PayPal Seeks Bank Charter

PayPal has applied for a U.S. banking charter so it can create “PayPal Bank,” an industrial loan company in Utah focused mainly on small-business lending and savings products, but it is not yet an approved bank.​

What PayPal Is Doing

PayPal filed applications with the Utah Department of Financial Institutions and the Federal Deposit Insurance Corporation (FDIC) to form a Utah‑chartered industrial loan company called PayPal Bank. This move would let PayPal bring more banking functions in‑house instead of relying on partner banks to fund and service its small‑business loans.​

Why It Wants a Bank Charter

PayPal says a charter would help it expand lending to U.S. small businesses and reduce dependence on third‑party lenders and “sponsor banks.” It also aims to lower funding and payment-processing costs and open new revenue streams, taking advantage of a more permissive U.S. regulatory stance toward fintech charters under President Trump.​

What PayPal Bank Could Offer

Under the proposed industrial loan company structure, PayPal Bank would focus on:​

• Business loans and working-capital lines for U.S. small businesses.​

• Interest-bearing savings accounts with FDIC insurance on customer deposits.​

• Direct membership with U.S. card networks for processing and settlement, alongside existing bank partners.​

How This Differs From a Traditional Bank

The charter PayPal is seeking is for an industrial loan company, which can make loans and take certain deposits while still being owned by a non‑bank parent. Unlike a full traditional “bank holding company,” this structure may face different Federal Reserve oversight and typically avoids offering standard demand deposit accounts like a typical checking account.​

Current Status and What’s Next

Regulators still need to decide whether to approve PayPal’s applications; until then, PayPal remains a payments company that offers financial services through partner banks rather than its own insured bank. If approved, PayPal Bank would give the company direct access to FDIC insurance for its deposits and cheaper funding to scale its lending to small businesses.​

PayPal must win approval from both Utah’s state banking regulator and the FDIC, satisfying strict standards on safety and soundness, capital, management, compliance, and how its non‑bank parent will be supervised.​

Core approvals required

PayPal needs a Utah industrial bank charter from the Utah Department of Financial Institutions (DFI) and federal deposit insurance approval from the Federal Deposit Insurance Corporation (FDIC). Utah typically grants only “conditional” approval first and makes it contingent on the FDIC signing off on deposit insurance.​

Utah state‑level hurdles

Utah DFI evaluates the organizers’ character and reputation, the adequacy and source of capital, the strength of the proposed board and management, and the overall business plan and risk controls. The department can impose conditions on parent companies, including registration and examination rights over the holding company that owns the industrial bank.​

FDIC review and prudential standards

The FDIC reviews industrial bank applications under Section 6 of the Federal Deposit Insurance Act, focusing on financial history, capital, earnings prospects, management competence, and risks to the Deposit Insurance Fund. It can require robust capital levels, liquidity, contingency funding plans, detailed risk‑management and internal controls, and ongoing reporting from PayPal and its parent.​

Parent company and activity restrictions

Because industrial banks are often owned by commercial or fintech parents, the FDIC and Utah DFI look closely at how the parent’s activities, leverage, and risk could affect the bank and may impose “source of strength” and ring‑fencing conditions. Utah and the FDIC can also restrict certain activities—such as demand deposits above specific thresholds or high‑risk lending—depending on the business model and size.​

Political and timing risks

Industrial loan company charters are politically sensitive, and past applications have faced intense scrutiny from lawmakers and traditional banks concerned about regulatory “loopholes.” As a result, PayPal could encounter extended back‑and‑forth with regulators, additional conditions, or even denial, with no fixed statutory timeline for a final decision.​