PayPal targets unbanked market with banking products
PayPal is setting its sight on the unbanked sector with plans to team with financial institutions to introduce new products targeted at US consumers.
Bill Ready, COO and EVP, PayPal, says in the US alone, more than 30 million Americans are “financially underserved” and spend 9.5% of their income on interest and fees for alternative financial services.
He adds: “To put it into context, that is about the same portion of income that the average American household spends on food in one year.”
Naturally it reckons with mobile technology it can tap into this market and grab some glory.
PayPal doesn’t name the banks it’s working with to provide these services, but it does mention its acquisition and integration of Xoom.
Via Xoom, consumers can deposit money directly into their bank accounts, to send cash, pay bills and reload prepaid mobile phones in more than 60 countries.
In terms of the products to launch, it will offer a PayPal Cash Mastercard. This is free to sign-up for and there are no monthly fees and no minimum balance requirement.
It explains that the card will let users access the money in their account to shop online or in stores anywhere Mastercard is accepted or users can withdraw cash from ATMs, including over 25,000 free MoneyPass ATMs nationwide.
It is also offering more ways to add money to a PayPal account to try and entice people who don’t have a bank account.
For this group, they can choose to directly deposit their paycheck into their PayPal account for free.
Customers who enrol in these features will be eligible to receive the Federal Deposit Insurance Corporation (FDIC) pass-through insurance on the funds held in their PayPal account, “and there is no minimum balance required”. PayPal says 85% of today’s transactions are still happening in cash and cheques.
To further back up its ambitions, it also cites the Center for Financial Services Innovation (CFSI), which states that financially underserved Americans spent $141 billion in 2015 alone to manage their financial lives.
But life is not all about one company and its goals. Others exist and provide competition.
As reported today (10 April), Amazon remains restless in the fintech world with a potential push into the digital payments market via its Alexa-powered P2P platform.
The firm is weighing up ways to take on Visa and Mastercard, as well as PayPal and its Venmo digital wallet.