Awareness is Key when using P2P apps

Jun 23, 2023Saving Strategies

In this digital age, Peer-to-Peer (P2P) apps have gained popularity for their convenience and simplicity in transferring money from one person to another. However, it's crucial to be aware of the risks associated with these apps, as they may not offer the same level of protection as traditional banking institutions.

“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 Consumer Financial Protection Bureau Director, Rohit Chopra in a statement.

P2P apps often operate outside the realm of traditional banking regulations. Unlike credit unions and banks, which are subject to strict regulatory requirements, P2P apps may not be required to offer deposit insurance or adhere to the same consumer protection laws.

“User agreements for digital payment apps often lack information on where funds are being held or invested, whether and under what conditions they may be insured, and what would happen if the company or the entity holding the funds were to fail.”

As a result, your money might not be protected in your P2P account, meaning if the app were to shut down, you would likely not be guaranteed your funds.

P2P platforms are amazing tools for transferring money; however, they should be used for just that – to facilitate transactions. If you use the app to hold your funds, your money is usually held in separate accounts or wallets outside the app's control. 

“When users receive payments, through these apps, these funds are not automatically swept into their linked bank or credit union account,” according to the Bureau. “In addition, payment app companies do not necessarily store customer funds in an insured account through a business arrangement with a bank or credit union. The company’s investments carry risk and if it were to fail, customers could lose their funds.”

Like any digital platform, P2P apps are vulnerable to cybersecurity threats, such as hacking and data breaches. While many reputable P2P apps implement robust security measures, there is always a possibility of unauthorized access to your personal and financial information.

While P2P apps offer convenience and accessibility, it's vital to recognize the potential risks involved. It is essential to carefully assess the credibility and security measures of any P2P app before entrusting it with your money. Always know the person who you are transferring your money to and once you receive funds, transfer them immediately into your NCUA or FDIC insured financial account.

Many Heavily Used Payments Apps May ‘Not be Safe’ in Event of Financial Distress, Cautions CFPB / Fresh Today / - CU Today

Annie Jacobs

Annie Jacobs

Integrated Marketing Specialist | HAPO Community Credit Union



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