PayPal has applied to establish a US industrial bank focused on small business lending. The application was submitted to the Utah Department of Financial Institutions and the Federal Deposit Insurance Corporation, with the proposed entity structured as a Utah-chartered industrial loan company.

The filing marks a structural shift in how PayPal could run parts of its lending business in the US, rather than a change in its customer-facing products.

Why an industrial bank structure matters

An industrial loan company allows a non-bank parent to own a regulated bank. This structure makes it possible to take deposits and issue loans directly, while operating outside the traditional bank holding company framework.

For PayPal, this is relevant because small business lending has been part of its offering for years. Since 2013, the company has facilitated more than $30 billion in loans and working capital to over 420,000 business accounts globally. Much of that activity has relied on partner banks.

A chartered industrial bank would allow more of that lending to sit directly within PayPal’s own regulated entity.

What the proposed bank would do

According to the application, the bank would focus on small business lending. It would also offer interest-bearing savings accounts and seek direct membership in US card networks.

If approved, deposits held at the bank would be eligible for FDIC insurance. From a product standpoint, this does not introduce new consumer features. The change is about balance sheet control, funding sources, and operational efficiency.

These are less visible changes, but they tend to shape long-term economics.

Leadership and regulatory scrutiny

PayPal has named Mara McNeill as president of the proposed bank. Her background is in commercial lending and financial services, which aligns with the operational demands of running a regulated institution.

Regulatory review will focus on governance, risk management, capital, and compliance. Approval is not guaranteed, and the process is typically detailed and time-consuming.

A familiar path for scaled fintechs

As fintech platforms grow, payments, lending, and deposits tend to converge. At that stage, dependence on third-party banks can limit flexibility and margins.

PayPal’s application reflects that reality. The company already operates at bank-like scale in parts of its business. The charter would formalise that position within the US regulatory framework.

Key takeaways for fintech startups

A few grounded lessons stand out:

• Industrial bank charters offer structural control, not product novelty
  
  
• Lending scale increases pressure to own more of the stack
  
  
• Regulatory readiness needs to precede growth, not follow it
  
  
• Partner banks work well early, but become constraints at scale
  
  
• Governance and risk capabilities matter as much as product design

If you are approaching similar inflection points, Your Fintech Story helps founders think clearly about structure, regulation, and scale before decisions become expensive to reverse. Get in touch.