PayPal – an unlikely contender to become a UK Bank?

CATEGORY: Payments News

If you watched the BBC breakfast news today you’d have seen their top story that was the government plans to create three new high-street banks from the Royal Bank of Scotland, Lloyds and Northern Rock. Separating some of the good assets from the toxic loans the new banks would be sold to companies not already in the banking industry.

The low down is that Richard Branson and Virgin Money could be in the running to bid for a bank, they already applied to the FSA for a banking license back in October. The bank of Tesco was another possibility the BBC mooted.

There is another company it might be worth placing an outside bet on to become a bank. PayPal already have an EU banking license which was granted to them in May 2007. They’re one of the most ubiquitous payment methods in the UK – almost everyone who has an eBay account also has a PayPal account. They’ve already diversified with PayPal credit cards and PayPal topup cards so why not get into mortgages and deposit accounts?

Back in 2007 PayPal said there were no plans to use the new licence to offer traditional banking services but that was two years ago and it’s not often the opportunity arises to buy a fully fledged bank along with existing deposit customers and mortgages. Whilst there has been no indication that PayPal may have changed their mind I wonder what services the Bank of PayPal could offer?

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