PayPal's Big Step: Is the Launch of PayPal Bank a Game Changer?

PayPal Holdings, Inc. PYPL announced that it has filed applications to the Utah Department of Financial Institutions and the Federal Deposit Insurance Corporation (FDIC) to establish PayPal Bank, a proposed Utah-chartered industrial loan company.

PayPal Bank would enhance PayPal’s ability to deliver business lending solutions more efficiently to U.S. small businesses, while reducing reliance on third-party providers and strengthening PayPal’s business.

Beyond offering small business lending solutions, PayPal Bank plans to introduce interest-bearing savings accounts for its customers. The bank also aims to obtain direct membership with U.S. card networks, thereby enhancing its processing and settlement operations through existing banking relationships. If approved, customer deposits at PayPal Bank would be eligible for FDIC insurance coverage.

Since 2013, PayPal has provided access to more than $30 billion in loans and working capital to over 420,000 business accounts worldwide, helping small businesses bridge critical funding gaps. These funds have supported business expansion, inventory purchases, and investments in talent and tools that drive success.

To conclude, by establishing PayPal Bank, the company stands to gain stronger control over its financial products and customer experience, reducing dependence on external financial institutions. This move could strengthen its business, enabling it to better support small business growth and economic opportunities across the United States.

How Are XYZ & SOFI Providing Similar Services?

Block Inc.’s XYZ subsidiary, Square Financial Services, has been an FDIC-insured industrial bank since 2021. The subsidiary’s Square Loans offers tailored small business financing and provides short-term consumer loans through Cash App Borrow. Also, Square Savings provides a business savings account with personalized recommendations. These services help reduce reliance on third-party partners.

SoFi Technologies’ SOFI banking arm, SoFi Bank, has operated as a nationally chartered online bank since obtaining its charter from the OCC in 2022. The bank provides high-yield savings, cash-back debit rewards, and integrated services like loans, investing, and crypto trading, all via a mobile app.

PYPL’s Price Performance, Valuation & Estimates

Shares of PayPal have declined 10.6% over the past six months, underperforming both the broader industry and the S&P 500 Index.

From a valuation standpoint, PayPal shares are trading cheaply, as suggested by the Value Score of A. In terms of forward 12-month P/E, PYPL stock is trading at 10.52X, which is at a significant discount to the Zacks Financial Transaction Services industry’s 20.79X.

PayPal’s estimate revisions reflect a positive trend. The Zacks Consensus Estimate for full-year 2025 EPS has been revised upward over the past two months. The Zacks Consensus Estimate for 2025 EPS suggests 14.8% growth year over year.

PayPal currently carries a Zacks Rank #3 (Hold). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

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This article originally published on Zacks Investment Research (zacks.com).

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