By Jamie Barrie P ayPal, the online payment processing firm is thinking about getting into the banking business with a new model that could fundamentally change the industry and how traditional banks acquire new customers. “If you’re a traditional bank,” says Alyson Clarke, principal analyst at research firm Forrester, “this is the stuff of night- mares.” Banks will get its new customers as children or young adults that have been brought into the branch by their parents to open their first account to hold their birthday money or first job. Traditionally parents take their kids to whichever bank they use and most cases, they remain loyal customers and stay with that bank for the rest of their lives.
traditional banking.
Currently in the U.S., PayPal offers traditional banking services to a select group of its customers, who can get a debit card to withdraw cash from ATMs, deposit cheques by taking a picture and have their pay slips deposited directly into their account. According to Bill Ready, Chief OperatingOfficer with PayPal, the company niche customer is the younger customer that does not have a traditional bank account or those custom- ers that considered themselves as “unbanked” customers. With todays technology and apps driving economy you need a bank account in order to take advantage of services like Uber or Airbnb. So, PayPal put together a lot of technol- ogy and because PayPal themselves do not have a banking licence in the U.S., they have partnered up with a select group of financial institutions to offer services like debit cards, chequing accounts and even loans, sounds like tradi- tional banking to us. For now, the pilot is only happening in the United States, but if successful it is expected that the PayPal untraditional bank model would move to Canada as there is an alterna- tive bank sector that it could partner with and to support the model along with more than enough potential custom- ers to make the project successful.
PayPal is looking to change all of that.
In an interview with CBC News Clarke said that, “A lot of consumers, particularly millennials, think that all banks are basically the same,” she went on to say that, “And that old method of going into the branch to open your bank account with your mom or dad just seems completely antiquated.”
Thus, the opening for PayPal to take advantage of this opportunity and make the gradual shift into untraditional,
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MARCH 2018 • SPOTLIGHT ON BUSINESS MAGAZINE
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