Most money stored in nonbank payment apps is not often protected by federal deposit insurance, the CFPB warns.
"Popular digital payment apps are increasingly used as substitutes for a traditional bank or credit union account but lack the same protections to ensure that funds are safe," CFPB Director Rohit Chopra said.
CFPB is also monitoring whether tech companies adhere to fiscal safeguards as they expand into banking and payments, according to Chopra. Tesla mogul Elon Musk began exploringPeer-to-peer applications have proven lucrative. PayPal, the parent company of Venmo, reported $27.5 billion in revenue last year.The standards for storing consumer funds differ from company to company. Some invest the money in interest-earning loans and bonds instead of depositing into a traditional bank or credit union.
CFPB said Thursday it will continue coordinating with state and federal regulators to monitor progress on automated funds-sweeping into insured banking accounts. Until then, app users must be proactive in moving money into an insured financial facility until a method is adopted, the agency said.
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