PayPal Banking on the Unbanked.

by Sarah Grotta 0

PayPal

PayPal has begun to offer banking services that include features like cards, surcharge free access to ATMs through the MoneyPass network, remote deposit capture for check deposits and FDIC insurance.  By PayPal’s own account, it isn’t trying to compete with traditional financial institutions as explained in The Verge:

According to Bill Ready, PayPal’s COO, the company isn’t looking to replace traditional banks anytime soon with the new service. Instead, it wants to offer banking options to customers that typically haven’t been able to take advantage of them (something the company views as increasingly important in today’s digital economy). According to Ready, if you already have a bank account connected to your PayPal account, “this isn’t an account for you.   

Banks and credit unions may also appreciate that PayPal isn’t looking to acquire a bank charter, but is using bank partners and sponsorship relationships:

How PayPal can actually do this is fascinating since it doesn’t actually have a banking license in the US. According to The Wall Street Journal, the company is getting around that by quietly partnering with several small banks that can provide those services. So behind the scenes, it’s not PayPal running these services, but a Delaware bank handles debit cards, a bank in Georgia deposits checks that users take pictures of, and banks in Utah offer loans to customers and small businesses. 

It appears that PayPal is using its powerful brand to compete with general purpose reloadable prepaid card providers who have been providing these types of services for over a decade.

Overview by Sarah Grotta, Director, Debit and Alternative Products Advisory Service at Mercator Advisory Group

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