PayPal applies to form its own bank to expand small-business lending

California: PayPal is seeking a banking charter that would allow it to boost its lending business, offer savings accounts that can earn interest and m...

California: 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 yesterday. PayPal has submitted applications to authorities in Utah and to the Federal Deposit Insurance Corp. to set up PayPal Bank, the 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 $30bn 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 Toyota Motor.

PayPal was created in 2000 after a payments company co-founded by Elon Musk merged with the 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 $8.4bn 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.