PayPal Introduces Banking Features Including Debit Card, Check Deposit
The popular online payments service PayPal has recently been introducing some traditional banking features and offering them to select customers. According to the Wall Street Journal, PayPal has been adding a number of features, including FDIC insurance on funds, debit cards that can be used for ATM withdrawals, direct deposits for payroll checks, and the ability to deposit paper checks by uploading photos of them. While these new services come with no monthly fees or minimum balance requirements, users will have to endure regular ATM fees for machines outside of PayPal’s network and will be assessed a 1% fee on checks deposited via photo upload.
As you may suspect, PayPal didn’t suddenly obtain a bank charter in order to roll out these features. Instead the company is partnering with a collection of small banks, with each making up a different part of the puzzle. For example WSJ reports that a bank in Delaware bank is helping to issue the debit cards, while a Georgia-based bank is managing the check depositing aspects. Interestingly the names of these banks are being kept private and they will be working behind the scenes. Thomas Brown of the law firm Paul Hasting LLP explains the logic of such a move, saying “It’s mostly just a question of stringing together the supply chain. You can use technology to create the appearance of integration across accounts at different financial institutions.”
Although PayPal has already been an option for many unbanked individuals, should these features roll out further, it seems likely that more customers who are frustrated with the big banks will flock to PayPal. Additionally, even with the 1% fee, PayPal’s check deposit function could make them a better option than the check cashing stores that are prevalent in many neighborhoods. That said, as Lisa Servon points out in her book The Unbanking of America, a big reason why check cashing stores prove so popular has a lot to do with the speed in which customers can get their cash. To that point, it’s unclear what PayPal’s processing time is for deposits.
On the FinTech side of things, it’s also worth noting that these moves come at a time when competition in the peer to peer payments field — which has always been one of PayPal’s core businesses — has been heating up. Beyond direct competitors like Square’s Cash app, Apple introduced their own Apple Pay Cash feature late last year, allowing users to send money using iMessage. Because of this, while perhaps still being noble in its own right, PayPal’s slight pivot could also help them keep the upper hand when it comes to payments.
Finally it’s always interesting to see a FinTech company partner with full-fledged banks. However this case is somewhat unique as the other players are shrouded in some mystery. Regardless, these new features show once again that certain technology companies have the potential to really make a difference in people’s financial lives. Hopefully PayPal will roll out their banking offerings to more unbanked customers soon.