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The Federal Deposit Insurance Corporation and the National Credit Union Administration warned customers this week about payment tools like: Cash App, PayPal and Venmo that your money is at risk of being lost as the funds are not protected.
According to government regulators, after the fall of Silicon Valley Bank, Signature Bank and First Republic Bank where many depositors desperately withdrew their funds, It was found that the vast majority of them were not insured.
In this regard, the Consumer Financial Protection Bureau (CFPB) stated in a statement that money deposited in payment applications such as those already mentioned that are not banking, cannot be protected by regulatory entities, In this case, when there is a collapse, the fund can be lost.
CFPB director Rohit Chopra said in a statement that “popular digital payment apps are increasingly being used as substitutes for a bank account or traditional credit union, but they lack the same protections to ensure that the funds are safe,” he said.
Although some applications claim that they have “transfer insurance” on their clients’ money through a bank or credit union. However, the agency explained that “when users of these digital applications receive paymentsfunds are usually not automatically transferred to the bank or credit union account linked to the recipient,” he said.
Therefore, according to the CFPB “companies retain and invest the funds. These activities are generally not subject to the same oversight that an insured bank or credit union faces,” he noted.
It is estimated that in the United States, 85% of the population between the ages of 18 and 30 have used these payment applications for purchases, make transfers and deposit funds; and according to detailed data from the CFPB, in 2022, consumers made payments and businesses worth close to $893 dollars on these types of platforms.
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