PayPal enters lending market, challenging traditional banking

PayPal enters lending market, challenging traditional banking

What happens when a payment platform with 430 million users decides it no longer wants to be just an intermediary? It turns into the nightmare of banks. That is exactly what is happening with PayPal, which has expanded its financing offerings for purchases from the classic three-installment plans to periods of 6, 9, and 12 months, and has also begun offering credit lines to businesses for their working capital. The move is clear: the company wants to stop being a mere payment gateway and become a full-fledged financial player.

A banking shift smelling of opportunity

The strategy is not accidental. In a context where consumption has cooled and families are looking for ways to stretch their budgets, offering financing up to 12 months is a magnet for the average consumer. Some see it as a kind of 'digital Cofidis' (a company that lends money easily and has fertile ground during times of financial strain). But others recall that easy debt burdened many households. The question is whether PayPal is willing to assume the credit risk traditionally managed by banks, or if it is simply seeking a new revenue stream.

The answer, given the market movements, appears to be the latter. The stock has moved from languishing at lows to consolidating around $62, with slow but steady gains. And this is not surprising: the market has begun to value that PayPal is no longer competing only with Stripe or Bizum, but also with traditional banking. In fact, in some work environments, financing is now being provided to customers exclusively through PayPal, leaving behind institutions like Caixa or Santander, which are seen as lagging in agility and digitalization.

The takeover effect: from euphoria to disappointment

The recent history of PayPal in the stock market has been an emotional rollercoaster. First, rumors of a takeover bid led by a consortium involving Advent and Stripe drove up the share price. Afterward, the news that both parties were abandoning the deal, valued at $50 billion, caused a 14% plunge outside of market trading. Now, as the stock recovers ground, rumors of another acquisition resurface, albeit without a clear name. The market is stuck in speculation, and PayPal has become the epicenter of all bets.

Some maintain that the takeover was a 'hostile bid' (a hostile acquisition attempt) with an initial price too low for the company's true value. Others, more skeptical, warn that the paper entering the deal must exit, and the stock could return to $42 levels before stabilizing. Meanwhile, individual investors are rubbing their hands: those who bought in June at 35–39 euros are enjoying considerable appreciation, while those hoping for a deeper drop to enter are watching with envy.

Intrinsic value versus market noise

The fundamental discussion remains the same: what is PayPal worth? Some argue that the company's intrinsic value can be calculated with a simple 'old-school account,' comparing historical EV with cash flows. Others prefer not to complicate matters: if the stock falls, buy; if it rises, sell. The reality is that PayPal possesses an asset no fintech can match: 430 million users. Revolut has 70 million and Wise, 19.

If the company manages its operations well, it can survive against several neobanks. The problem is that management is precisely the weak point. The company has been criticized for its drift towards proge and authoritarian policies, which have cost it the boycott of a segment of its user base in the United States. Fruta damage, as seen with other brands, does not recover easily. And in Europe, competition from Bizum, which allows instant payments without needing bank details, is eroding its market share in the peer-to-peer payment segment.

And the user? The eternal debate on debt

While investors discuss valuations and takeovers, there is an uncomfortable reality: consumer financing is growing, and PayPal is one of the main drivers. Some accounts that in its subscription business, many customers pay with PayPal precisely to finance payments of 70 euros in three installments. It is a ridiculous amount, but it demonstrates that deferral has become a consumption habit. And some go further: if you can defer a payment of 2,000 euros and put that money into an interest-bearing account, the free money doesn't depreciate.

The paradox is that easy debt, which some consider a trap for the most vulnerable, is also the engine of these companies. Without it, there would be no business. And meanwhile, financial education remains conspicuously absent. In the United States, home economics was taught in schools since the 1950s. Today, that is not taught at all because it isn't interesting.

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So there you have it: PayPal wants to be a bank, the market doesn't know whether to buy or sell it, and consumers continue financing their purchases for 12 months without thinking about the cost. The next time someone wonders why traditional banking is in crisis, they should look at their own portfolio. Perhaps the answer lies in the last deferred payment made through PayPal.