Have you discussed this with a lawyer? It seems like this would qualify you as a money transmitter which has very strict requirements in many states. There are restrictions on the word "bank" and how that term can be used too.
A very common practice in the non-profit world, but very much not something that is accessible to students. Most fiscal sponsors out there are very bureaucratic and not set up to handle short-term engagements like hackathons.
Hey Zach, if you want to open bank accounts with an API and be able to provide real time balances to your users ping me ... I can help make that a reality
Yeah, this is straight up illegal in my country (Australia) - to call yourself a ‘bank’ referring to financial services you need to be a licensed Authorised Deposit-taking Institution (ADI) with our prudential regulator (APRA). This requires going through a compliance program that would probably take longer than a year, having $50 million (!) of paid up capital, etc.
Just a few months ago they did bring in a new restricted ADI licensing scheme though where you can start with only $3 million and get started quicker but there are a bunch of restrictions.
Whilst what you say is true, I don't think it would be impossible to create a structure that achieves similar outcomes without being a licensed ADI.
If I were attempting to do a similar thing, rather than positioning the "bank" as a separate service, I'd be offering full "auspicing" as many national NGOs have traditionally done for locally-run activities, where the "bank" service is actually just automating internal financial procedures for authorising transfers of money that belongs to the incorporated body rather than accepting deposits on behalf of a separate group of people.
edit: hah, just read the comments below and this seems to be exactly what they're doing
Although the other onerous requirement for a bank is that it can't have any one owner with more than 5% shareholding (although there's a lender here that's trying to get the government to change that).
Have you discussed this with a lawyer? It seems like this would qualify you as a money transmitter which has very strict requirements in many states. There are restrictions on the word "bank" and how that term can be used too.