Deposits on mobile payment apps may not be insured by the FDIC, and customers may not know whether their money is insured or not.
Facts
- The United States Consumer Financial Protection Bureau (CFPB) has cautioned Americans against keeping their money in uninsured payment apps.
- Nonbank peer-to-peer (P2P) payment apps, including those used for crypto transactions, pose a risk of loss in case of a crisis.
- The bankruptcy of crypto platforms and recent banking crises have highlighted the lack of FDIC coverage for billions of dollars stored on payment service apps.
- P2P apps like PayPal, Venmo, Cash App, Apple Pay, and Google Pay offer stored value services similar to deposit accounts.
- Payment service providers are incentivized to encourage customers to store funds with them, but these funds are not FDIC insured and rarely earn interest.
- In the event of a failure, pass-through deposit coverage eligibility is determined after the fact, and the insurance protects against bank failure, not the payment service.
- Most state regulations for payment services focus on money transfer, not storage, and the location of deposits may
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Source: Cointelegraph
