| Over the past few months, PayPal has been offering certain customers an opportunity to add basic banking features to their PayPal digital wallet, according to The Wall Street Journal.
Those features include Federal Deposit Insurance Corp. insurance for balances up to government-set limits, a debit card that can be used to withdraw cash at ATMs and the ability to add funds to accounts by taking a photo of a paper check or by having employers direct-deposit earnings there.
According to the Journal, the move is likely geared to those with less access to the banking system. PayPal does not pay interest on balances and is charging a fee of 1 percent on any check a customer deposits via a photo, making it less appealing to those already with a bank account.
But for those that largely rely on check-cashing centers and other alternative providers of financial services, the services could be more appealing because PayPal isn’t charging a monthly fee and isn’t requiring customers to keep a minimum balance.
PayPal’s COO Bill Ready told the Journal the company’s goal was to give those excluded from the banking system access to the digital economy.
“If you don’t have a bank account, you can’t take an Uber ride, can’t stay in a room on Airbnb,” he said.
There does seem to be a desire and gap for low cost banking services. When Bank of America announced in January that it would end free checking accounts, consumers launched a change.org petition that garnered more than 46,000 signatures.
A number of other technology firms are considering providing banking functions. Square offers bank cards to users of its Cash App, and Amazon is in talks to roll out a checking-account-like product.
The issue is that tech firms don’t have a U.S. banking license, the FDIC doesn’t insure funds stored at nonbanks and Visa and Mastercard only permit cards that run on their network to be issued by banks.
PayPal has reportedly made 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.
