The Federal Government Just Imposed Some New Rules For Digital Payment Apps

Anyone who grew up before the smartphone era likely remembers what it was like to actually travel to a physical bank branch to handle personal financial matters. But these days, not only do most banks have their own digital apps, but a host of other platforms like Cash App and PayPal are offering many of the same features.

And now U.S. regulators want to make sure that they are all playing by the same rules.

Addressing the issues

Although digital financial services are arguably more convenient and customizable than brick-and-mortar banks or credit unions, there are some deficiencies that have left many customers frustrated.

Among the most commonly cited issues are a lack of protection against accounts being closed down and the difficulty associated with trying to report unauthorized transactions.

For its part, the U.S. Consumer Financial Protection Bureau is using its authority to implement a new rule that requires major services to abide by the requirements set for banks on matters including:

• Transaction disputes
• Data privacy
• Fraudulent activity

While this could prove to be a positive step in the right direction, it’s worth noting that the new regulation won’t solve every problem.

Certain limitations apply

The CFPB’s latest rule is clearly designed to address the business practices of large platforms, as evidenced by the stipulation that only apps handling 50 million transactions or more per year will be affected.

In addition to Cash App and PayPal, that means platforms like Apple Pay, Venmo, and Google Play are also bound by the rules … but not many of their much smaller competitors.

Furthermore, only transactions conducted in U.S. dollars fall under the purview of the agency’s authority.

Critics worry that this loophole will allow global scams, particularly those involving cryptocurrency, to continue unabated.

Chris Agee November 22nd, 2024

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