PayPal is still committed to becoming a bank. Under a new chief executive and in the middle of a broad restructuring, the payments company continues to see a bank charter as a way to expand lending and change how it pays for that lending.
Jamie Miller, who serves as both chief financial officer and chief operating officer, laid out the reasoning at the KBW Fintech Ecosystem Conference this week, according to a report by Banking Dive. Her comments offer the clearest picture so far of how a PayPal bank would fit into the company's plans.
An Application Filed Under Previous Leadership
PayPal, based in San Jose, California, submitted applications last December to the Federal Deposit Insurance Corp. and the Utah Department of Financial Institutions. It is seeking to form a Utah-chartered industrial loan company, a type of institution that lets companies outside traditional banking offer certain bank services.
The filing came while Alex Chriss was still running the company. Chriss has since left, and Enrique Lores took over as CEO in March. The bank effort has survived the leadership change.
Merchant Lending at the Core
Asked by the conference's analyst host about the industrial bank plan, Miller tied it directly to PayPal's ambitions in financial services. She described merchant lending as a foundation of the company's work.
PayPal processes payments for small businesses, sole proprietors and micro-sellers, and Miller noted that all of these groups can tap its lending products. A bank charter would give the company a dedicated vehicle for serving that base, which spans about 20 million merchant clients.
A Broader Push Into Financial Services
Lores has kept the strategy of selling more financial products to PayPal's roughly 400 million consumer customers and its merchants. That includes expanding buy now, pay later lending under the PayPal Pay Later brand and adding services through Venmo, its peer-to-peer payments app.
The push sits alongside a restructuring that began in April. Lores has eliminated about 2,000 jobs, removed layers of management and reorganized PayPal into three divisions: checkout and PayPal; consumer financial services and Venmo; and processing, payment services and crypto. Miller said the company expects to remove about $1.5 billion in costs over the next two to three years.
Deposits as a Cheaper Source of Capital
Beyond lending, Miller said a bank would help PayPal widen the range of places its money comes from. Today the company relies heavily on its own free cash flow and the cash on its balance sheet.
It has also started moving loan books off its balance sheet in both Europe and the United States. Last year, for example, PayPal sold KKR a portion of its buy now, pay later receivables originated in France, Germany, the U.K. and other European markets.
If a PayPal bank were able to accept consumer or commercial deposits, Miller said, those funds would offer another cost-efficient way to finance the business. Deposits are typically among the least expensive forms of funding available to lenders.
Staying Balance Sheet Light
Miller did not suggest that winning a charter would transform PayPal into a heavily capitalized lender. "We continue to expect to be generally balance sheet light," she said.
Instead, the company plans to decide case by case whether to hold loans or sell them, based on which option produces the better return. She gave no update on how regulators are responding to the application.
What the Charter Race Means for Fintech
PayPal is part of a growing group of payments companies seeking bank status. Buy now, pay later provider Affirm applied for FDIC and Nevada charters this year, while Fiserv and Stripe have secured special Georgia bank charters.
For fintech founders and investors, the trend shows that large payments players increasingly view a charter as a strategic asset rather than a regulatory burden. Direct access to deposits and lending authority could lower funding costs and reduce reliance on partner banks, though approval timelines remain uncertain, as PayPal's still-pending application shows.
Source: Banking Dive
