According to GSM Arena, PayPal has officially submitted applications to the Utah Department of Financial Institutions and the FDIC to establish “PayPal Bank.” This would be a Utah-based chartered industrial loan company, a specific type of banking institution. The company stated this move is to strengthen its business and improve efficiency, specifically to better support small business growth. PayPal Bank would offer interest-bearing savings accounts with FDIC insurance and become a member of U.S. card networks. The company also highlighted that since 2013, it has provided over $30 billion in loans and working capital to more than 420,000 business accounts globally. This new bank structure is intended to let PayPal provide business lending more efficiently in the U.S. while reducing its reliance on third parties.
PayPal’s Endgame
So, why does a payments giant want the hassle of being a bank? Look, it’s all about control and margin. For years, PayPal has been a layer on top of the traditional banking system. It needs partner banks to hold deposits, issue loans, and process cards. That means sharing revenue and dancing to someone else’s tune. Becoming a bank changes the entire game. They can take deposits directly, lend from their own balance sheet, and likely streamline their card operations. Basically, they want to cut out the middleman and keep more of the profits. The stated focus on small business lending isn’t just PR—it’s where they already have a huge customer base and data advantage. They know the cash flow of millions of small merchants. Who better to lend to them?
The Industrial Loan Loophole
Here’s the thing: PayPal isn’t applying to be a traditional national bank. They’re going for an Industrial Loan Company (ILC) charter in Utah. This is a classic tech industry workaround. ILCs are sometimes called the “non-bank bank” charter because they allow commercial companies—like retailers or, in this case, tech firms—to own a full-service bank without being subject to the same consolidated supervision as traditional bank holding companies. It’s a controversial path that companies like Square (now Block) and Rakuten have already taken. For PayPal, it’s probably the fastest and least restrictive route to getting the banking powers they crave without a complete corporate overhaul.
What It Means For You
For the average user or small business owner, the immediate changes might be subtle. But the trajectory is clear. First, you’ll probably see PayPal pushing FDIC-insured savings accounts with competitive rates to attract customer deposits—a direct challenge to online banks like Ally or Marcus. More importantly, small business loans could get faster and maybe cheaper, as PayPal leverages its own data and capital. Think less paperwork, more algorithm-based approvals. And let’s be real, it also makes PayPal stickier. If your business banking, savings, and payments are all in one ecosystem, you’re a lot less likely to leave. The real question is whether regulators will greenlight this. The ILC charter has been a political football for years, with traditional banks arguing it creates an unfair advantage. PayPal’s move will definitely reignite that debate.
