PayPal Partnering with Banks to Attract New Customers

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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.

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