PayPal is... a bank now?
"New bank would offer lending solutions and interest-bearing savings accounts to customers."
A few weeks ago, it was announced that “PayPal plans to launch bank serving small businesses around the U.S.”
“The company said Monday that it filed documents with the Utah Department of Financial Institutions and the Federal Deposit Insurance Corporation (FDIC) to launch PayPal Bank.
“PayPal said that the bank would allow the firm to provide lending solutions for small businesses, as well as interest-bearing savings accounts. It also plans to pursue direct membership with card networks to complement processing and settlement activities through existing banking relationships.
“If PayPal’s application is approved, customer deposits would have FDIC insurance coverage, which protects up to $250,000 per depositor, per insured bank.”
“Securing capital remains a significant hurdle for small businesses striving to grow and scale… Establishing PayPal Bank will strengthen our business and improve our efficiency, enabling us to better support small business growth and economic opportunities across the U.S.”
-PayPal CEO Alex Chriss.
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Does this change anything for “PainPal”?
There are some who believe this change is a welcome one (here are two examples below):
There are some who believe PayPal is at a “pivotal moment” and might not have what it takes:
My take? I am as uncertain as I have been in some time. As I’ve pointed out before, earnings and the stock price of PayPal are splitting, and one of those things has to change. I still expect it to be the stock price because I trust Chriss’ leadership, especially when it comes to SMBs (based on what we accomplished at Intuit). But I would like to see more focus from PayPal on what matters most.
Valuation
If Cash from Operations can stay relatively consistent, and they can keep buying back shares like maniacs, I believe the downside is priced in, and the upside for growth is not.
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