About 15.6 million consumers living in the U.S. don’t have a bank account.
Surveys show that people don’t use banks because they don’t have enough money to keep in an account, don’t want to deal with all the fees, or they just plain ol’ don’t trust banks.
Fintech companies like PayPal are looking to tap into this population.
PayPal has been quietly offering basic banking services to a handful of its customers over the past several months, according to a report by The Wall Street Journal.
Other companies like Square and SoFi are also working on offering banking services. Amazon wants to offer checking accounts.
Nobody’s complaining. With traditional banks like Bank of America eliminating flexible free checking accounts, the need for banking products with a low barrier to entry is only increasing.
PayPal’s new banking services include a debit card to withdraw cash at ATMs, the ability to direct deposit their paychecks via mobile devices and FDIC insurance for their balances.
There is no monthly fee or minimum balance requirement for a PayPal bank account, but users will end up paying more over time.
Users pay a fee to withdraw cash at out-of-network ATMs — which currently seems to be most ATMs — and a 1% fee on any check deposited via a mobile device.
PayPal also doesn’t have a U.S. banking license, which means it’s classified as a nonbank.
To get around potential roadblocks, PayPal is piecemealing services from anonymous small banks. For example:
A bank in Delaware issues its debit cards.
A bank in Georgia provides its mobile check deposit service.
- Banks in Utah are giving its loans to consumers and small businesses.
It will all look seamlessly integrated behind a pretty user interface — which still has yet to be revealed.
The thing is, you can use the same internet access and mobile phone to open a free checking account with an online bank.
Alternatives to New PayPal Banking Services
Banks like Chime can give you early access to your paycheck, no overdraft fees, a free savings account and the ability to make cash deposits at Green Dot locations around the country.
Like the new PayPal service, Chime doesn’t have a minimum balance or monthly maintenance fees. You must be a U.S. citizen or permanent resident to apply.
It’s 2018, and you can get 100% online access, a free checking account, savings account, debit card and withdrawals from tens of thousands of ATMs without the hoops and gimmicks big banks and companies try to pull you through.
Jen Smith is a junior writer at Codetic and gives tips on saving money and paying off debt on Instagram at @savingwithspunk.