According to Inc, digital payment and fintech giant PayPal applied this week to Utah’s Department of Financial Institutions to establish a banking entity. The company, which also owns Venmo, simultaneously filed with the FDIC for deposit insurance for its proposed “PayPal Bank.” CEO Alex Chris stated the main objective is to offer entrepreneurs credit they often fail to get from traditional banks, calling capital a “significant hurdle.” PayPal revealed it has already provided access to roughly $30 billion in loans and working capital to over 420,000 businesses since 2013. The company believes operating as a formal bank will create a faster, more efficient financing option. It also plans to assume roles handled by third parties, which would add to its profit margins.
PayPal’s Endgame
Here’s the thing: this isn’t really about becoming your neighborhood bank. You won’t be walking into a PayPal branch for a checking account. This is a highly strategic, vertical move. They’re essentially formalizing and supercharging what they’ve already been doing for a decade. By getting a bank charter, they can hold deposits directly (likely starting with business customer funds), which provides a cheaper, more stable source of capital to fund those loans. They cut out the banking middlemen they currently have to partner with. That means more control, better margins, and probably faster decision-making for loan applicants. It’s a classic fintech play: use technology and focus to do one specific banking function better and cheaper than the incumbents.
The “Anti-Bank” Position
And that’s where the positioning is so clever. They’re framing this entirely as a pro-small-business, “anti-bank” maneuver. Traditional banks are often criticized for being too risk-averse with small business loans, especially for newer or smaller operations. PayPal’s whole pitch is, “We have the data, we have the tech, and we’re not afraid to lend where they are.” They’ve already got a decade of transaction data from millions of merchants using their payment systems. That’s a goldmine for underwriting risk more accurately than a traditional bank with just a credit score and a business plan. So, is this a genuine mission to help the little guy? Sure, partly. But it’s also a brilliant business model: serve an underserved market with a superior, data-driven product and keep all the profits for yourself.
Broader Implications
Look, this is another massive step in the blurring of lines between tech and finance. We’ve seen it with Apple and Goldman Sachs, with Square (now Block) getting industrial loan charters. The tech companies that already have the customer relationships and the data pipelines are moving inexorably into the high-margin financial services that underpin those relationships. For small businesses, this could be great news—more options and potentially more access to capital. But it also raises questions. What happens when your payment processor, your loan officer, and your deposit holder are all the same company? That’s a lot of leverage in one place. Still, you can’t argue with the $30 billion already deployed. They’ve proven there’s a hungry market. Now they’re just building the factory right next to the store.
