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Monday, June 17, 2024
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Money stored on mobile payment apps may not be FDIC insured, US watchdog warns



Deposits on mobile payment apps may not be insured by the FDIC, and customers may not know whether their money is insured or not.


  • 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

Source: Cointelegraph


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