• PayPal has applied to launch a Utah-chartered bank, allowing it to lend directly, take deposits, and bypass traditional banking partners.
• The move follows over USD 30bn in SME loans routed through partner banks, where PayPal handled underwriting but shared profits.
• If approved, PayPal’s bank could reshape access to capital and savings for small businesses globally.

Paypal

Paypal announced that it applied to establish a PayPal Bank, a Utah-chartered industrial loan company. It filed applications to both the Utah Department of Financial Institutions and the Federal Deposit Insurance Corporation.

In the past, PayPal has attempted to bridge the gap in small business lending. Oftentimes, banks do not want to lend to MSMEs because of the risk and small nature of the loan amounts. Thus, PayPal became a way for companies to lend money.

Bank

The fintech giant has lent more than USD 30 billion to 420,000 small business accounts. However, it has not been able to achieve this alone. Instead, it has had to arrange every loan through a third-party bank. These banks often included WebBank, Wells Fargo, JPMorgan Chase, and Goldman Sachs. Paypal would make the sale, do the underwriting, and manage the relationship. However, it would hand the actual lending to the bank and split the profit.

Thus, the move to establish a bank would mean that the fintech giant would no longer need to share profits. If approved, it would no longer need sponsor banks and would be able to make its own loans. It would be able to accept its own deposits and retain all the profits that used to go to middlemen.

This marks a pivotal moment for PayPal, and for how small businesses and savers access capital in the years ahead.

Bottom line: If approved, PayPal’s bank could shift how small businesses access credit, away from traditional banks and toward platforms they already use.