NEW YORK (AP) – Venmo, PayPal and CashApp customers should not store funds in these apps long-term as they may not be safe during a crisis, the Consumer Financial Protection Agency said Thursday. warned.
The warning comes weeks after the failures of Silicon Valley Bank, Signature Bank and First Republic Bank. all experienced a bank run After terrified customers with uninsured deposits withdrew en masse.
The Federal Deposit Insurance Corporation insures bank accounts up to $250,000. But money stored in Venmo, CashApp, or Apple Cash isn’t stored in a traditional bank account. As such, those funds may not be protected in the event of a bank run-like event on these payment apps.
Some funds may be eligible for pass-through insurance if customers engage in certain activities on the app, but generally apps are not covered by deposit insurance by default, the CFPB said. For example, when a customer opens his PayPal savings account, deposit insurance is provided through his PayPal partner bank, Synchrony Bank. However, his public PayPal account is not insured. For Apple Cash, which can be insured through Green Dot Bank, users must verify their identity to receive deposit insurance.
“Funds in custody may be at risk of loss in the event of financial distress or the failure of the entity operating the non-bank payment platform and are often not held in bank or credit union accounts. We found that the bank was not covered by personal deposit insurance,” the CFPB said. in that report.
“Consumers may not fully understand when and under what conditions they are protected by deposit insurance,” the agency added in the report.
Peer-to-peer payment apps and non-banks that offer bank-like services have exploded in popularity over the past decade. Venmo now has over 90 million customers and recently announced that it will allow parents to create. teenage children accountswhich could bring tens of millions of new customers to your app.
Apple recently Savings account associated with Apple Card It is run by Goldman Sachs. This savings account has amassed billions of dollars within days of opening.
The Financial Technology Association, a trade group representing Block, owner of PayPal and Cash App, stressed in a statement that the products are safe.
“Tens of millions of American consumers and small businesses rely on payment apps to better spend, manage and transfer their money. You can receive FDIC insurance in your account as appropriate,” the association said.
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https://fox40.com/news/national-and-world-news/money-stored-in-venmo-and-other-payment-apps-could-be-vulnerable-financial-watchdog-warns/ Money stored in Venmo and other payment apps could be vulnerable, financial watchdog warns