CFPB warns against using Venmo, PayPal, and other payment apps.

 The Consumer Financial Protection Bureau advises Americans not to keep their Money in a payment app.

According to a consumer advisory released this week by the federal consumer watchdog, Money held in well-known apps like Venmo, PayPal, and CashApp is more vulnerable to financial instability because those accounts might not offer federal deposit insurance through the National Credit Union Administration or the Federal Deposit Insurance Corporation.

Consumers could risk losing their Money if one of those payment apps failed or went bankrupt, and the federal agency noted that knowledge of this type of deposit insurance had become more crucial following the failures of Silicon Valley Bank, Signature Bank, and First Republic Bank this year.
Rohit Chopra, director of the Consumer Financial Protection Bureau, stated in a press release that "popular digital payment apps are used more and more often in place of a traditional bank or credit union account, but they do not have the same security measures."

The CFPB advised users to move any cash they had in a payment app to an account that was federally insured in order to avoid risking their money.
According to Miranda Margowsky, a spokesman for the Financial Technology Association, which speaks on behalf of PayPal and other financial technology companies, millions of Americans and businesses that use payment app accounts are secure.

According to the products that users use, FDIC insurance is provided on their accounts, making these accounts safe and transparent, according to Margowsky. "Consumer protection is a top priority for FTA members at every stage of the process, and they include clear and understandable terms in every one of their products."
IN ITS REPORT, the CFPB described the circumstances under which funds transferred through payment apps might be federally insured.
For instance, Money added to PayPal-owned Venmo via direct deposit, its cash-a-check feature, or by acquiring cryptocurrency may be covered by pass-through insurance. Deposit insurance might apply to funds held in Goldman Sachs, Wells Fargo, and Bancorp Bank, the program banks for Venmo.

Another well-known payment app is Zelle, which states that it does not "hold accounts, transfer funds, or settle transactions" and that all funds transferred through its network go through federally insured accounts.
The spokesperson stated, "Money is typically sent from one bank account to another for enrolled users in minutes — Money is never in a third-party application.
In the CFPB's report on these apps and their deposit insurance offerings, Zelle should have been listed alongside other payment platforms. A spokesperson for CashApp is still required to respond to a publication's request for comment.

The CFPB reported that 3 in 4 Americans use a payment app and that these companies frequently invest in the funds that are kept on their apps, allowing them to profit from their users and discovering that funds saved in payment apps lack federal insurance.
According to a recent Pew Research Center survey, 34% of users of payment apps needed more confidence in the security and privacy those apps offered.
Chopra said the CFPB is intensifying its focus on companies that circumvent the safeguards that neighborhood banks and credit unions have long upheld as tech companies enter the banking and payments industries.