PayPal has taken a significant step towards expanding its financial services by applying to become a bank in the United States. The company has submitted applications to both the Utah Department of Financial Institutions and the Federal Deposit Insurance Corporation (FDIC) to establish PayPal Bank. This move is reflective of the current regulatory environment, which has become more accommodating to fintech firms under the Trump administration.
With this banking charter, PayPal aims to enhance its lending capabilities to small businesses, a segment that often faces challenges in securing capital. Chief Executive Alex Chriss emphasized this point, noting that establishing PayPal Bank would bolster the company’s operations and efficiency, thereby fostering growth opportunities for small businesses across the nation. Since 2013, PayPal has extended over $30 billion in loans and financial support to more than 420,000 business customers around the world.
By obtaining a U.S. banking license, PayPal seeks to lessen its reliance on third-party financial institutions and provide its customers with FDIC insurance for their deposits. This move aligns with a broader trend where various fintechs and cryptocurrency firms have pursued banking charters in 2023, capitalizing on the administration’s openness towards the integration of non-traditional financial enterprises into the regulated banking landscape. Companies like Brazilian digital lender Nubank and cryptocurrency exchange Coinbase have also sought banking approvals this year.
The Office of the Comptroller of the Currency recently granted conditional approval for banking to Ripple and Fidelity Digital Assets, reinforcing the trend of welcoming new entrants into the sector. Additionally, US regulators approved the establishment of Erebor, a bank backed by a group of tech billionaires connected to the Trump administration, aimed at addressing gaps left by financial disruptions like the collapse of Silicon Valley Bank.
Comptroller of the Currency Jonathan Gould commented positively on these developments, stating that new entrants benefit consumers, the banking industry, and the economy by providing access to innovative products, services, and credit sources.
If approved, PayPal has indicated that it would appoint Mara McNeill, the former CEO of Toyota’s financing business, to lead the regulated banking entity. This appointment would signify a strategic move to leverage experienced leadership within the finance sector as PayPal endeavors to navigate the complexities of traditional banking regulations.
