Money Stored in Venmo, Other Payment Apps May Not Be 'Safe' in Event of Financial Crisis, Gov Warns The Consumer Financial Protection Bureau is warning customers that money kept in popular payment apps is not protected in the same manner as banks.

By Madeline Garfinkle

Opinions expressed by Entrepreneur contributors are their own.

Tada Images | Shutterstock
The Consumer Financial Protection Bureau warned users of non-bank payment apps that their funds may not be safe in financial crisis.

Payment apps like Venmo and Cash App have made it easy to make payments to friends, family, and businesses. However, the platforms may lack financial stability in the event of a crisis, the Consumer Financial Protection Bureau (CFPB) warned on Thursday.

"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," said CFPB director Rohit Chopra, in a statement. "As tech companies expand into banking and payments, the CFPB is sharpening its focus on those that sidestep the safeguards that local banks and credit unions have long adhered to."

Unlike traditional banks (which have insurance on consumer deposits), payment apps may not have the same safeguards (such as the FDIC's policy that insures deposits up to $250,000) to protect money stored on the platform.

Since peer-to-peer payment platforms do not automatically transfer funds to one's bank account, the CFPB added, the companies' investments "carry risk" and in the event of a failure, users could lose their funds.

Related: Getting Paid on Venmo? This New IRS Rule Could Threaten Your Small Business.

The agency added that it is working with state and federal regulators to monitor the increasingly popular sector of non-bank payment apps to "take appropriate steps."

And yet, it's not the only electronic banking issue that has come up this week.

In April, Apple launched its own savings account in partnership with Goldman Sachs with a high annual percentage yield (APY) of 4.15%. Within the first day of launching, nearly $400 million in funds were deposited into Apple Card savings accounts.

While the Apple Card Savings account is FDIC-insured (it prohibits users from depositing more than the FDIC insurance limit of $250,000), some users are claiming it is taking weeks to withdraw money or transfer funds to their banks, per the Wall Street Journal.

"A two- to four-week delay definitely seems long," Dennis Lormel, a bank consultant with three decades of experience working in financial crimes told the outlet. "As someone who deals with banks on a frequent basis, to me that seems unreasonable."

The WSJ notes that the delays could have a simpler explanation: Attempts to withdraw significant sums of money from brand-new accounts may have triggered fraud and money laundering alerts that required banks to conduct additional screening.

"While the vast majority of customers see no delays in transferring their funds, in a limited number of cases, a user may experience a delayed transfer due to processes in place designed to help protect their accounts," a spokesperson for Goldman Sachs said in a statement to Entrepreneur.

Madeline Garfinkle

News Writer

Madeline Garfinkle is a News Writer at Entrepreneur.com. She is a graduate from Syracuse University, and received an MFA from Columbia University. 

Want to be an Entrepreneur Leadership Network contributor? Apply now to join.

Buying / Investing in Business

Former Zillow Execs Target $1.3T Market

Co-ownership is creating big opportunities for entrepreneurs.

Side Hustle

She Quit Her Job at Trader Joe's After Starting a Side Hustle With $800 — Then She and Her Brother Grew the Business to $20 Million

Jaime Holm and Matt Hannula teamed up to build a business in an industry that "didn't exist" yet.

Business Ideas

70 Small Business Ideas to Start in 2025

We put together a list of the best, most profitable small business ideas for entrepreneurs to pursue in 2025.

Business News

Microsoft Is Laying Off Over 6,000 Employees, About 3% of Its Workforce. Here's Why.

The company said the cuts will affect all divisions and locations, with a focus on managers.

Business News

Klarna Is Hiring Customer Service Agents After AI Couldn't Cut It on Calls, According to the Company's CEO

Klarna released an AI chatbot and implemented an AI-induced hiring freeze last year.

Resumes & Interviewing

Land More Gigs with This AI-Powered Job App Assistant for Just $55

Apply faster, smarter, and more effectively—no subscription required.