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This Checkout Giant Tried On a Banking Upgrade
If the core button stays relevant and the banking push improves margins, this could be a huge discount play.
Noah Zelvis
December 17, 2025
Not every comeback needs a flashy new product.
Sometimes it’s about tightening the plumbing, improving unit economics, and expanding into the services that make customers harder to steal.
When a payments platform starts leaning into banking, the bet is to keep the transaction flow, then earn more per customer with fewer middlemen taking a cut.
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What Just Happened
PayPal Holdings (NASDAQ: PYPL) applied for approval to form PayPal Bank, which would be able to offer loans to small businesses and interest-bearing savings accounts.
The company said applications are pending with Utah’s Department of Financial Institutions and the FDIC.
The announcement gave the stock a small lift, but it landed in a tough context.
PYPL has been down sharply this year and the market has been quick to punish anything that looks like slow growth, heavy spending, or unclear payoff timelines.
At the same time, PayPal is not coming from zero.
The company already offers credit lines and has been pushing further into banking-like services while competing with both traditional banks and a crowded field of fintech rivals.
The bank application is the clearest signal yet that management wants more control over the economics behind those services.
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The Business
PayPal is still one of the largest payment networks on the internet. It connects consumers and merchants, helps transactions clear, manages risk and fraud tooling, and gets paid a spread for making the whole thing smoother.
That includes PayPal-branded checkout, broader processing capabilities, and Venmo as a consumer brand that can drive engagement and volume.
The challenge is that payments is no longer an easy toll road. Apple Pay has become a default habit for many users.
Shopify pushes merchants toward native checkout flows. Card networks keep improving tokenization and fraud protection.
Buy now, pay later providers are everywhere. In that kind of environment, PayPal has to win in two places at once: consumer preference and merchant economics.
That is why banking matters. If the payments layer is becoming more commoditized, the path to better returns is often to build profitable services on top of the flow you already own, especially for small businesses.
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Why A Bank Charter Matters
This move looks like management trying to pull three practical levers.
Funding And Spread Control
If PayPal can offer savings products, it can potentially build a more stable funding base over time.
That matters for lending economics. It can reduce reliance on external partners and improve how PayPal prices, funds, and manages credit products.
Small Business Stickiness
Small businesses are not just payment users. They need cash flow tools, working capital, and a place to park money.
If PayPal becomes a more complete home base for SMBs, it becomes harder to replace.
A merchant might switch a checkout flow more easily than they switch the place that handles savings and short-term financing.
Efficiency And Product Velocity
PayPal framed the bank plan as a way to improve efficiency.
In plain terms, owning more of the stack can reduce friction, improve product design, and keep more economics in-house.
The tradeoff is regulation and compliance complexity, which can be expensive and slow.
So the bank idea is not automatically bullish or bearish. It is a tool.
The question is whether PayPal can turn it into higher margins and stronger retention, without turning it into a regulatory weight that drags returns.
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The Setup In The Stock
At around the low $60s, PayPal is priced like a company the market does not fully trust.
A roughly 12x earnings multiple and a modest dividend do not scream high-growth fintech. They scream mature, contested, and under scrutiny.
That can be an opportunity, but only if the business shows it can still compound cash flow.
Low expectations can become a tailwind if PayPal starts delivering steady progress.
Low expectations can also become a trap if core growth keeps slowing and new initiatives do not pay off.
You can feel that tension in the narrative. Some investors see a high-quality network at a depressed valuation.
Others see a former category king stuck in a crowded market, trying to rebuild momentum one product launch at a time.
Why Bulls Still Care
The Network Still Matters
PayPal remains deeply integrated across online commerce. That distribution is not easy to replicate.
If execution improves, the platform can still generate meaningful cash and fund buybacks, dividends, and reinvestment.
Small Business Is A Real Lane
If PayPal Bank helps the company become more useful to SMBs, it can increase retention and improve economics per merchant.
Small business relationships tend to be sticky when the tools save time and smooth cash flow.
Valuation Gives You A Cushion
You are not paying a premium multiple here.
If PayPal stabilizes branded checkout performance, keeps total payment volume growing, and shows improving profitability, the stock can re-rate without heroic growth assumptions.
Multiple Shots On Goal
Payments is the base. Value-added services are the upside.
Lending, savings, and merchant solutions can become meaningful contributors if PayPal can package them in a way that is simple and trusted.
Why Bears Still Worry
Banking Is Hard Mode
A bank charter adds supervision, compliance spend, and a slower operating cadence.
If PayPal underestimates that burden, the plan can become a margin headwind rather than a margin tailwind.
Competition Keeps Getting Better
Apple Pay and platform-native checkouts keep improving, and merchants will follow the path that converts best at the lowest cost.
If PayPal loses share in the most valuable checkout surfaces, the rest of the strategy has to work harder to compensate.
Headline Risk From Credit
If PayPal expands small business lending, credit quality becomes a bigger story. Growth looks great until losses spike.
Even a few quarters of ugly credit performance can reset investor confidence.
Investor Patience Is Thin
After years of mixed momentum, PayPal has less room for vague timelines.
The market wants measurable progress, not just strategic intent.
What To Watch Next
Regulatory Progress And Timelines
Approvals, milestones, and concrete rollout plans for PayPal Bank. If this stays abstract, investors will not give it credit.
Small Business Adoption Signals
Any data points on loan demand, retention, and product usage. The key is whether SMB customers use PayPal more often and in more ways.
Core Checkout Health
Branded checkout trends matter because they are the heartbeat of the franchise. If the core weakens, it is harder for new initiatives to carry the story.
Profitability And Cash Discipline
Watch for consistent operating leverage, not one-off improvements. The market will reward repeatable cash generation.
Management Messaging Becoming More Specific
Less vision, more metrics. When management starts talking in clear operating terms and then hits those targets, sentiment can shift quickly.
How I’d Think About Position Size
This is not a momentum darling right now. It is closer to a value-plus-execution setup. That means position sizing should respect uncertainty.
Starter (1 to 2%) if you want exposure to a potential sentiment turn, with valuation as a partial cushion.
Add (up to 3 to 4%) only after you see proof that the core is stable and the bank plan is becoming real, with clear milestones and improving economics.
Brake Lights if core checkout momentum deteriorates while expenses rise, or if lending expansion introduces new volatility without clear returns.
Valuation Without The Headache
PayPal does not need to become a hypergrowth story again for shareholders to do well from here.
At a low earnings multiple, the path to upside can be straightforward: stabilize the franchise, keep volume growing, improve margins, and show that new services increase customer lifetime value.
The bank application fits that framework. If it improves efficiency and economics, it can help justify a better multiple.
If it turns into a slow, costly project with unclear adoption, the market will keep the multiple tight.
The Bottom Line
The bank charter push is a meaningful strategic move because it targets the real problem in modern payments: the transaction is not enough anymore.
PayPal is trying to own more of the stack so it can earn more per customer, especially among small businesses.
The stock will not rerate on ambition alone. It will rerate on evidence.
Look for steady core checkout performance, improving profitability, and tangible progress turning PayPal Bank from an application into a product that customers actually use.
If those show up, today’s low expectations can become a surprisingly powerful tailwind.
Action Recap
✅ Starter: Small position while valuation is cheap and expectations are low
✅ Add On Proof: Core stability plus measurable bank milestones plus improving profitability
⚠️ Trim On Trouble: Core weakness paired with rising costs or messy credit outcomes
👀 Watch Next: Regulatory updates, SMB lending traction, core checkout trends, and cash discipline
That's our coverage for today; thanks for reading! Reply to this email with feedback or any tech stocks you want me to check out.
Best Regards,
—Noah Zelvis
Tech Stock Insider