I signed up for a PayPal account nearly 10 years ago, only to buy and sell things on eBay. But boy how times have changed! I now use my account to get paid online, transfer money to friends, pay for services and products online and deposit my earnings from cash back apps like Ibotta.
Who would’ve predicted PayPal to be such an e-commerce force in 2018? Today there are over 227 million active customer accounts and it is arguably one of the easiest ways to pay and get paid online.
If PayPal were a bank, it would be ranked among the top 25 largest banks in the U.S.
PayPal offers banking services like a traditional bank
Speaking of that, PayPal has recently started offering services that traditional banks offer. For instance, they have been reaching out to customers to offer basic banking features to their PayPal digital wallets.
These features include:
- Federal Deposit Insurance Corp. insurance for their balances
- A debit card that can be used at ATMs to withdraw cash
- The ability to direct deposit paychecks
However, there is one big catch. And that is that PayPal doesn’t have a U.S. banking license. Meaning the FDIC won’t backstop funds and Visa and Mastercard won’t be supplying debit cards (because they only allow their cards to be issued at banks).
PayPal partners with several banks
This isn’t stopping PayPal though. They have reached out to a variety of small banks that stay anonymous and behind the scenes to issue debit cards, deposit checks instantly and to issue loans to consumers and small businesses. Several of these smaller banks have reportedly been out of Delaware, Georgia, and Utah.
The new service
All the new services don’t come free. There is a fee to take out money from ATMs not in PayPal’s network and a 1% fee on any check deposited by camera via a smartphone. However, there are no monthly fees or minimum-balance requirements.
PayPal’s goal is to serve users that don’t already have bank accounts. And while they are partnering with several different banks to get these products to consumers, the company has no intentions of becoming a bank.
Not convinced? Another “new” banking solution is to bank with Chime, who have no fees and no minimums and will help you get your paycheck two days early.