PayPal continues to pursue a bank charter that could give the payments company another way to fund and expand lending products, including services offered to merchants and buy now, pay later loans for consumers.
Chief Financial and Operating Officer Jamie Miller discussed the application this week at the KBW Fintech Ecosystem Conference. PayPal filed applications with the Federal Deposit Insurance Corp. and the Utah Department of Financial Institutions last December to establish a Utah-chartered industrial loan company. The application was submitted while Alex Chriss was chief executive officer. Enrique Lores became CEO in March and has continued the company's strategy of adding financial services.
What the proposed bank could do
Miller said a bank operation could support PayPal's broader financial-services plans. Those plans include lending to small businesses, sole proprietors and micro-sellers that use PayPal's payment-processing services. The company also is expanding consumer products, including buy now, pay later loans under the PayPal Pay Later brand and services connected with Venmo.
“The other side of it is to diversify our funding sources,” Miller said at the event.
A bank charter would not automatically approve any particular loan product or guarantee that PayPal's application will be granted. The FDIC and Utah's financial regulator are reviewing the proposed industrial loan company through their respective processes. The report did not identify a decision date or say that the application had been approved.
PayPal's interest in a charter comes as the company reorganizes its business around payments and financial services. The company has divided its operations into three areas: checkout and PayPal; consumer financial services and Venmo; and processing, payment services and crypto. PayPal also has cut about 2,000 jobs and expects to remove approximately $1.5 billion in costs over the next two to three years, Miller said.
Potential effects on borrowers and merchants
PayPal serves about 400 million consumers and 20 million merchants, according to the report. A charter could give the company a more direct role in providing and funding financial products to those customers, although the effect on eligibility, pricing, fees or underwriting was not detailed.
For consumers, the most visible connection may be PayPal Pay Later, which allows eligible customers to spread purchases over time. For merchants, the company has described lending as part of the support it provides to small businesses and other sellers. Any expansion would operate within the terms of the products and the regulatory requirements that apply to them.
| Development | Status reported Nov. 13 |
|---|---|
| Utah industrial loan company | Applications filed with the FDIC and Utah Department of Financial Institutions in December |
| Merchant lending | Identified by PayPal as a financial service for merchants, sole proprietors and micro-sellers |
| PayPal Pay Later | Part of the company's planned expansion of consumer financial services |
- PayPal has applied for a Utah industrial loan company charter.
- The company says the charter could diversify its funding sources and support lending.
- The application remains a regulatory matter; no approval was reported.
PayPal's push reflects a wider effort by the company to combine payment processing with lending and other financial services. Its executives have presented the charter as one part of that strategy, rather than as a standalone change to the terms of any existing consumer account or loan.
