Recently, the U.S. Consumer Financial Protection Bureau (CFPB) issued a warning about digital payment apps. The analysis found that funds stored in these apps may not be safe during a financial failure because the money may not be covered by federal deposit insurance. The CFPB also released a consumer advisory explaining how customers can help keep their money safe.
“Popular digital payment apps are increasingly being used as a substitute for traditional bank or credit union accounts, but they lack the same protections that help keep funds safe,” said CFPB Director Rohit Chopra. “As tech companies expand into banking and payments, the CFPB is increasing its focus on companies that sidestep the safeguards long followed by local banks and credit unions.”
Use of nonbank payment apps such as PayPal, Venmo, and Cash App has grown rapidly in recent years. These apps let people quickly pay merchants and others, and they also offer options to store funds. Unlike traditional bank and credit union accounts with deposit insurance, money stored with these nonbank payment companies may not be protected.
There have in fact been recent cases of PayPal accounts being shut down, so I also suggest not keeping money on these payment platforms. It is better to move it into a bank checking account sooner rather than later.
