PayPal plans banking features like FDIC coverage by mid year

Source: ZDNET.COM By Jake Smith for iGeneration 

PayPal is rolling out traditional banking features like check deposit. (File photo)

PayPal is planning to roll out traditional banking features to some users in the coming months, the company said Monday. The features include Federal Deposit Insurance Corp. coverage of the PayPal Wallet, online check deposit, and a debit card that can be used to withdraw cash.

PayPal told the Wall Street Journal its new banking features will launch in the first half of 2018, following an initial testing phase. PayPalsaid it will determine testing candidates based on how they've used the service in the past. The banking features are geared to people who don't have access to traditional financial services.

PayPal describes in its announcement:

People who don't have a bank account can choose to directly deposit their paycheck into their PayPal account for free, so customers can enjoy the benefits of spending their PayPal balance anywhere. Customers who enroll in these features will be eligible to receive FDIC pass-through Insurance on the funds held in their PayPal account, and there is no minimum balance required. Eighty-five percent of today's transactions are still happening in cash and checks...Additionally, people can now deposit checks via a mobile device more affordably and conveniently.

 "We're trying to bring more of those people into the digital economy," Bill Ready, EVP and Chief Operating Officer at PayPal, toldTechCrunch. "For folks who don't have bank accounts, for folks who don't have credit and debit cards, we want to give them something so they're not turning to prepaid cards, check cashiers and payday lenders."

PayPal itself won't become a bank. Instead, PayPal is working with a Georgia bank for mobile deposits, and Utah banks for consumer and small business loans. PayPal is also developing relationships for an ATM network, the company said.

PayPal previously offered a debit card allowing users to load cash to their accounts at retailers. PayPal said it won't rollout a separate debit card -- the existing will be updated.

PayPal didn't detail if it will eventually open the banking features to its entire user base.