PayPal Inc., with 106.3 million active users, clearly has no trouble signing up consumer accounts. But it is now partnering with banks to sign up even more.

Users who sign up for PayPal accounts can fund them from any bank account they choose, or they can ignore their bank and use a store-bought MoneyPak from Green Dot Corp. PayPal's new partnerships allow banks to avoid disintermediation by ensuring their own accounts are funding customers' PayPal purchases.

PayPal's first partnership is with la Caixa, which allows its users to enroll for PayPal accounts on the bank website, PayPal said in a blog post last week. The process ensures that the Spanish bank's credit and debit cards are linked to each freshly created PayPal account.

PayPal, a unit of eBay Inc. of San Jose, is speaking with U.S. retail banks about similar arrangements, says Dan Schatt, PayPal's general manager of financial innovations.

"This benefits all of those financial institutions that have debit card programs that often lose out to people that have another credit card in their wallet," he says.

If banks work with PayPal to sign up new users, "everyone in the ecosystem is making money," Schatt says. "The issuers are making money [and] the networks are making money. And that's something."

PayPal is often viewed as a competitor to banks and payment networks, especially in light of its recent push at the point of sale. But in recent years PayPal has begun offering banks access to its person-to-person payment system and other services.

In October 2009, the online payments company announced two agreements that enable consumers fund their PayPal accounts with prepaid cards from Green Dot or through debit cards linked to First Data Corp.'s Star debit network (see story).

And in a PaymentsSource interview in January 2010, former PayPal president Scott Thompson discussed PayPal’s hopes of working more closely with banks, including providing them with a la carte online payments (see story).  Among the first was Mercantile Bank of Michigan, which agreed to offer PayPal to customers through its online-banking channel.

What do you think about this? Send us your feedback. Click Here.


Subscribe Now

Authoritative analysis and perspective for every segment of the payments industry

14-Day Free Trial

Authoritative analysis and perspective for every segment of the industry