After a fraudulent $99 charge hit her PayPal account last month, Robin DesCamp encountered one frustrating bump after another as she navigated the world of digital payment app policies.
She flagged the unfamiliar charge to PayPal and her bank, then sank hours into spotty customer service calls and unclear user agreements. After a month of back-and-forth, she got her money back. Now she is urging her friends who use digital payment apps to be more diligent — or avoid them altogether.
“I’m just one person,” said DesCamp, a lawyer in Bend, Ore. “If you extrapolate that across millions of transactions they do every month … a lot of people are too busy and too harried to say: Wait a minute.”
Almost three-quarters of U.S. consumers used payment accounts such as PayPal, Venmo and Cash App in 2023, according to the Atlanta Federal Reserve — up from 68 percent in 2022. In a 2023 report, the Consumer Financial Protection Bureau estimated that payment volume on these apps quadrupled between 2018 and 2022, with usage especially concentrated among younger Americans.
And these apps are no longer just for simple payments between friends. These days they’re “increasingly used as substitutes for a traditional bank or credit union account,” according to the 2023 CFPB report. For example, some app users receive their paychecks via Cash App or PayPal, while others leave their funds sitting on the apps for future payments, treating them effectively like bank accounts.
The CFPB and other watchdogs say it’s often unclear if such money is insured against risky investments or fraud. State laws regulating how payment apps protect stored funds vary, creating a confusing patchwork that’s compounded by customer service challenges. And millions of Americans operate in the dark about how payment apps use or invest those funds.
Here’s what you need to know.