The Federal Deposit Insurance Corporation and the National Credit Union Administration this week warned customers of payment tools such as: Cash App, PayPal and Venmo that their money is at risk of being lost since the funds are not protected.
According to government regulators, after the fall of Silicon Valley Bank, Signature Bank and First Republic Bank where many depositors desperately withdrew their funds, the vast majority of them were found to be uninsured.
In this sense, the Consumer Financial Protection Bureau (CFPB) expressed in a statement that money deposited in payment applications such as those already mentioned that are not banking, cannot be protected by the regulatory entities, in which case, when there is a collapse, the fund may be lost.
The director of the CFPB, Rohit Chopra, said in a statement that “the Popular digital payment apps are increasingly being used as substitutes for a traditional bank or credit union account, but lack the same protections to ensure funds are safe,' he said.
Although some applications claim that they have “transfer insurance” on their clients' money through a bank or credit union. However, the agency explained that “when users of these digital apps receive payments, the funds are typically not automatically transferred to the recipient's linked bank or credit union account,” it said.
Therefore, according to the CFPB “companies retain and invest the funds. These activities are generally not subject to the same oversight that an insured bank or credit union faces, he noted.
It is estimated that in the United States, 85% of the population between the ages of 18 and 30 have used these payment applications for purchases, making transfers and depositing funds; and according to detailed data from the CFPB, in 2022, consumers made payments and businesses worth close to $893 billion dollars on these types of platforms.