Yes, customers might hold their own private keys, but are they sharing that Private key with the Bitwala service? People will only have control over their Private key, if they have sole control over that Private key and if that Private key was not logged onto some centralized server. 

I like the fact that it is backed by a Bank that are "Bitcoin friendly" when you want to on-ramp from Fiat to Bitcoin and visa versa, but storing coins in a centralized system, is never a good idea. 

Centralized services just bleed customers for extra fees and they pose a real danger, because people can lose coins when these services are targeted by hackers.