Customers of Venmo, PayPal and CashApp should not store their money for the long term with these apps since their funds may not be covered by deposit insurance, the Consumer Financial Protection Bureau warned on Thursday.
NEW YORK — Customers of Venmo, PayPal and CashApp should not store their money for the long term with these apps because their funds might not be safe during a crisis, the Consumer Financial Protection Bureau warned on Thursday.
The Federal Deposit Insurance Corporation insures bank accounts up to $250,000. But money stored in Venmo or CashApp or Apple Cash is not being held in a traditional bank account. So, if there is an event similar to a bank run with these payment apps, those funds may not be protected. People are also reading… "We find that stored funds can be at risk of loss in the event of financial distress or failure of the entity operating the nonbank payment platform, and often are not placed in an account at a bank or credit union and lack individual deposit insurance coverage," the CFPB said in its report.
Peer-to-Peer payment apps and non-banks offering bank-like services have exploded in popularity in the last decade. Venmo now has more than 90 million customers and recently announced it was going to allow parents to create accounts for their teenage children, potentially bringing in tens of millions more customers for the app.
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