Capitalizing on the regulatory easing under the Trump administration, U.S. digital payments giant PayPal Holdings Inc. has applied for a bank charter, aiming to expand small business lending capabilities and offer interest-bearing savings accounts to customers by leveraging the government’s openness toward fintech firms entering the banking system.
On Monday, November 15, PayPal announced it submitted applications to the Federal Deposit Insurance Corporation (FDIC) and the Utah Department of Financial Institutions to establish PayPal Bank, a Utah-chartered industrial loan company. If approved, the bank would enable PayPal to provide more efficient lending solutions to U.S. small businesses. Since 2013, PayPal has extended over $30 billion in loans and working capital to more than 420,000 business accounts globally.
PayPal CEO Alex Chriss stated that access to capital remains a significant hurdle for small businesses striving to grow and expand. Establishing PayPal Bank would enhance the company’s operations and efficiency, allowing it to better support small businesses nationwide with economic opportunities.
The move aligns with the Trump administration’s relaxed stance toward fintech firms. Last week, several cryptocurrency companies, including Circle Internet Group Inc., Ripple, and Paxos, secured preliminary regulatory approval to become banks—a stark contrast to the stringent scrutiny under the Biden administration.
Following the bank charter announcement, PayPal’s shares, which closed down 1.5% on Monday, reversed course in after-hours trading, rising as much as 1.5%.
In October, PayPal reported third-quarter revenue of $8.42 billion, up 7% year-over-year and exceeding analyst expectations. However, its shares have declined nearly 30% year-to-date, while the S&P 500 has gained close to 16%.
A bank charter could provide PayPal with new growth drivers, operational efficiencies, and cost savings. By reducing reliance on third-party financial institutions, PayPal may gain greater control and higher margins in delivering financial services to small businesses and consumers.
**Small Business Lending as a Core Focus**
The primary goal of PayPal Bank is to strengthen small business lending. According to PayPal, it has already provided over $30 billion in loans and working capital to more than 420,000 commercial accounts globally since 2013, addressing critical funding gaps for businesses seeking expansion, inventory purchases, or workforce and tool investments.
Upon approval, PayPal Bank would streamline lending solutions for U.S. small businesses while reducing third-party dependencies and bolstering its own operations. The bank also plans to become a direct member of U.S. card networks to supplement existing processing and settlement activities through banking partners.
If approved, Mara McNeill, a financial services veteran with over 25 years of experience in banking, commercial lending, and private equity, will serve as PayPal Bank’s president. She previously held leadership roles at Toyota Financial Savings Bank.
**Expanding Consumer Financial Products**
Beyond small business lending, PayPal Bank intends to offer interest-bearing savings accounts as part of its strategy to broaden and refine consumer financial products. PayPal already provides credit lines to consumers and has been expanding its bank-like services to compete with fintech rivals encroaching on traditional banks’ turf.
PayPal holds a banking license in Luxembourg. If the U.S. application succeeds, customer deposits at PayPal Bank would qualify for FDIC insurance coverage. The company owns the popular payment app Venmo.
**Shifting Regulatory Landscape Creates Opportunities**
PayPal’s application coincides with the Trump administration’s welcoming approach toward fintech firms entering banking. Interest in bank charters has surged since President Trump took office in January, diverging sharply from the Biden era, when approvals were rare due to perceived regulatory hurdles.
The tide has turned. In addition to last week’s crypto firm approvals, Nissan’s financing arm applied for a similar charter earlier this year, and Japan’s Sony Group has also sought to become a bank.
Comments