PayPal Targets Unbanked Consumers with Traditional Financial Services
PayPal is taking new steps to provide unbanked Americans with “less expensive, less time-consuming” financial services. This includes a new PayPal debit card, along with the ability to directly deposit checks into a PayPal account.
PayPal has long offered a debit card for business accounts, which boasts 1% cash back for purchases run as credit. However, this is the first time PayPal has provided a debit card for consumers. The PayPal Cash Mastercard will have no monthly fees and requires no minimum balance, and users can withdraw money for free from MoneyPass ATMs nationwide.
Accountholders who do not have a bank account can deposit checks into their PayPal accounts by simply taking a photo of the check, for a 1% transaction fee. Their employers set up direct deposits into their PayPal accounts at no charge. The processing times for checks and direct deposits will vary.
PayPal says customers who sign up for these services will receive “FDIC pass-through Insurance on the funds held in their PayPal account.” The only issue with this is that PayPal does not have a banking license. The FDIC only provides insurance for licensed banks.
To make this possible, PayPal is running their services through several small banks throughout the country. A bank in Delaware issues the debit cards, while a bank in Georgia handles check deposits. Consumers only use the PayPal interface to complete transactions, but PayPal uses a network of banks to actually get the job done. Since the banks are FDIC insured, PayPal can extend the service to its customers.
Should you apply for a PayPal debit card? If you actively use PayPal or do not currently have a bank account, this may be a wise move. If you use a traditional bank for checks and daily transactions, there would not be much benefit to working through PayPal. The new services are specifically targeted to unbanked and underbanked Americans, like those who were outraged when Bank of America closed their free checking accounts.