SAN FRANCISCO — PayPal has applied to establish a bank in Utah, a move that would deepen the digital payments company’s push into traditional financial services as fintech firms seek to operate more like banks and credit unions, according to analysts.
PayPal, which owns Venmo, said it filed applications with the Utah Department of Financial Institutions and the Federal Deposit Insurance Corp. to form PayPal Bank. The proposed institution would be a Utah-chartered industrial loan company, a type of bank that can accept FDIC-insured deposits and make loans while being owned by a nonfinancial parent.
PayPal said the bank would help make its small-business lending more efficient by reducing reliance on third-party partners. Since 2013, the company said it has provided more than $30 billion in loans and working capital to more than 420,000 business accounts worldwide.
Interest-Bearing Savings
The company also plans to offer interest-bearing savings accounts through the proposed bank. PayPal Bank would seek direct membership in U.S. card networks to complement processing and settlement activities currently handled through existing banking relationships.
Mara McNeill was named president of PayPal Bank. She previously served as chief executive of Toyota Financial Savings Bank.
As the CU Daily has been reporting, the filing comes as payments and fintech companies increasingly look for ways to expand into banking-like services. Buy now, pay later (BNPL) providers and cryptocurrency platforms have been among those pursuing bank charters or related licenses to improve efficiency and broaden offerings.
As the CU Daily also reported, Minneapolis-based BNPL platform Sezzle said in November it was exploring becoming an industrial loan company, calling the option less complex than forming a bank holding company. Klarna and Affirm have launched debit cards in recent years, with Affirm aiming to compete more directly with credit card issuers and Klarna adding rewards-style perks similar to traditional loyalty programs.
Five Crypto Firms Seeking to Form Banks
The trend extends to crypto firms. Last week, five cryptocurrency platforms, including Ripple and Circle, received conditional approval from the Office of the Comptroller of the Currency to establish national trust banks. Those entities would not be allowed to take deposits, offer checking or savings accounts, or provide FDIC insurance.
