The Bankwatch

Tracking the consumer evolution of financial services

PayPal gets banking licence in Europe

This is huge – Paypal is a Bank!

Person-to-person payments firm PayPal has been granted a banking licence in Luxembourg and is relocating its European headquarters to the country from London, in a move that will see it escape FSA oversight and multiply the number of Web sites that can offer its service.

Source: Finextra

Five years ago, Paypal successfully argued with the New York State Banking Department, that they were not a Bank, and then similar success with the FDIC. But now in Europe they are a Bank.

An institution with no branches, deposit taking institution, with worldwide payment capabilities. hmmmm – here is what I wrote here last year, about Paypal waking up.

My Paypal coverage.

Relevance to Bankwatch: (from Mar 2006)

Paypal are living (successfully) off legal semantics. Banks live mainly off balances, but their reliance on payment revenue is growing. Paypal will disintermediate banks on payments, because they are lower cost, and have large international scale.

On the (only) other Bank revenue generator, Paypal are different than the other payment networks, in that consumers can leave money with Paypal. The risk of balance run off is real with regard to Paypal, and that’s why they need to be watched.

Written by Colin Henderson

May 15, 2007 at 22:09

Posted in Payments

4 Responses

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  1. As with any institution if you accept the public money for deposit you need to be regulated. If you don’t then taxpayers should not be liable if something fails. So those that deposit are at risk and please don’t go to big brother for the bail out when you know that from the start.

    tinfoiling

    May 16, 2007 at 05:05

  2. About 7 or 8 years ago, when I was w/ Forrester, I met w/ the founder of PayPal to discuss his new venture. I came away with two thoughts: 1) this guy is from another planet, and 2) there’s no way this thing is going to succeed.

    The jury may still be out on thought #1, but MAN was I wrong on thought #2 (see, Dan, I’m big enough to admit when I’m wr…wr….not entirely right).

    After I read your post, Colin, I thought “no way this is going to succeed in Europe.” But I was wrong before at PayPal.

    rshevlin

    May 16, 2007 at 07:41

  3. I will be interested to see how they deal with anti-money laundering issues. So far they have not had to by using, effectively, (other) banks to do the leg work. Now they are a bank are they going to maintain the same business model or will they look to dealing with the mountain of regulation that the banks have effectively been taking care of for them?

    Andrew

    May 16, 2007 at 17:39

  4. […] Mais sa filiale PayPal vient également de franchir une étape importante puis qu’elle est devenu officiellement une banque en Europe plus précisément au Luxembourg, là où elle va […]


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