These apps are also not immune to the same type of panic-based bank run that closed down Silicon Valley Bank and others recently, the agency added. There are billions of dollars at risk for consumers as a result of payment apps encouraging customers to store funds rather than just make transactions, said the CFPB in its report. If one of those companies were to go under, then, customers could lose their funds.īillions of consumer dollars at risk, agency says
Payment apps, however, are not federally insured on the institution level. (In the case of those two banks, the FDIC even abolished the limit, covering all deposits.) Their customers were made whole because account holders at federally insured financial institutions are guaranteed to get back up to $250,000 per account if the bank fails. The watchdog released the comments in the wake of high profile bank failures like Silicon Valley Bank and Signature Bank. More than three-quarters of US adults have used at least one payment app, the agency said. But the Consumer Financial Protection Bureau wants people to know they don’t have the same protections as a bank or credit union.ĬFPB Director Rohit Chopra warned in a Thursday statement that payment services like PayPal, Venmo, Cash App and Apple Pay “are increasingly used as substitutes for a traditional bank or credit union account but lack the same protections to ensure that funds are safe.” Some consumers are using services like PayPal, Venmo, Cash App and Apple Pay for direct deposit of paychecks, or simply storing lots of cash in them.
Payment apps like PayPal and Venmo might be convenient, but they’re not banks - and a federal financial services watchdog is worried that too many consumers are treating them as such.
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