![]() These accounts are safe and transparent, with users receiving FDIC Insurance on their accounts depending on the products they use," the association said. "Tens of millions of American consumers and small businesses rely on payment apps to better spend, manage, and send their money. Plus, we’ll also introduce an alternative, Wise. ![]() ![]() The Financial Technology Association, an industry group that represents PayPal as well as Cash App's owner Block, emphasized in a statement that those products are safe. While many PayPal vs Cash App features are quite similar, there are differences in the exact ways you can use your accounts, and the fees you’ll pay. The savings account took in billions of dollars in deposits within days of its launch. 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 of new customers for the app.Īpple recently announced a savings account tied to its Apple Card that is operated by Goldman Sachs. Peer-to-Peer payment apps and non-banks offering bank-like services have exploded in popularity in the last decade. "Consumers may not fully appreciate when, or under what conditions, they would be protected by deposit insurance," the agency added in its report. "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. For Apple Cash, which can be insured through Green Dot Bank, it requires a user to verify their identity to get deposit insurance. (For Zelle, the researchers looked at the stand-alone Zelle mobile service. But the general PayPal account is not covered by insurance. CR began with a limited application of the framework to four popular P2P apps: Apple Cash, Cash App, Venmo, and Zelle. For example, if a customer opened a PayPal Savings account, it would have deposit insurance through PayPal's partner bank, Synchrony Bank. Some of the funds may be eligible for pass-through insurance coverage if customers do certain activities with the apps, the CFPB said, but generally by default the apps are not covered by deposit insurance. So, if there is an event similar to a bank run with those payment apps, those funds may not be protected. Cash App also charges a 0.5-1.75 fee, with a minimum fee of 25 cents, for instant deposits that let you withdraw your money immediately. But money stored in Venmo or CashApp or Apple Cash is not being held in a traditional bank account. Cash App charges a 3 fee if you send money using a credit card, but sending payments from your balance or bank account is free. The Federal Deposit Insurance Corporation insures bank accounts up to $250,000. The alert comes several weeks after the failure of Silicon Valley Bank, Signature Bank and First Republic Bank, which all experienced bank runs after fearful customers with uninsured deposits pulled their money en masse. The CFPB also found that user agreements for the payment apps often contain little to no information about whether a user's money can be insured in a given app, or whether their money may be used for other investments or purposes within the company while it is held in the app.Customers of Venmo, PayPal and CashApp should not store their money with those apps for the long term because the funds might not be safe during a crisis, the Consumer Financial Protection Bureau warned Thursday. "As tech companies expand into banking and payments, the CFPB is sharpening its focus on those that sidestep the safeguards that local banks and credit unions have long adhered to," CFPB Director Rohit Chopra said in a statement. Deposit insurance has been a popular topic across the finance industry this year with the collapse of three regional banks sparking discussion and questions about bank deposits that are insured by the federal government. Without deposit insurance, if money is no longer accessible because of something like a bankruptcy filing, that money could be gone forever with little to no chance for the user to be reimbursed, the CFPB said. Given the massive amounts of money passing through the apps, the CFPB said the lack of federal regulation and oversight on the apps comparable to what banks have to face is concerning. That's expected to nearly double to $1.6 trillion by 2027. The apps saw a collective $893 billion in transactions last year, per the CFPB's report. All of them use data encryption to protect users against unauthorized transactions and store users data on servers in secure locations. Account icon An icon in the shape of a person's head and shoulders.
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