PayPal Seeks Banking License in Strategic Shift

PayPal US70450Y1038

The digital payments giant PayPal has taken a formal step toward becoming a bank. The company has filed an application with U.S. regulators to establish "PayPal Bank," structured as an Industrial Loan Company (ILC). This move has the potential to fundamentally reshape its business model, though the initial reaction from Wall Street has been muted.

Securing a banking charter would allow PayPal to operate without relying on partner banks, granting it greater autonomy. The primary advantages center on three key areas:

• Offering FDIC-insured savings accounts directly to its customer base.
• Providing loans to small and medium-sized businesses using its own balance sheet.
• Reducing operational costs by cutting out third-party intermediaries.

Since 2013, PayPal has already facilitated over $30 billion in loans through partners. An in-house banking license would significantly improve margins in this segment and give the company full control over the entire value chain.

Market Experts Express Caution

Despite the long-term strategic importance of the application, analyst sentiment on December 17 remained cautious. Bernstein SocGen Group reiterated its "Market Perform" rating with a $76 price target, noting that the approval process with the FDIC and Utah state authorities could take years.

Other firms are more critical. Baird recently downgraded the stock to "Neutral," lowering its price target to $66. Bank of America Securities followed with a similar downgrade to "Neutral" and a $68 target. Compass Point maintains a "Sell" rating with a $56 price target, citing increasing competitive pressure in PayPal's core checkout business.

The consensus price target among 38 covering firms currently stands at approximately $79, yet "Hold" ratings dominate the overall sentiment.

Insider Selling Activity Noted

As the company advances its banking ambitions, several executives have been reducing their equity holdings. Over the past six months, Suzan Kereere, President of Global Markets, sold a total of 25,824 shares, including a 12,500-share transaction in early November. Aaron Webster, an Executive Vice President, disposed of 9,282 shares worth around $615,000 in November.

In total, corporate insiders have sold over $2.4 million worth of stock in the past 90 days. This activity suggests management is capitalizing on current share prices to realize gains rather than adding to their positions.

Solid Quarterly Performance Amid Growth Transition

PayPal's most recent quarterly report for Q3 2025 showed solid, if unspectacular, results. Revenue increased by 7.3% to $8.42 billion. Earnings per share came in at $1.34, surpassing expectations of $1.20. The company's net margin was approximately 15%.

This single-digit growth rate underscores a market perception shift: PayPal is increasingly viewed as a mature financial services provider rather than a high-growth stock. While the banking license could provide new long-term momentum, the near-term outlook remains clouded by skepticism until regulatory approval is secured and the core business demonstrates accelerated growth.