In a strategic move to reshape its role in the financial ecosystem, PayPal has taken formal steps to establish its own bank. On December 15, 2025, the digital payments giant submitted applications to both the Utah Department of Financial Institutions and the Federal Deposit Insurance Corporation (FDIC) to form “PayPal Bank”, a state-chartered industrial loan company (ILC). This initiative is designed to deepen the company’s roots in lending, bring new stability to its stablecoin, and ultimately create a more integrated and efficient financial platform.
A New Chapter for Small Business Lending
The driving force behind this application is PayPal’s long-standing commitment to small businesses. Since 2013, the company has facilitated access to more than $30 billion in loans and working capital for over 420,000 businesses. However, by relying on third-party banking partners, PayPal cedes control and potential efficiency. The proposed bank charter would allow PayPal to bring these lending operations in-house, reducing costs and complexity. As CEO Alex Chriss stated, establishing PayPal Bank will strengthen the business and improve efficiency to better support small business growth across the U.S.. The bank also plans to offer interest-bearing savings accounts, adding another tool for its customers.
The Strategic Advantage of an Industrial Loan Company
PayPal’s choice of a Utah-chartered ILC is a calculated one. This specific structure allows commercial companies like PayPal to own a federally insured bank while operating under a different regulatory framework than traditional banks. Crucially, industrial banks that do not offer demand deposit accounts can bypass oversight by the Federal Reserve, falling instead under the authority of state regulators and the FDIC. This model has become an attractive path for non-bank financial firms, from automakers like Nissan and GM Financial to fintech companies like Sezzle, seeking to expand their services without becoming full-fledged bank holding companies.
Solidifying the Foundation of PYUSD
Perhaps the most significant ripple effect of this move will be on PayPal’s stablecoin, PYUSD. Currently, PYUSD is not insured by the FDIC. The creation of PayPal Bank could dramatically alter its standing. While specific integration plans are not yet detailed, housing the stablecoin within a regulated banking entity promises greater credibility, clearer reserve management, and a stronger trust proposition for institutional users. This development would mark a major evolution for PYUSD, which PayPal has been aggressively integrating across its services—from enabling YouTube creator payouts to facilitating global merchant payments for over 100 cryptocurrencies.
PayPal’s bank application is now subject to regulatory review. If approved, it will mark a pivotal moment, blurring the lines between fintech innovation and traditional banking, and positioning PayPal as a more formidable, full-stack financial institution.
