SAN JOSE, Calif.–PayPal is expanding into traditional banking through new partnerships with smaller banks to offer consumers debit cards connected to their PayPal accounts, along with direct deposit for paychecks and other services.
PayPal said its new products are targeted specifically at the unbanked, and will launch in the first half of 2018, following consumer testing, the Wall Street Journal reported.
As PayPal does not hold a bank charter, a Delaware bank issues the debit cards and a Georgia bank helps with photo deposits of checks.
According to the Journal report, there are some small fees involved with using PayPal's banking services, including ATM fees for withdrawals from those not in PayPal's MoneyPass network, and 1% of any check deposited via a photo from a smartphone. There are no monthly fees or minimum balance requirements.
“Traditional banking customers may not want to pay for things like check deposits, but the lower fees will appeal to those who usually go to payday lenders, and don't have regular bank accounts, the company tells us,” noted TechCrunch in its analysis.
"We're trying to bring more of those people into the digital economy," Bill Ready, EVP and Chief Operating Officer at PayPal, was quoted by TechCrunch as saying. "For folks who don't have bank accounts, for folks who don't have credit and debit cards, we want to give them something so they're not turning to prepaid cards, check cashiers and payday lenders."
PayPal estimates there are some 30 million in the U.S. who are unbanked who spend an estimated nine-and-half percent of their income on interest and fees from alternative financial services providers.
PayPal today already offers consumers a debit card (PayPal's Cash card) for loading accounts with cash at retailers, as one way of serving the underbanked. There's also the PayPal prepaid Mastercard linked to PayPal customer accounts and other credit products, noted TechCrunch.
According to PayPal, it has been quietly testing the new products with select consumers over the past several months and will begin rolling out publicly in the "weeks and months" ahead.