Key Points
- PayPal has applied for a charter to create its own bank, called PayPal Bank. The new bank would allow PayPal to offer loans to small businesses.
- The company also hopes to provide interest-bearing savings accounts to its customers.
- This move deepens PayPal’s competition with both fintech rivals and traditional banks.
- The announcement gave PayPal’s stock a small boost, as it has underperformed this year.
PayPal is making a major move into traditional banking. The digital payments giant announced on Monday that it has applied for a bank charter to form “PayPal Bank.”
If approved, the new bank would be able to offer loans to small businesses, a significant expansion of the company’s current services. “Establishing PayPal Bank will strengthen our business and improve our efficiency, enabling us to better support small business growth,” said CEO Alex Chriss.
The company, which also owns the popular payment app Venmo, doesn’t plan to stop there. It also hopes to offer interest-bearing savings accounts to its customers.
PayPal already provides credit lines to consumers, but this new effort is a much bigger step toward becoming a full-fledged financial institution.
The move puts PayPal in direct competition with a growing wave of fintech companies that are challenging the dominance of traditional brick-and-mortar banks. The company’s application will be reviewed by the Federal Deposit Insurance Corporation (FDIC) and Utah’s Department of Financial Institutions.
The news was a bright spot for the company’s stock, which has struggled this year. Shares of PayPal rose 1.5% in after-hours trading following the announcement.
