Making payments to friends, family, and companies is now simple thanks to apps like Venmo and Cash App. However, the Consumer Financial Protection Bureau (CFPB) cautioned on Thursday that the platforms might not be financially stable in the event of a crisis.
According to CFPB director Rohit Chopra, “popular digital payment apps are increasingly used as alternatives for a traditional bank or credit union account but lack the same protections to ensure that funds are safe.” The CFPB is intensifying its scrutiny of companies that circumvent the precautions that regional banks and credit unions have traditionally upheld as tech corporations enter the banking and payments industries.
Payment apps might not have the same precautions to protect money placed on the platform as traditional banks (which offer insurance on consumer accounts), such as the FDIC’s policy that guarantees deposits up to $250,000.
According to the CFPB, since peer-to-peer payment platforms do not immediately transfer funds to users’ bank accounts, their investments “carry risk” and consumers run the danger of losing their money in the case of a failure.
n ever-growing category of non-bank payment apps to “take the necessary action.”
However, it’s not the only problem with electronic banking to arise this week.
In collaboration with Goldman Sachs, Apple debuted its own savings account in April, offering a competitive annual percentage yield (APY) of 4.15%. Nearly $400 million in money were deposited into Apple Card savings accounts on the first day of operation.
The Wall Street Journal reports that although the Apple Card Savings account is FDIC-insured (users are not permitted to deposit more than the $250,000 FDIC insurance cap), some customers are complaining that it takes weeks to withdraw money or transfer monies to their banks.
“A two- to four-week delay definitely seems long,” said Dennis Lormel, a bank expert with three decades of experience working in financial crimes. “To me, as someone who frequently interacts with banks, that seems unreasonable.”
The WSJ says that a simpler explanation for the delays could be that attempts to withdraw substantial sums of money from newly opened accounts may have sparked flags for fraud and money laundering, necessitating additional screening by banks.
Goldman Sachs issued a comment to Entrepreneur saying, “While the vast majority of customers see no delays in transferring their funds, a user may experience a delayed transfer due to processes in place designed to help protect their accounts.”
