PayPal is seeking a banking charter that would allow it to boost its lending business, offer savings accounts that can earn interest and make customers’ deposits eligible for federal insurance coverage, the payments company said Monday.
PayPal has submitted applications to authorities in Utah and to the Federal Deposit Insurance Corporation to set up PayPal Bank, the online payments company said in a news release.
The banking option would also allow PayPal to expand loans to small businesses and rely less on third parties, it said. PayPal has provided $30 billion in loans to more than 420,000 businesses worldwide since 2013, according to the company.
If PayPal’s applications are approved, the company will join other entities that have not been traditionally seen as banks in receiving banking charters, such as the digital asset firms that have recently received preliminary approval from the federal government. The trend reflects the broader push from President Donald Trump’s second administration to ease banking rules.
The company plans to name Mara McNeill as the first president of the bank. McNeill previously served as the chief executive of Toyota Financial Savings Bank, a subsidiary of the Toyota Motor Corporation.
PayPal was created in 2000 after a payments company co-founded by Elon Musk merged with software company Confinity, whose founders included Trump supporter and tech mogul Peter Thiel. The company has since become a global household name that enables millions of transactions daily. It reported a net revenue of $8.4 billion in the most recent quarter.
But consumers have been wary of storing large amounts of money on the platform or others like it, such as the PayPal-owned Venmo, because the money is not insured by the federal government.
The Trump administration’s Office of the Comptroller of the Currency, a major U.S. financial regulator, last week approved preliminary banking charters for digital asset platforms Circle, BitGo, Fidelity, Paxos and Ripple.
The OCC said that it had “applied the same rigorous review and standards it applies to all charter applications,” while Comptroller Jonathan V. Gould said the approvals would help make the banking industry more competitive by providing consumers with more access to new products, services and sources of credit.
According to the regulator, the public comments it received during the review process raised concerns about “unsavory actors” gaining access to the banking system if digital assets firms were allowed to be banks.
Other companies that have not been traditional players in the banking industry but have submitted applications for charters include Sony and Nissan.
Rod Garratt, a former vice president at the Federal Reserve Bank of New York from 2013 to 2015, said permitting crypto and payment companies to have banking charters does “raise concerns about bringing more firms under federal banking regulation and increasing Fed exposure.”
But he said such risks could be mitigated by removing some of the benefits offered to traditional banks. Garratt noted that the Fed could, for instance, provide access to payment settlements but not offer certain lines of credit usually given to banks, referring to remarks by Federal Reserve Gov. Christopher Waller in October.
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