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Analysis of Deposit Insurance Coverage on Funds Stored Through Payment Apps

This issue spotlight analyzes the extent to which popular payment apps, sometimes described as P2P payment platforms, claim to provide federal deposit insurance coverage to users through business arrangements with banks. While the primary purpose of these quickly growing platforms is to allow consumers and businesses to send and receive money, payment app companies offer an increasing array of services alongside this function, including the ability for consumers to store funds. We find that stored funds can be at risk of loss in the event of financial distress or failure of the entity operating the mobile payment platform, and often are not placed in an account at a bank or credit union and lack individual deposit insurance coverage.

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