After deposit into e-wallet from a bank where is the money?
Just trying to understand how e-wallet works for system design prep. I use Square/Venmo in my life, but I just realized I never really understand how it works under the hood when coming to deposit. Does the service take the money deposited from user bank account into a company bank account? Thanks for the knowledge sharing in advance!
It's usually kept in an FBO account. Lookup For Benefit Of. The idea is the company sets up an FBO where it will pool money from users and maintain a virtual ledger of each user's balance.
Thanks! It’s my first time hearing about FBO account. I just googled a couple articles talking about PayPal manages the users’ money in FBO account in the way you mentioned. Good to know!
This way, transferring money between users is just an internal accounting transfer. No money actually has to move, meaning no fees for the company.
Yes, they used partner fdic banks and sweep the money there. They keep a balance sheet on their end to keep track of what owns what.