PayPal has announced that it has officially applied to the Utah Department of Financial Institutions and the Federal Deposit Insurance Corporation to create PayPal Bank.
Through this move, PayPal intends to establish a Utah-chartered industrial loan company. For the past 12 years, the company has facilitated access to over USD 30 billion in loans and working capital to over 420,000 business accounts globally. This enabled PayPal to bridge a gap for small businesses requiring capital to scale their operations, acquire inventory, or invest in individuals and tools.
PayPal’s proposition
With PayPal Bank, PayPal would be able to optimise how it offers business lending solutions to small enterprises across the US. Additionally, the strategic move would minimise reliance on third parties and further solidify PayPal’s business.
Besides small business lending solutions, PayPal Bank plans to provide interest-bearing savings accounts to customers. Concomitantly, it would aim for direct membership in the US with card networks to complement processing and settlement activities via existing banking relationships.
If the Utah Department of Financial Institutions and the Federal Deposit Insurance Corporation approve PayPal’s applications, customer deposits at PayPal Bank would be eligible for FDIC insurance coverage.
Talking about the strategic initiative, Alex Chriss, President and Chief Executive Officer, PayPal, stated that, as obtaining capital poses significant difficulties for small businesses looking to grow and scale their operations, establishing PayPal Bank will allow the company to support companies in these situations, enabling them to expand and benefit from economic opportunities across the US. He added that this will be achieved while PayPal strengthens its business and increases its efficiency.
PayPal’s decision to establish PayPal Bank comes just as more fintech and cryptocurrency companies started pursuing bank charters to grow their business. Just before PayPal’s announcement, the Office of the Comptroller of the Currency (OCC) provided its conditional approval of five national trust bank charter applications. The regulator gave its approval to Ripple, Circle, BitGo, Fidelity, and Paxos after reviewing each application, based on its individual merits, consistent with applicable statutory and regulatory requirements.
