PAYPAL LOOKS to be the latest company to dabble in conventional banking to rival the many "challenger" banks emerging.
A report in the Wall Street Journal (paywalled) suggests that the former eBay subsidiary has signed deals with a number of US banks to 'white label' services under the PayPal name. This will include cheque deposits and even loans.
In essence, PayPal offering is a way of creating a union amongst the hundreds of small banks and credit unions in the US. It also means that PayPal doesn't have to spring for an extensive additional infrastructure.
Although PayPal was one of the first to offer in-app payments in shops, it has never translated it into a banking offering, or a contactless payment method to rival Google, Apple and Samsung, though it can link with them at some level.
It does have a Mastercard which can be used to pay directly from a PayPal account but it is only available on invite currently.
Everyone wins. eBay has already decided to switch away from PayPal as its default payment method. Amazon has never supported it. A change of direction was inevitable.
By moving into banking, PayPal shores up its offering and gives itself a much more solid future. For the banks it is using, it creates a much more cohesive income stream for them in a world where money is controlled by financial giants.
As for the UK, there's no evidence that this technique will come to the UK, but there are actually more opportunities for PayPal if it did.
Here, there's more opportunity to get licensed in your own right as a "challenger bank". The concept is proving hugely popular with the likes of Monzo, Revolut, Curve and Starling becoming regular sights for those taking payment. Monzo particularly has gained an almost Applesque cult status with its luminous orange cards.
In terms of payment, there won't be an account charge as some challenger banks insist on, but rather:
"Users will have to pay a fee to take their money out from ATMs not in PayPal's network, in addition to 1% of any check they deposit via taking a photo with their smartphone." - which is pretty standard stuff really.
PayPal already offers peer-to-peer payments via Messenger to rival Google Pay's embed within Gmail and a POS service, PayPal Here, for merchants to use on-premise. µ
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