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PayPal Wants to Become a Bank—Here’s Why Incumbents Should Care

PayPal Holdings Inc. has officially submitted applications to the Federal Deposit Insurance Corp. and the Utah Department of Financial Institutions to launch a new banking entity, “PayPal Bank.” If approved, this Utah-chartered industrial loan company (ILC) would significantly expand PayPal’s reach into traditional financial services, including small business lending and consumer savings products. The application reflects a broader regulatory shift under the Trump administration, which appears more receptive to fintechs entering the banking ecosystem—evidenced by recent approvals for crypto-native firms like Circle and Paxos. PayPal’s move comes after facilitating more than $30 billion in loans since 2013 and aims to enhance its product breadth, particularly for underserved small businesses and digital-first consumers. However, the strategic pivot introduces a range of execution, regulatory, and capital adequacy risks that could alter its operating structure.