After 12 years of providing loan and operational capital services, PayPal has officially submitted the relevant applications to the Utah Department of Financial Institutions and the Federal Deposit Insurance Corporation to launch PayPal Bank, as reported through PayPal Holdings. With this move, the company would become a bank, being able to offer not only loans but also savings accounts. According to PayPal CEO Alex Chriss, this measure would help strengthen the company and improve its efficiency.
If approved, deposits made by customers in PayPal Bank would be eligible for FDIC insurance coverage. PayPal is not the only company that has applied to become a regular bank; several cryptocurrency companies such as Circle Internet Group Inc., Ripple, and Paxos obtained their approval last week. Additionally, companies from other sectors, such as the financial arm of Nissan Motor Co. and Sony Group Corp. from Japan, have also submitted an application to become a bank.
PayPal
PayPal is a worldwide online payment system that allows you to send, receive, and manage money securely over the Internet, acting as an intermediary between your bank/card and sellers without sharing your financial information. It is a good option for online purchases, transfers to friends, and managing international payments. Using it is very easy: you just need to register, add payment methods, and select it as your payment option when making an online purchase.
Transitioning into a bank
After 12 years of operation, PayPal has decided to take it a step further and has officially submitted an application to the Utah Department of Financial Institutions and the Federal Deposit Insurance Corporation to become a bank. According to the company’s own publication through PayPal Holdings, it provided access to more than 30 billion dollars in loans and working capital to over 420,000 business accounts worldwide over the years of its operation.
According to the press release, “The new bank would help the California-based company offer loan solutions more efficiently to small U.S. businesses, while reducing dependence on third parties and strengthening PayPal’s business.” PayPal CEO Alex Chriss stated, “Access to capital remains a major hurdle for small businesses struggling to grow and scale. Establishing PayPal Bank will strengthen our business and improve our efficiency, enabling us to better support the growth of small businesses and economic opportunities across the United States.” With the goal of complementing processing and settlement activities through existing banking relationships, the bank would seek direct membership in the United States with card networks.
In addition, the bank would seek direct affiliation in the United States with card networks. If approved, deposits that customers make at PayPal Bank would be eligible for FDIC insurance coverage. According to Chriss, “Raising capital remains a significant obstacle for small businesses striving to grow and expand. The establishment of PayPal Bank will strengthen our business and improve our efficiency, allowing us to better support small business growth and economic opportunities in the United States”.
Licenses outside the United States
PayPal already has approval for a banking license in Luxembourg, whose president is Mara McNeill, who has over 25 years of experience in financial services in banking.
More companies joining
PayPal has not been the only company making this move; several sectors have also found this option attractive. This is the case in the cryptocurrency sector, where companies like Circle Internet Group Inc., Ripple, and Paxos have already received preliminary approval to become banks. Other companies, such as Nissan Motor Co. and Sony Group Corp. from Japan, have also submitted applications to become banks.
Frequently asked questions
What new services will PayPal offer?
In addition to loans, it will be able to offer its own savings accounts and direct capital management without relying on third parties.
Will my money be safe in the new bank?
Yes, if the application is approved, customer deposits will be protected by FDIC insurance.
What other companies are doing the same?
Companies like Sony, Nissan, and cryptocurrency firms like Ripple and Circle have also applied for banking licenses.