PayPal Moves Toward Bank Charter as Fintechs Push Beyond Traditional Banking

PayPal is taking a significant step toward becoming a regulated bank, underscoring a broader shift across the fintech industry as major players seek greater control over financial infrastructure and revenue streams. The San Jose, California–based payments company plans to establish a bank, allowing it to operate with fewer constraints than traditional partnerships with regulated financial institutions. As fintech services continue to expand rapidly, companies like PayPal are increasingly pursuing licenses that enable them to function more like banks.

PayPal has provided bank-like services to approximately 420,000 small businesses globally since 2013. However, these offerings have relied on third-party banks and partners. Securing a bank charter would allow PayPal to directly expand its capabilities, unlock new growth opportunities, and strengthen its business model through additional revenue sources.

As part of the initiative, PayPal has appointed Mara McNeill as president of the proposed bank. McNeill previously served as CEO of Toyota Financial Savings Bank and joined PayPal as a vice president in September. Her background includes leading regulated financial institutions as well as executive roles in fintech.

If approved, the bank would initially focus on lending to small businesses and could also introduce interest-bearing savings accounts. PayPal would further seek direct connections to U.S. card networks for processing and settlement, while maintaining its existing banking relationships. The company emphasized that these new connections would complement—not replace—current partners. Approval of the charter would also allow PayPal’s bank to access Federal Deposit Insurance Corporation (FDIC) insurance for customer deposits, providing an added layer of security and regulatory credibility.

PayPal is not alone in this strategic shift. Buy now, pay later (BNPL) provider Klarna already operates as a digital bank in Europe. Meanwhile, Minneapolis-based Sezzle is exploring an industrial loan charter, citing evolving regulatory pressures at the state level as a key motivation. Sezzle CEO Charlie Youakim has noted that obtaining a charter could reduce exposure to fragmented state regulation of BNPL products. The company is considering applying for a charter in Utah as early as next year.

Together, these moves highlight a growing trend: fintech companies are no longer content with sitting on top of the banking system—they want to become part of it.

Source: PaymentsDive