- PayPal wants to establish a Utah-chartered industrial loan company.
- The move would allow it to hold deposits and fund loans directly.
- Small business lending is a key focus of the plan.
PayPal is seeking to deepen its role in financial services after applying to create a Utah-chartered bank. This move would push the company closer to traditional banking while keeping regulatory demands lower than those faced by major banks.
The San Jose-based firm already offers loans to small businesses through products such as PayPal Working Capital. However, most of this lending is done in partnership with banks, meaning PayPal relies on third-party balance sheets.
By setting up its own bank, PayPal would be able to fund loans directly, accept deposits and run its lending operations with more control and speed. This could also lower costs and reduce dependence on external partners.
“Access to capital is still a major challenge for small businesses trying to grow,” PayPal CEO Alex Chriss said, adding that the proposed bank would improve efficiency and expand economic opportunities.
PayPal is applying to form an industrial loan company (ILC), a type of state-chartered bank allowed in only a few US states, including Utah.
Unlike traditional banks, ILCs are not required to register as bank holding companies. This means PayPal would avoid full Federal Reserve oversight of its entire corporate group, facing lighter regulation while still being able to take deposits and make loans.
Utah has become a popular choice for such banks because it has clear rules and long experience regulating ILCs owned by non-bank companies.
Several well-known firms already operate under the same model. Ally Bank began as General Motors’ finance arm, while Toyota Financial Services Bank supports Toyota’s auto-financing business.
PayPal said it already holds a banking licence in Luxembourg and plans to offer interest-earning savings accounts in the US if the new bank is approved.
If regulators approve the application, Mara McNeill will serve as President of PayPal Bank. She brings over 25 years of experience in banking, commercial lending, and private equity.
McNeill previously led Toyota Financial Services Bank through a similar transition, an experience PayPal believes will be key as it moves into core banking.
The application signals PayPal’s intention to go beyond payments and become a stronger player in lending and deposits, especially for small businesses looking for easier access to capital.
