Already safe in the arms of Google's massive empire, Google Wallet funds are now protected by the Federal Deposit Insurance Company (FDIC).
If Google were to ever fall into bankruptcy, the signs of such a catastrophic event would be years in the making, and users would have ample time to move their funds out of Google Wallet. However, in an act of prudence, the search engine company has received the backing of the FDIC.
The FDIC insures funds so that consumers are forced to tread a lengthy path of litigation to reclaim their funds after a financial institution goes under.
Though Google Wallet and other mobile payments apps can hold money, they aren't considered banks. That means they aren't required to obtain the FDIC's backing, but Google's move, beyond being an act of prudence, helps to show the public just how serious it is about its financial services.
Google Wallet users may not see the change listed in the service's policy just yet, but a Google spokesperson confirmed the update in a statement to Yahoo Finance.
PayPal isn't backed by the FDIC, but the company said it has other consumer protections in place. These include buyer protections and safeguards against unauthorized purchases, a Paypal spokesperson pointed out.
PayPal users don't generally store funds in their accounts, the spokesperson stated. Federal insurance is meant to protect the savings in people's bank accounts, stated the spokesperson.
"This is because it is not required to store a balance in a PayPal account to use PayPal and it's free to withdraw any funds that may be in the account," stated a PayPal spokesperson. "For customers who do hold a balance in their account PayPal adheres to the same Regulation E consumer protection laws as banks."
Google continues to develop its mobile payments platform. Near the end of last month, Google announced that Softcard, which it purchased this year, will begin sending customer to Google Wallet.
As a result of the acquisition, Google is powering its mobile payments systems with some of the technology that has been driving Softcard. Softcard may be more familiar to consumers under its original moniker, ISIS, but it understandably decided to change its name.
Softcard, which uses near-field communication like Apple Pay, was launched to compete with Google Wallet, and it had the backing of three of the four top wireless carriers in the US: Verizon, AT&T and T-Mobile. As part of the terms of the acquisition, the wireless carriers agreed to install Google Wallet on each of the compatible handsets they sell.
Photo: Sergio Uceda | Flickr
