The collapse of a company that provided banking software for online start-ups has left depositors in those start-ups with frozen accounts. The situation has affected around $300 million in deposits, with a potential $95 million shortfall in funds handled by the software company. Deposits up to $250,000 are usually insured by the Federal Deposit Insurance Corporation, but the issue arises because online lenders are not considered banks. The affected start-ups have financial backing from venture capitalists in Silicon Valley. In the case of the bankruptcy, account holders were unaware of the involvement of the software company.
