely - and stonewall you at the customer service level. It’s not like they are required by any law to respond to you or anything like that.
There is likely more recourse if you have enough funds worth perusing legal action to its final conclusion - if you win then you can be more assured the bank will exist six years later when your judgement finally hits. Enjoy paying those legal bills though.
Having witnessed this happen and seen six figure losses due to absolutely zero crime being committed, I basically operate under the mental model that any money within a bank or financial institution is their money and not yours.
A lot of banks are now fintechs - no branches, everything in an app, with a website if you are lucky. The rest would like to be like them to cut costs.
Wise is straightforward in the UK, where it is regulated by the same regulator as banks but subject to different rules (the big difference being customer fund ringfencing rather than a deposit guarantee). It varies in other countries but is locally regulated in a good many.
Reputable financial businesses follow regulations in countries in which they do not operate (e.g. by not opening accounts in countries where they are not authorised).