Funds flow diagram

What is a funds flow diagram?

A funds flow diagram shows a detailed view of how money will flow into, within, and out of Synctera’s ecosystem as your customers use your FinTech app or embedded banking product. 

Synctera’s Solutions Consulting team works with you to create your funds flow diagram by deeply understanding your use case and customer journey. When meeting with the Solutions Consulting team, you will be asked to explain your product vision and walk through some common customer journeys for your product. Preparing this information ahead of time will help our team craft a thorough and comprehensive funds flow for your product. 

The Solutions Consulting team uses the information gathered during the discussion to create a diagram that illustrates how the funds flow through your product. The funds flow is structured in a way that provides a delightful experience for your customers while ensuring regulatory compliance. 

Going through this process will determine the types of bank accounts you will need, along with the specific Synctera products and features you will require.

How is the funds flow diagram used?

The funds flow diagram helps both your Sponsor Bank and Synctera’s Implementation & Onboarding (I&O) team understand how your financial product will function.

When going through the bank due diligence process with your potential Sponsor Bank, the funds flow diagram helps the bank to understand the details of your use case and how money will flow in and out. Understanding these details will help the bank perform the necessary oversight and also ensure that your use case aligns with the programs they support. 

When onboarding with Synctera, the funds flow diagram is used to help the I&O team understand what Synctera products need to be implemented and how to best configure the APIs to support your use case. Also, if you are utilizing any external vendors as a part of your product the funds flow diagram will detail out how these vendors will be integrated into the overall solution.

What information is included in the funds flow diagram?

The funds flow diagram will typically answer three key questions as to how your financial product will be used:

1. How will money enter your financial ecosystem? For example, will users connect an external bank account or will it be by other means?
2. How does money move your financial ecosystem and what accounts are used?
3. How will the money leave your ecosystem? In other words, what will your customers be spending their money on using your financial product? 

Let’s dive in a little deeper into these three areas of a funds flow diagram:

How does money enter your financial ecosystem?

Your customers will need a way to fund their bank account in your product. Once the money is in the account they can use it to power debit card transactions, ACH transfers, or for savings purposes. 

There are four common ways that money enters your financial product:

• Connecting an external bank account - customers can connect an account that they have at another financial institution and transfer money into the bank account powered by your product. Synctera has a direct integration with Plaid, making this account connection seamless for your customers.
• Remote Check Deposit - customers can use their mobile device to deposit a check to fund the account
• Direct deposit - customers can receive an electronic deposit of funds into their account from an external bank account. This is conducted via the ACH network.
• Transfer with Card - customers can move money from their debit cards to fund their checking or savings accounts in real time using the Visa or Mastercard networks.

How does money move through your financial ecosystem and what accounts are used?

In order to operate your financial product, there are multiple bank accounts that you set up with your Sponsor Bank. These various accounts, which are all seamlessly integrated into the Synctera platform, serve different purposes and work in unison to act as the financial backbone for your product.

When creating the funds flow diagram, it’s important to delineate how these multiple accounts will be used and how money will flow into and between them when your product is being used. 

Below we explain what these different accounts are and how they’re used:

• Settlement Account - the settlement account tracks all the money entering and exiting the program from external sources, such as debit cards, ACH, Wires, and Transfer with Card. This account is monitored for end of day reconciliation. 
• FBO Account - the FBO account houses all of the program accounts (consumer and business). The sponsor bank sees one account balance for all of the accounts within the program. It is important to note, however, that all accounts within this FBO account are FDIC insured and have their own account and routing numbers.
• Adjustment Accounts - adjustment accounts are utilized for adjustments such as P&L, fraud, and interest payments
• Reserve Accounts - the reserve account holds the 25K initial reserve requirement. This money is allocated for fraud loss implications.
• Operating Account - the operating account is used to bring external fintech money into the program, in the form of incentives provided by the fintech. Additionally, the operating account is utilized to collect revenue from the program, like interchange.
• Customer Accounts - customer accounts include all checking and savings accounts opened by consumers through the fintech program
• External Accounts - external accounts are utilized for customers to fund their accounts within the fintech program

The funds flow diagram also indicates how your product’s money movement interacts with the Synctera Ledger. 

The Synctera Ledger accounts mirror the Sponsor Bank’s accounts, while providing you greater granularity into the data. This can help you view your individual account information broken out by specific products, such as debit cards, ACHs, or wires. 

The funds flow helps both you and the Sponsor Bank understand how this transaction information flows into Synctera Ledger. 

How does money leave your ecosystem?

It is important for both Synctera and your Sponsor Bank to understand what your customers will be spending money on when using your product. Both where and how they will be spending the money are key parts of the equation. 

For example, it is important to understand whether your customers will be spending using a debit card or if most transactions will be via ACH. Additionally, for the Sponsor Bank to have a comprehensive understanding of your use case they will want to know what types of purchases your customers will be making. There are different implications if customers are using your product to make personal healthcare payments, paying for business expenses, or routinely spending money at specific merchant types. 

What does a funds flow diagram look like?

Below is a sample funds flow diagram. When working with the Synctera Solutions Consulting team, this diagram will be customized to fit your specific use case.