PayPal Bank on cards? Global payments giant seeks banking charter amid lending push in US — all you need to know

PayPal Bank: Global online payment giant PayPal Holdings announced that the company has filed an application with the Utah Department of Financial Institutions and the Federal Deposit Insurance Corporation (FDIC) to establish ‘PayPal Bank’, which will be registered as a chartered industrial lending company.

“PayPal Holdings, Inc. (NASDAQ: PYPL) announced today that it has filed with the Utah Department of Financial Institutions and the Federal Deposit Insurance Corporation to establish PayPal Bank, a Utah-approved industrial lending company,” an official statement said.

PayPal’s banking plans

In its announcement on December 15, PayPal also revealed that the online payment platform has provided $30 billion in loans and working capital to over 4,20,000 business accounts worldwide since 2013.

If the deal is approved, PayPal aims to expand its credit solutions business to small business operators in the United States, thereby reducing small businesses’ dependence on third-party credit providers.

PayPal also recognized that there was a ‘critical gap’ among small businesses seeking capital to purchase inventory or invest in their operations.

“The establishment of PayPal Bank will strengthen our business and increase our efficiency, allowing us to better support small business growth and economic opportunity across the United States,” said Alex Chriss, PayPal President and Chief Executive Officer.

PayPal’s move to apply for a banking charter comes amid a broader crackdown on fintech and crypto companies seeking banking licenses to expand their businesses, according to multiple US-based news agencies.

What will PayPal Bank offer customers?

If PayPal Bank is approved by U.S. government regulators, the company aims to focus on small business lending operations as well as offer interest-bearing savings accounts to its customers.

In its official statement, the payment giant also revealed that PayPal Bank will seek to establish direct affiliations with card networks to assist transaction and payment activities through existing banking relationships.

Customers will also be eligible for FDIC insurance coverage upon possible approval of the banking charter. FDIC insurance coverage protects customers’ money up to $250,000 per person per bank per account, according to the regulator’s website.

According to the Federal Deposit Insurance Corporation’s website, “Deposositors may be eligible for coverage over $250,000 if they have funds in different ownership categories and all FDIC requirements are met.”

If approved, the company has named Mara McNeill, who has more than 25 years of industry experience in banking, commercial lending and private equity, as President of PayPal Bank. Prior to joining PayPal, McNeill was President and CEO of Toyota Financial Savings Bank.

What is a chartered industrial credit company?

PayPal has applied to become a chartered industrial credit company; This refers to a state or national chartered industrial bank where the entity is usually owned by a commercial company and is not supervised by a federal banking agency.

Industrial banks accept deposits from customers and are authorized to provide loans to them and small businesses as part of their lending operations, according to Investopedia data.

These Industrial banks are also known as industrial loan companies and are chartered in only a few states, such as Utah, which reportedly provide the majority of contracts for industrial banks in the US.

Press for banking

PayPal’s application for a banking charter comes at a time of a general crackdown on lending in the US under the new administration of Donald Trump, who takes office in January 2025.

According to a recent news Bloomberg According to the report, interest in financial companies that want to become banks in America has increased compared to the previous Biden administration. According to the agency’s report, very few applications were being submitted at that time and even fewer were being considered for approval.

Last week, U.S.-based cryptocurrency giants such as Ripple and Circle received preliminary approval from the U.S. banking regulator, the Office of the Comptroller of the Currency, to establish national trust banks, a major move to integrate digital assets into the banking system, Reuters reported on Saturday.

While the regulator on Friday approved the national trust bank charter for Ripple and Circle, it also conditionally approved applications from companies such as BitGo, Paxos and Fidelity Digital Assets to convert their state trust bank charters into national contracts.

However, the report also emphasized that the regulator must sign the final approval for each of the trust banks to operate in the country.