A sign is posted outside the PayPal headquarters in San Jose, California.
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PayPal is looking into a possible stock trading platform.
After introducing the ability to trade cryptocurrencies last year, the payments giant looked to two sources familiar with the plans for ways to let users trade individual stocks.
The San Jose, California-based company recently hired realtor industry veteran Rich Hagen as part of the move, according to one of the sources. After leaving Ally Invest, Hagen is now CEO of a previously unreported division of PayPal called Invest at PayPal, according to his LinkedIn page. Hagen co-founded the online brokerage TradeKing, which was bought by Ally Invest.
His current job description outlines PayPal’s efforts to “explore opportunities” in the consumer investment business. When asked for comment, CNBC referred CNBC to comments made by CEO Dan Schulman at the company’s Investor Day in February, when he spoke about the company’s long-term vision and how it could encompass many more financial services, including “investing skills” .
PayPal’s move comes amid a retail renaissance. More than 10 million new private investors entered the market in the first half of this year, which, according to JMP Securities estimates, is roughly the same as last year’s record level. A combination of stay-at-home orders during the pandemic, government economic controls, and viral events like the rise of GameStop in January has sparked renewed interest in the stock market.
Trading has become a booming business for the companies that offer it. PayPal rival Square offers stock and cryptocurrency trading through the Square Cash app, and its CFO said the app increases engagement and revenue per user. Robinhood, which became a publicly traded company this summer, has seen explosive growth with more than 22.5 million customers and doubled its revenue in the most recent quarter from a year earlier.
In order to offer stock trading to customers, it is possible for PayPal to work with an existing broker-dealer or to buy an existing one. According to a source, PayPal has already held talks with potential industry partners.
However, a source familiar with the idea said the trading service was unlikely to roll out this year. The sources spoke on condition of anonymity as PayPal’s plan was not public and they were not authorized to share information about potential partnerships.
PayPal’s shares rose more than 3%, while Robinhood’s shares fell more than 3%, according to the CNBC report.
If PayPal wanted to get full approval just as a brokerage company, it would have to complete a new membership process through the industry’s premier regulator, FINRA. This process can take more than eight months. PayPal has more than 400 million accounts worldwide.
A rollout of PayPal stock trading would come at a competitive time for the fintech industry. Square, PayPal, Robinhood, and SoFi offer a list of overlapping products and describe the same mission of being a one-stop finance shop. Cryptocurrency and stock trading are seen as ways to engage consumers on these payment platforms.
While the retail boom is helpful to user growth and sales, it has also resulted in more regulatory scrutiny.
The Securities and Exchange Commission announced last week that it was intensifying its investigation into gamification and the use of technology by brokers to interact with their customers. The agency mentioned behavioral prompts that are used by online brokers and investment advisers that can encourage investors to trade more stocks and other securities and take more risks.