Written by: Sleepy.txt

PayPal is going to open a bank.

On December 15, this global payment giant with 430 million active users officially submitted an application to the Federal Deposit Insurance Corporation (FDIC) and the Utah Department of Financial Institutions, planning to establish an industrial bank named "PayPal Bank."

However, just three months earlier, on September 24, PayPal had announced a significant deal to package and sell up to $7 billion in "buy now, pay later" loan assets to the asset management company Blue Owl.

During that conference call, CFO Jamie Miller emphatically emphasized to Wall Street that PayPal's strategy was to "maintain a light asset balance sheet," aiming to free up capital and improve efficiency.

These two actions are contradictory; on one hand, they pursue "lightness," while on the other, they apply for a banking license. It is important to note that being a bank is one of the "heaviest" businesses in the world, requiring substantial collateral, accepting the strictest regulations, and bearing the risks of deposits and loans.

Behind this twisted decision lies a compromise that must have been made due to some urgent reason. This is not a routine business expansion but more like a landing on the regulatory front.

Regarding why they want to open a bank, PayPal's official reason is "to provide lower-cost loan funding to small businesses," but this reasoning does not hold up under scrutiny.

Data shows that since 2013, PayPal has issued over $30 billion in loans to 420,000 small businesses worldwide. In other words, in the 12 years without a banking license, PayPal has still managed to thrive in the loan business. If that’s the case, why apply for a banking license at this particular moment?

To answer this question, we first need to clarify: who has actually been issuing these $30 billion in loans?

Issuing Loans, PayPal is Just a "Sublessor"

The lending data in PayPal's official press release looks impressive, but there is a core fact that is often obscured. Each of these $30 billion loans was not actually issued by PayPal, but by a bank located in Salt Lake City, Utah—WebBank.

Most people may have never heard of WebBank. This bank is extremely mysterious; it does not have consumer-facing branches, does not advertise, and even its official website is very brief. However, in the hidden corners of American fintech, it is an unavoidable giant.

PayPal's Working Capital and Business Loan, the installment payments of the star company Affirm, and the personal loan platform Upgrade all have WebBank as the underlying lender.

This involves a business model called "Banking as a Service (BaaS)": PayPal is responsible for customer acquisition, risk control, and user experience, while WebBank is only responsible for one thing—issuing the license.

To put it in simpler terms, in this business, PayPal is just a "sublessor," while the real property title is held by WebBank.

For a tech company like PayPal, this was once a perfect solution. Applying for a banking license is too difficult, slow, and expensive, and applying for lending licenses in all 50 states in the U.S. is an extremely cumbersome administrative nightmare. Renting WebBank's license is equivalent to a VIP fast track.

However, the biggest risk of "renting a house" for business is that the landlord may stop renting at any time, or even sell or demolish the house.

In April 2024, a black swan event occurred that sent chills down the spines of all American fintech companies. A BaaS intermediary company named Synapse suddenly filed for bankruptcy, directly leading to the freezing of $265 million in funds for over 100,000 users, with even $96 million going missing, causing some to lose their life savings.

This disaster made everyone realize that the "sublessor" model has significant vulnerabilities; if any link in the chain goes wrong, the hard-earned trust of users can collapse overnight. Consequently, regulators began to conduct strict reviews of the BaaS model, and several banks were fined and restricted due to BaaS compliance issues.

For PayPal, although it is cooperating with WebBank and not Synapse, the risk logic is the same. If WebBank encounters problems, PayPal's loan business will be paralyzed; if WebBank adjusts the cooperation terms, PayPal has no bargaining power; if regulators require WebBank to tighten cooperation, PayPal can only passively accept it. This is the dilemma of being a "sublessor": while working hard to do business, the lifeline is still in someone else's hands.

In addition, another more naked temptation that made the management determined to go solo is the exorbitant profits of the high-interest era.

In the past decade of zero interest rates, being a bank was not considered a sexy business because the interest margin was too thin. But today, the situation is completely different.

Even though the Federal Reserve has begun to cut interest rates, the U.S. benchmark rate remains at a historically high level of around 4.5%. This means that deposits themselves are a gold mine.

Look at PayPal's current awkward situation: it has a massive pool of funds from 430 million active users, and this money is sitting in users' PayPal accounts, while PayPal has to deposit this money into partner banks.

The partner banks take this low-cost money to purchase U.S. Treasury bonds with a 5% yield or issue loans with even higher interest rates, making a fortune, while PayPal can only get a small share of the leftovers.

If PayPal obtains its own banking license, it can directly turn the idle funds of these 430 million users into its own low-cost deposits, then buy Treasury bonds with one hand and issue loans with the other, keeping all the interest margin profits for itself. During this high-interest window period, this represents a profit gap of tens of billions of dollars.

However, if it were just to get rid of WebBank, PayPal could have acted long ago; why wait until 2025?

This brings us to another more urgent and deadly anxiety deep within PayPal: stablecoins.

Issuing Stablecoins, PayPal is Still a "Sublessor"

If PayPal's "sublessor" identity in the loan business only meant it earned less money and had more worries, then in the stablecoin battlefield, this dependency is evolving into a real survival crisis.

In 2025, PayPal's stablecoin PYUSD experienced explosive growth, tripling in market value within three months to $3.8 billion, and even YouTube announced in December that it would integrate PYUSD payments.

But behind these lively battle reports, there is a fact that PayPal will not emphasize in its press releases: PYUSD is not issued by PayPal itself, but through a partnership with Paxos, a company based in New York.

This is another familiar "white label" story; PayPal is merely the brand licensor, similar to how Nike does not operate factories to produce shoes but licenses its logo to manufacturers.

In the past, this was more like a division of labor, with PayPal holding the product and traffic, while Paxos was responsible for compliance and issuance, allowing everyone to eat their own meals.

However, on December 12, 2025, this division of labor began to change. The Office of the Comptroller of the Currency (OCC) granted "conditional approval" for a national trust bank license to several institutions, including Paxos.

Although this is not a "commercial bank" in the traditional sense that can accept deposits and obtain FDIC insurance, it means that Paxos is moving from being a manufacturer to an issuer with a license.

When you bring in the framework of the GENIUS Act, you can understand why PayPal is in a hurry. The act allows regulated banking systems to issue payment stablecoins through subsidiaries, concentrating the issuance rights and profit chain increasingly in the hands of "licensed entities."

Previously, PayPal could treat stablecoins as an outsourced module, but now that the outsourcing party has a stronger regulatory identity, it is no longer just a supplier; it can also become an alternative partner or even a potential competitor.

PayPal's awkwardness lies in the fact that it neither controls the issuance base nor holds a regulatory identity.

The promotion of USDC and the OCC's release of trust licenses are all reminding it of one thing: in the stablecoin battle, the final competition is not about who issues the stablecoin first, but who can grasp the strings of issuance, custody, clearing, and compliance.

Therefore, rather than saying PayPal wants to become a bank, it is more accurate to say it is trying to secure a ticket; otherwise, it will forever remain on the sidelines.

What’s worse is that stablecoins pose a dimensional threat to PayPal's core business.

PayPal's most profitable business is e-commerce payments, relying on charging a transaction fee of 2.29% to 3.49%. However, the logic of stablecoins is completely different; they charge almost no transaction fees and make money from the interest on user funds deposited in Treasury bonds.

When Amazon starts accepting USDC and Shopify launches stablecoin payments, merchants will face a simple arithmetic problem: if they can use stablecoins at nearly zero cost, why would they pay PayPal a 2.5% toll?

Currently, e-commerce payments account for more than half of PayPal's business revenue. In recent years, it has seen its market share drop from 54.8% to 40%. If it does not seize the initiative in stablecoins, PayPal's moat will be completely filled.

PayPal's current situation is very similar to Apple's when it launched the Apple Pay Later service. In 2024, Apple, lacking a banking license, was constrained by Goldman Sachs and ultimately shut down the service, retreating to its core hardware business. Apple can retreat because finance is just a bonus for it; hardware is its core competitiveness.

But PayPal has no retreat.

It has no phone, no operating system, and no hardware ecosystem. Finance is its entirety; it is its only source of sustenance. Apple's retreat is a strategic contraction, while if PayPal dares to retreat, death awaits.

Therefore, PayPal must move forward. It must obtain that banking license and reclaim the rights to issue, control, and profit from stablecoins.

However, opening a bank in the U.S. is no easy task, especially for a tech company burdened with $7 billion in loan assets, where the regulatory approval threshold is frighteningly high.

Thus, in order to obtain this ticket to the future, PayPal meticulously designed a brilliant capital magic trick.

PayPal's Escape from the Shell

Now, let’s shift our focus back to the contradiction mentioned at the beginning of the article.

On September 24, PayPal announced that it would package and sell $7 billion in "buy now, pay later" loans to Blue Owl, with the CFO publicly declaring the intention to "lighten up." At that time, most Wall Street analysts thought this was merely to embellish the financial statements, making cash flow appear more attractive.

However, if you look at this event alongside the application for a banking license three months later, you will realize that this is not a contradiction but rather a carefully designed combination move.

If PayPal did not sell this $7 billion in receivables, its chances of successfully applying for a banking license would be nearly zero.

Why? Because in the U.S., applying for a banking license requires passing through an extremely rigorous "physical examination," with regulators (FDIC) holding a ruler called "capital adequacy ratio."

The logic is simple: the more high-risk assets (like loans) you have on your balance sheet, the more collateral you must provide to mitigate risks.

Imagine if PayPal approached the FDIC with this $7 billion in loans; the regulatory officer would immediately see this heavy burden: "With so many risky assets, what will you do if there are bad debts? Do you have enough money to cover the losses?" This not only means PayPal would need to pay astronomical amounts in collateral but could also directly lead to a rejection of the application.

Therefore, PayPal had to undergo a comprehensive slimming down before the examination.

The deal with Blue Owl is known in financial jargon as a forward liquidity agreement. This design is very clever. PayPal offloaded the future two years' worth of newly issued loan receivables (essentially "printed money") and default risks entirely to Blue Owl; but it smartly retained the underwriting rights and customer relationships, effectively keeping the "money printing machine" for itself.

In the eyes of users, they are still borrowing money from PayPal and repaying through the PayPal app, with no change in experience. However, on the FDIC's examination report, PayPal's balance sheet instantly became extremely clean and refreshing.

Through this escape from the shell, PayPal completed a transformation of identity, shifting from a lender burdened with heavy bad debt risks to a mere passerby earning risk-free service fees.

This deliberate asset maneuvering to pass regulatory approval is not without precedent on Wall Street, but the decisiveness and scale of this action are rare. This precisely demonstrates the determination of PayPal's management, willing to share existing fat profits (loan interest) with others in exchange for a longer-term ticket.

Moreover, the time window for this gamble is rapidly closing. PayPal's urgency stems from the fact that the "backdoor" it is eyeing is being closed off by regulators, even being welded shut.

The Closing Backdoor

The license PayPal is applying for is officially called an "Industrial Loan Company" (ILC) license. If you are not a deeply experienced financial professional, you likely have not heard of this name. Yet, it is one of the most bizarre and coveted entities in the U.S. financial regulatory system.

Looking at the list of companies with ILC licenses, you will feel a strong sense of incongruity: BMW, Toyota, Harley-Davidson, Target…

You might ask: why are these car sellers and grocery retailers opening banks?

This is the magic of the ILC. It is the only regulatory loophole in the U.S. legal system that allows non-financial giants to legally open banks.

This loophole originated from the "Competitive Equality Banking Act" (CEBA) passed in 1987. Although the law is named "Equality," it left an extremely unequal privilege: it exempted the parent company of an ILC from the obligation to register as a "bank holding company."

If you apply for a regular banking license, the parent company must undergo comprehensive oversight from the Federal Reserve. However, if you hold an ILC license, the parent company (like PayPal) is not subject to Federal Reserve jurisdiction and only needs to accept oversight from the FDIC and the state of Utah.

This means you enjoy the national-level privileges of banks to accept deposits and access the federal payment system while perfectly avoiding the Federal Reserve's interference in your business landscape.

This is what is known as regulatory arbitrage, and what’s more enticing is that it allows for "mixed operations." This is how BMW and Harley-Davidson operate, with vertical integration of the supply chain.

BMW Bank does not need physical counters because its business is perfectly embedded in the car-buying process. When you decide to buy a BMW, the sales system automatically connects to BMW Bank's loan services.

For BMW, it earns profits from your car purchase while also capturing the interest from the car loan. Harley-Davidson goes even further; its bank can even provide loans to motorcyclists who have been turned away by traditional banks because only Harley knows that the default rate among these loyal fans is actually very low.

This is precisely the ultimate form that PayPal dreams of: payments in one hand, banking in the other, with stablecoins in between, and no outsiders allowed to intervene.

At this point, you must be wondering, if this loophole is so useful, why don’t Walmart or Amazon apply for this license and open their own banks?

Because the traditional banking sector despises this backdoor.

Bankers believe that allowing commercial giants with vast user data to open banks is a dimensional blow. In 2005, Walmart applied for an ILC license, which triggered a collective uproar in the U.S. banking industry. The banking association lobbied Congress furiously, arguing that if Walmart Bank used supermarket data advantages to offer cheap loans only to Walmart shoppers, how could community banks survive?

Under immense public pressure, Walmart was forced to withdraw its application in 2007. This incident directly led to the "freezing" of ILC applications by regulators; from 2006 to 2019, for a full 13 years, the FDIC did not approve any applications from commercial companies. It wasn't until 2020 that Square (now Block) finally broke the deadlock.

But now, this backdoor, which had just reopened, faces the risk of being permanently closed.

In July 2025, the FDIC suddenly released a request for comments on the ILC framework, which was seen as a strong signal of tightening regulation. Meanwhile, legislative proposals in Congress have never ceased.

As a result, everyone began to scramble for licenses. In 2025, the number of banking license applications in the U.S. reached a historical peak of 20, with the OCC (Office of the Comptroller of the Currency) receiving 14 applications, equivalent to the total of the past four years.

Everyone knows this is the last opportunity before the door closes. PayPal is racing against regulators; if it does not rush in before the loophole is completely sealed by law, this door may close forever.

Life-and-Death Breakthrough

The license that PayPal has painstakingly fought for is essentially an "option."

Its current value is certain: the ability to issue loans and earn interest in a high-rate environment. But its future value lies in granting PayPal the qualification to enter currently prohibited but imaginatively promising territories.

What is the most coveted business on Wall Street? It is not payments, but asset management.

Without a banking license, PayPal can only act as a simple toll collector, helping users transfer funds. However, once it possesses the ILC license, it gains the legitimate status of a custodian.

This means PayPal can rightfully hold Bitcoin, Ethereum, and even future RWA assets for its 430 million users. Furthermore, under the future framework of the GENIUS Act, banks may be the only legal entry point allowed to connect to DeFi protocols.

Imagine that in the future, PayPal's app might feature a "high-yield investment" button, with the backend connected to on-chain protocols like Aave or Compound, while the insurmountable compliance barrier in between is bridged by PayPal Bank. This would completely break down the wall between Web2 payments and Web3 finance.

In this dimension, PayPal is no longer competing with Stripe over transaction fees; it is building a financial operating system for the crypto era. It is attempting to evolve from processing transactions to managing assets. Transactions are linear and have ceilings, while asset management is an infinite game.

Understanding this layer allows you to grasp why PayPal is launching this charge at the end of 2025.

It is acutely aware that it is being wedged in the door of the times. Behind it lies the fear of traditional payment business profits being zeroed out by stablecoins; in front of it is the urgency of the ILC regulatory backdoor being permanently welded shut.

To squeeze through this door, it had to sell $7 billion in assets in September to detoxify itself, all for the sake of obtaining that life-and-death ticket.

If you extend the timeline to 27 years, you will see a cycle filled with a sense of destiny.

In 1998, when Peter Thiel and Elon Musk founded the predecessor of PayPal, their mission was to "challenge banks" and eliminate those outdated and inefficient financial institutions with electronic currency.

27 years later, this former "dragon-slaying youth" is doing everything possible to "become a bank."

In the business world, there are no fairy tales, only survival. On the eve of cryptocurrency reconstructing the financial order, continuing to exist as a "former giant" outside the system leads only to a dead end. Only by obtaining that identity, even through the "backdoor," can it survive into the next era.

This is a life-and-death breakthrough that must be completed before the window closes.

If it wins the bet, it will be the JPMorgan of the Web3 era; if it loses, it will merely be a relic of the previous generation of the internet.

Time is running out for PayPal.

免责声明：本文章仅代表作者个人观点，不代表本平台的立场和观点。本文章仅供信息分享，不构成对任何人的任何投资建议。用户与作者之间的任何争议，与本平台无关。如网页中刊载的文章或图片涉及侵权，请提供相关的权利证明和身份证明发送邮件到support@aicoin.com，本平台相关工作人员将会进行核查。