WASHINGTON — More people are using payment apps like Venmo, Cash App and PayPal to send and receive money.
These kinds of services processed an estimated $893 billion in transactions last year alone, according to the Consumer Financial Protection Bureau (CFPB).
But now the agency warns more people are turning to these payment apps instead of traditional banks or credit unions. They believe this means more people may be relying on them for more than just transfers.
“Many people are even getting paid through digital payment apps that makes it such that people are storing more money than they probably ought to,” said Rohit Chopra, Director of the Consumer Financial Protection Bureau (CFPB).
Chopra said money stored in these apps may not have the same federal protections as traditional banks.
“Your money is safe up to $250,000 in the event that your bank or credit union fails. But when you put money in other places, you can’t be sure that’s the case,” he said. “Just so important that people realize that money sitting in these apps is not earning interest, and not secure in the same way that an insured bank account is.”
In light of recent bank failures, the agency is now urging people to transfer money from these apps into a secure bank account right away.
“At the end of the day, a consumer should feel confident that where they deposit their money is going to be safe,” said Chopra.
The Washington News Bureau also talked to the Financial Technology Association (FTA) which represents PayPal and other fintech companies.
In a written statement, the spokesperson said “Tens of millions of American consumers and small businesses rely on payment apps to better spend, manage, and send their money. These accounts are safe and transparent, with users receiving FDIC Insurance on their accounts depending on the products they use. FTA members provide clear and easy-to-understand terms in all their products and prioritize consumer protection every step of the way.”
Chopra said these payment companies are also regulated by the CFPB so the agency is taking some action as well.
“We have ordered them to provide information about their business practices, given the growth in popularity of these apps, we need to make sure that they’re safe,” said Chopra.
The agency says consumers can submit complaints about financial products and services by visiting the CFPB’s website or by calling (855) 411-CFPB (2372).
Download the FREE WPXI News app for breaking news alerts.
©2023 Cox Media Group