PayPal Turning to the Unbanked For its Next Push

April 12, 2018         By: Steven Anderson

We’ve heard a lot about PayPal lately, and with good reason. With the specter of the eBay business loss looming, the company’s been working frantically to make up for the shortfall and continue to show profit. The good news is it’s done just that, and recently revealed that its next move is to go after the unbanked.

Yes, PayPal has a plan to expand its lineup of banking services in its mobile payments operation. It’s already got some basic banking services being offered to some consumers, mainly through its digital wallet and some Federal Deposit Insurance Corp. (FDIC) protections for balances.

While PayPal doesn’t have a banking license—a move that limits what it can do—it can offer some services, especially in conjunction with other banks. A Delaware bank is helping it offer up PayPal balance-backed debit cards, and a Georgia bank is allowing customers to deposit checks direct to PayPal by photo. It even has a couple of banks in Utah working with it to provide lending services.

Throw in cross-border remittances—popular with those working in other countries who want to send cash back to the family—and you’ve got a full plate of options. PayPal actually gets a bit ahead on this because it’s not offering any interest on balance deposited, and it charges one percent for every check deposited by photo.

With PayPal able to function as at least a skeletal bank with minimal features, it might well be able to draw in a whole new base of customers. That’s not just in the US, either; if it can branch out from there into all the other countries where it has a presence, there’s some real potential opportunity for gains to be had. PayPal branching into new market sectors like this is what’s likely going to let it slide on by the loss of eBay with minimal, if any, impact.

The utter tragedy of all this is that we’re just seeing PayPal basically treading water. All these gains will be sunk by the loss of eBay trade imminently, and draw it back to merely flat. But flat is much better than a crater in the balance sheet, so kudos to PayPal for seeing a problem and diversifying in response.