The Consumer Financial Protection Bureau (CFPB) has advised non-bank payment app customers that their accounts are not federally insured.
The CFPB discovered that non-bank digital payment apps may not protect funds in financial trouble.
The Consumer Financial Protection Bureau (CFPB) said that more than 75% of American adults have used a payments app and that these apps will handle nearly $893 billion in transactions by 2022. The study found that when digital non-bank apps like PayPal, CashApp, and Venmo receive payments, the money is kept by the companies and invested. This means the customer’s money isn’t safe in their account. If a company fails without deposit insurance, consumer funds could be lost.
In the US, the Federal Deposit Insurance Corporation or National Credit Union Administration protects banks and credit unions in case they have money problems. Recent bank failures, like those of Silicon Valley Bank and First Republic Bank, have shaken up the financial market and made officials tighten up on bank security.
Rohit Chopra, CFPB director:
“Popular digital payment apps are increasingly used as substitutes for a traditional bank or credit union account but lack the same protections to ensure that funds are safe. As tech companies expand into banking and payments, the CFPB is sharpening its focus on those that sidestep the safeguards that local banks and credit unions have long adhered to.”
US states are considering digital payment app regulations to safeguard customers.
