When you cash in to your independent digital wallet, where does the money go?

When I say "independent", I mean those digital wallets that are not backed by banks.

  • 4
    Can you give an example of an independent digital wallet? I don't know what you're talking about Commented Aug 4, 2022 at 12:18
  • @user253751 PayPal
    – Noob_Guy
    Commented Aug 4, 2022 at 13:52
  • 6
    paypal probably keeps its money in a bank Commented Aug 4, 2022 at 15:22
  • I’m quite, but not 100%, sure that they are keeping money in the bank since that is the place you transfer money to.
    – vasin1987
    Commented Aug 8, 2022 at 4:50

1 Answer 1


You give Paypal as an example of this, so I'll use that.

The Paypal Balance Account Terms and Conditions state:

Any funds in your Balance Account represent unsecured claims against PayPal, unless you have a PayPal Debit Mastercard® (“PayPal Debit Card”), have enrolled in Direct Deposit, or have bought or received cryptocurrency. In that case, PayPal places the U.S. dollar funds held in your Balance Account in one or more Program Banks...

I am not a lawyer, but I take "unsecured claims" to mean they take your money as a sort of "loan". They use it how they want but you can always request it back.

So if you have a debit card, direct deposit, or crypto, then they deposit the cash in "pass-through" banks. This is exactly like the Paypal Savings account which uses Synchrony Bank as the pass-through. If you don't have these, the next paragraph says what they do with the money:

If your Balance Account is not eligible for FDIC pass-through insurance, PayPal combines your Balance Account balance with the balances of other Balance Account holders and invests those funds in liquid investments in accordance with state money transmitter laws.

Read the T&C's for more details.

I would expect any other "digital wallets" with non-bank institutions do the same thing: either hold the cash in pass-through banks or invest it. You will have to look at the T&C's for that specific account to know for sure.

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