Customer funds stored in payment apps could be vulnerable, CFPB warns
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Customer funds held in nonbank payment apps like PayPal (NASDAQ:PYPL), Venmo and Block's (NYSE:SQ) Cash App may be unprotected during time of financial distress, the Consumer Financial Protection Bureau warned Thursday.
That's because the money is not being held in a traditional bank account, where deposits (up to $250K) are insured by the Federal Deposit Insurance Corporation, thus those funds could be vulnerable in the event of a financial crisis.

The report comes shortly after regional lenders Silicon Valley Bank, Signature Bank and First Republic Bank all failed in the face of outsized deposit withdrawals. While those banks faced a run, insured depositors "could have confidence their money was safe," the consumer watchdog said.
"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,â said CFPB Director Rohit Chopra.
Earlier, the Wall Street Journal reported that some customers who signed up for an Apple (AAPL) Savings account, offered through its partnership with Goldman Sachs (GS), have run in snags in withdrawing their money.