Good news for consumers who store funds directly in a Google Wallet: your funds are will soon be protected by Federal Deposit Insurance Corporation (FDIC) Insurance, according to press reports.
In general terms, deposit insurance makes sure that consumers don’t lose money if the bank where their money is kept fails. (Note that not all banks and not all financial products are FDIC insured; for more on FDIC Insurance, see here.)
This is a big deal because mobile wallet providers that store money are not required to make sure that those funds are covered by deposit insurance. In fact, we have criticized wallet providers that store funds for not providing deposit insurance, and we have called on the Consumer Financial Protection Bureau to require that companies that take and store consumer funds be required to insure consumers’ funds. If Google Wallet does offer FDIC insurance for consumer funds, it will be among the few mobile wallet providers to do so.
Google may be making this move to inspire greater consumer confidence in its mobile wallet so that more folks will use it, as consumers have been slow to embrace mobile wallets, and to better compete with Apple Pay.
Google hasn’t announced the details of how it will work, but consumers shouldn’t have to do anything, as there’s no consumer application required to get FDIC insurance.
Have you used Google Wallet? How about Apple Pay? Tell us about it here.