In a first-of-its-kind move, FDIC will back Google Wallet
WASHINGTON – In a landmark announcement, the Federal Deposit Insurance Corp. will now insure money held in Google Wallet accounts.
The federally run program insures all deposits in U.S. banks up to $250,000. The move will be a first for mobile payment systems, which are classified by the federal government as non-banking institutions and, as such, not subject to FDIC insurance. In order to qualify for FDIC protection, Google Wallet will now keep its users’ funds in multiple federally insured institutions.
Google’s main money transfer competitors PayPal and Venmo are not federally insured.
FDIC protection is only applicable if something – bankruptcy for example – happens to the company holding the user’s funds. Although the prospect of Google, PayPal or Venmo going under seems unlikely, FDIC protection for customer accounts will make it possible for users to keep up to $250,000 in their Google accounts with no fear of that money disappearing.
Google has confirmed to multiple media outlets that its policy in regard to FDIC insurance has indeed changed, however, no comment has been made on when the new user agreements will go into effect.
The current user agreement reads:
“With respect to the processing service, GPC processes payment transactions through the processing service as an agent of and on behalf of sellers. Funds held by GPC or its service providers (including any bank service providers) in connection with the processing of payment transactions are not deposit obligations of buyer and are not insured for the benefit of buyer by the Federal Deposit Insurance Corporation or any other governmental agency.”
Google is expected to update this to reflect its new policies very soon.
Google is not the first digital company to seek FDIC protection; PayPal, one of the oldest digital currency systems in existence, had previously been FDIC insured. The company discontinued holding user funds in federally insured banks in 2012 when California law made the practice more costly.
