For those who use Google Wallet, their money just became safer with federal-level insurance. Google Wallet mobile payment system now insures users money to protect them against fraudulent account activity & company bankruptcy. Google confirmed to Yahoo Finance in a statement that its current policy changed – meaning the company will store the balances for users of the mobile transfer service similar to PayPal and Venmo in multiple federally-insured banking institutions.
The Federal Deposit Insurance Corporation (FDIC) is a United States government corporation operating as an independent agency created by the Banking Act of 1933. As of August 2014, it provides deposit insurance guaranteeing the safety of a depositor’s accounts in member banks up to $250,000 for each deposit ownership category in each insured bank. As of August 27, 2014, the FDIC insured deposits at 6,638 institutions. The FDIC also examines and supervises certain financial institutions for safety and soundness, performs certain consumer-protection functions, and manages banks in receiverships (failed banks). The FDIC receives no congressional appropriations — it is funded by premiums that banks and thrift institutions pay for deposit insurance coverage and from earnings on investments in U.S. Treasury securities.
This is good news for people who place large amounts of money in their Wallet Balance because the Federal Deposit Insurance Corporation insures funds for banking institutions up to $250,000. This is a change that sets Google Wallet apart from its competitors, namely PayPal. Like Google Wallet, PayPal is categorized as a “non-banking institution” and isn’t legally required to FDIC-protect your funds. In fact, PayPal’s current user agreement reads: “If you do hold a Balance, that Balance represents an unsecured claim against PayPal and is not insured by the FDIC.” Essentially, in PayPal’s case, you’re lending them money for free—and it’s completely unsecured.
There is a legit point here that Google still didn’t updated this new policy on their website.
The current (as of April 19, 2015) Google Wallet Terms of Service states:
— 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.
These Terms of Service do not amend or otherwise modify your agreement with the issuer of your Funding Account or Payment Instrument or redeemable Wallet Object item, and you are responsible for ensuring your use of the Google Wallet complies with such agreements.– (Source)
While the current Terms of Service clearly reads that funds held by Google Payment Corp. are not insured by the Federal Deposit Insurance Corporation. But a Google spokesperson reportedly confirmed that this policy has changed. We are still not sure that why Google has not updated it in the current policy.
Now after this big update if you need to store large amounts of money in your Google Wallet Balance you must be protected if something happens to Google Inc.