San Jose, California: PayPal has applied to establish a Utah-chartered bank, a move that would allow the payments company to hold customer deposits and expand its lending capacity to small businesses in the United States.
The San Jose-based firm said the proposed PayPal Bank would enable it to fund loans more directly and operate with greater efficiency, rather than relying primarily on partner banks and third-party balance sheets. PayPal currently offers small-business financing through products such as PayPal Working Capital, but does not directly hold deposits in the U.S.
The application comes as PayPal seeks to deepen its role in core banking services and take advantage of a regulatory environment that has become more accommodating to fintech firms under the Trump administration.
PayPal said the new bank would also allow it to offer interest-bearing savings accounts to customers. The company already holds a banking licence in Luxembourg, which supports certain European operations.
“Securing capital remains a significant hurdle for small businesses striving to grow and scale,” PayPal President and Chief Executive Alex Chriss said in a statement. He added that establishing PayPal Bank would strengthen the company’s business and improve efficiency in supporting small businesses across the U.S.
Under the proposal, PayPal Bank would operate as an industrial loan company (ILC), a type of state-chartered bank permitted in a limited number of states, including Utah. Unlike traditional banks, ILCs are not required to register as bank holding companies under the Bank Holding Company Act, meaning the parent company is not subject to full Federal Reserve supervision.
ILCs can be owned by non-bank parent companies, such as fintech firms and retailers, and are regulated primarily at the state level. Utah has long been a preferred jurisdiction for such charters due to its established regulatory framework.
Other companies operating banks under ILC charters include Ally Bank, which originated from General Motors’ financing arm, and Toyota Financial Savings Bank, which supports Toyota’s auto-financing business.
If regulators approve the application, Mara McNeill has been selected to serve as President of PayPal Bank. PayPal said McNeill brings more than 25 years of experience in banking, commercial lending, and private equity, and previously led Toyota Financial Savings Bank through a similar transition to an industrial loan company structure.
