PayPal has a relationship with over 60% of U.S. households.
It also does more revenue that all the service revenue earned by banks under
$10 Billion, even though it relies completely on settlement to bank checking
accounts or credit cards. Now, PayPal is
extending its powerful reach with an attractive
PayPal
Credit alternative to bank overdrafts marketed through Retailers at
point-of-sale. Just as overdraft
revenues have been the center of checking revenues for years, PayPal says it
wants to “move credit more towards the center of its brand." They will make it easy for consumers when
checking out with PayPal to use PayPal Credit to pay over time.
“For the first time, by leveraging new credit models
retailers can customize PayPal Credit to offer a monthly payment option and
decide on the number of months and interest rate that works best for their
customers.”
PayPal hopes to win more transactions in store from
merchants by offering these services as well as earn more from consumers
through offering credit services. Of
course most in-store transactions today are done with bank debit cards, and
most of your fees earned on accounts come from overdraft services. What PayPal is accomplishing is stealing your
transactions away from debit cards and settling back to you as low value debit ACH items, and now stealing your related overdraft or credit revenues.
This is particularly important because
Chain Store Age reports most consumers
choose their payment methods according to what simple and attractive financing
options are related to it. Regulatory
changes are really the least financial institution problems. The real challenge
is capitalist non-bank competitors providing enhanced alternative integrated
payment and credit services digitally and in-store.
Where or where can financial institutions find an integrated
payments and liquidity digital solution to serve their customers and businesses
to compete and grow their revenues in this new competitive environment?
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