- PayPal applied for a Utah industrial bank charter to lend directly to U.S. small businesses
- The charter would allow PayPal to accept deposits and offer FDIC-insured savings accounts
- PayPal aims to cut reliance on partner banks and lower funding costs for business loans
PayPal has applied for an industrial bank charter in Utah as it expands lending to U.S. small businesses and reduces its reliance on partner banks. The payments company said Monday it plans to form a new subsidiary, PayPal Bank, if regulators approve the application.
According to reports, the unit would focus on business loans and savings products while operating under federal and state oversight. Alongside the charter filing, PayPal submitted an application to the Federal Deposit Insurance Corporation seeking deposit insurance.
If approved, customer deposits held at PayPal Bank would be insured up to standard FDIC limits. Chief Executive Officer Alex Chriss said access to capital remains a constraint for many small businesses, particularly as traditional lenders tighten credit standards.
“Securing capital remains a significant hurdle for small businesses striving to grow and scale,” said Alex Chriss, President and Chief Executive Officer, PayPal.
However, he acknowledged the charter would allow the firm to provide lending solutions directly rather than through third-party institutions.
Direct Lending and Deposits
An industrial bank charter would allow PayPal to issue loans, accept deposits, and offer interest-bearing savings accounts under its own license. Based on reports, the company articulated that the structure would streamline operations and improve efficiency across its financial products.
The firm also plans to apply for direct membership in major card networks. That step would allow PayPal Bank to handle parts of payment processing and settlement internally, reducing dependence on intermediaries.
Moreover, customer funds placed with PayPal Bank would qualify for FDIC protection if regulators approve the application. The company said insured deposits would strengthen confidence in its expanding financial services.
Reducing Partner Dependence
Today, PayPal relies on partner banks such as WebBank to underwrite and support its small business lending products. Those arrangements provide regulatory coverage but limit control over loan terms and funding costs.
Anyhow, by operating its own bank, the company would gain direct access to deposits as a funding source. Industry data show deposit funding is typically cheaper and more stable than wholesale borrowing, especially during periods of market stress.
The proposed bank would be led by Mara McNeill, a banking executive with more than 25 years of experience. McNeill previously served as president and chief executive of Toyota Financial Savings Bank, according to company disclosures.
Lending Footprint and Market Context
PayPal has expanded its merchant financing products over the past several years as branch closures and stricter credit policies reduced access to bank loans for small firms.
Moreover, fintech lenders have increased their share of small business originations by using transaction data and automated underwriting. In this case, PayPal already processes large volumes of merchant payments, giving it insight into cash flows and sales trends.
On the other hand, industry reports show digital lenders continue to attract demand from businesses seeking faster approval times and flexible repayment structures.
Regulatory Review Ahead
Industrial bank charters are subject to close regulatory scrutiny. Consequently, PayPal must meet capital, governance, and compliance standards before receiving approval. The review process can take months and does not guarantee a positive outcome.
Analysts describe the move as an extension of PayPal’s existing financial services rather than a shift away from payments. The company would remain separate from traditional retail banks while operating within established banking rules.
If approved, the charter would place PayPal among a growing group of fintech firms seeking regulated bank status to support lending and deposit-taking activities in the U.S.
