Google Wallet just made its digital wallet a little more secure.
According to a Yahoo Finance report, Google has taken the necessary steps to making its mobile payments service FDIC-insured — giving its users a safer way to store their money. While the FDIC insures banking funds up to $250,000, when it comes to money being stored in mobile wallets, it’s a bit less secure because of how they are categorized under financial regulations. Similar to prepaid debit cards, funds on most mobile wallet services aren’t federally insured.
While Google Wallet or other mobile wallet services aren’t typically a place for consumers to store money, as they are primarily used for P2P transfers or payments, Google Wallet does allow its users to keep funds in the digital wallet via its Wallet Balance service. But the security of that service, Google says, is about to change, according to Yahoo’s report.
“As of now, Google Wallet’s user agreement says balances are not FDIC-insured. However, a Google spokesperson confirmed in a statement to Yahoo Finance that its current policy has changed,” Yahoo reported. “The company will hold Wallet balances in multiple banking institutions that are FDIC-insured, which means if anything were to happen to the company, users’ funds would be protected.”
So what about services like PayPal? Yahoo also reached out to other mobile payment service providers to get their perspective on FDIC protection. Here’s a section of what a PayPal spokesman reported to Yahoo:
“While it is true that PayPal balances are not FDIC-insured, it’s important to note that this insurance is intended to insure the savings in people’s bank accounts. Our customers do not use PayPal in this way. This is because it is not required to store a balance in a PayPal account to use PayPal and it’s free to withdraw any funds that may be in the account. For customers who do hold a balance in their account PayPal adheres to the same Regulation E consumer protection laws as banks,” the statement said.
Yahoo reported that the CFPB is attempting to strengthen the regulation of how nonbanks are viewed, specifically as it relates to mobile wallet services that aren’t required to have FDIC insurance because of how they are categorized.