Move over Bank of America, Citibank and Wells Fargo, here comes PayPal. In a very stealth initiative, PayPal is rolling out some very basic banking services including debit cards, loans and check depositing features. Customers who accept the requisite agreements will also have their balances protected by the FDIC (Federal Deposit Insurance Corp). Just like a “real” bank. And guess what? PayPal found a way to be a virtual bank WITHOUT a US banking license. How? PayPal has teamed up with a group of small banks in different states around the country that perform the various functions (loans, debit cards, etc) of banking and PayPal puts the whole package together with a pretty bow. White label banking as it were. Apple might also play this game as banking becomes more virtual………..and cheaper. Hmmmm, been wondering where all those bank branches have gone.
(Bill Taylor/Managing Editor)
“PayPal is quietly rolling out basic banking services to some of its U.S. customers, which include a debit card, the ability to deposit checks and even take out a loan. For customers who accept, their PayPal balances also become protected by Federal Deposit Insurance Corp (FDIC) insurance.
Surprisingly, PayPal has found a way to do this without a U.S. banking license …
The WSJ reports that it has partnered with a number of licensed banks whose own branding remains hidden.
The FDIC doesn’t backstop funds stored at non-banks, and Visa and MasterCard only permit cards that run on their network to be issued by banks.
So the company turned to a hodgepodge of small banks that stay anonymous and behind the scenes. It cut deals with a Delaware bank to issue debit cards, a Georgia bank to deposit checks instantly after users take a photo of them and banks in Utah to make loans to consumers and small businesses.
There are no monthly banking fees, but some services do attract charges.
Users will have to pay a fee to take their money out from ATMs not in PayPal’s network, in addition to 1% of any check they deposit via taking a photo with their smartphone…”