PayPal is reportedly discussing a proposed entry into the stock market, offering users the ability to buy and sell stocks listed on the US stock market. Considering the size and notoriety of the company, this has the potential to seriously shake up the American business space.
Explanation of PayPal’s stock trading plans
Sources close to PayPal have highlighted the company’s interest in the shares, and while nothing is finalized yet, the rumors have already had a positive effect on PayPal’s own value. This response from investors is a notable sign of support from the financial world.
However, the retail equity trading industry can be difficult to break into as many other platforms have consolidated their position in recent years. If PayPal is to enter the market, it will fight against several popular apps such as Robinhood, E * Trade, Fidelity, and even Chinese competitors who entered the US market earlier in the year.
The news sent shockwaves through the industry, however, as Robinhood’s stock fell more than 7% after it came to light. The PayPal news was also coupled with SEC chief Gary Gensler recently discussing a payment ban for order flow, which is Robinhood’s primary revenue generation model. All of this could cause problems, especially given Robinhood’s bad reputation and the fact that it has struggled to turn a profit this year.
It could also prevent Robinhood from becoming a so-called ‘one-time money app’, as their CEO Vlad Tenev described it in a recent interview:
“Over time, we want to be the one-time money app, the most trusted and culturally relevant money app in the world. So whatever you use your money for you should be able to do through Robinhood …
Anytime you receive a paycheck direct deposit, we would love you to do so through Robinhood. Your emergency fund, paying your bills, your daily expenses, we would like customers to use us for that. And of course, all types of investing, from more discretionary investing to long-term retirement savings. “
PayPal has already partially derailed Tenev’s plans by offering crypto trading solutions, and if it goes into stock trading, it will certainly shrink some of Robinhood’s user base. PayPal has a largely positive reputation, although it is clearly lacking in some areas according to customer reviews.
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Is there a place for PayPal in the US stock market?
It’s worth considering what the retail side of equity trading would look like if PayPal started offering this capability. While the industry is saturated and in the throes of competition, it’s fair to say that there is still no single leader in the retail equity trading market. There are many different brokerage firms, with each broker working with a specific group of investors.
For example, the average size of an account on Robinhood is $ 3,500. With Interactive Brokers, that number rises to $ 250,000.
This means that it is certainly possible for PayPal to take the reins and become the first port of call for those looking to enter the market. The CNBC report notes that PayPal may partner with another company to offer this capability, although no specific identities have yet been released.
While the company has never offered this to its customers before, it recently hired former commerce veteran Richard J. Hagen Jr as CEO of a new division named Invest in PayPal. Prior to working there, he was President of trading firm Ally Invest, Vice President of Retail Brokerage at Folio Investing and Securities Broker at TD Waterhouse. Needless to say, it appears this hire was of strategic importance and conducive to active rumors.
Given PayPal’s positive response through its increase in the share price and the lack of a clear market leader in terms of one-stop personal finance application, it certainly seems possible that the form will have a big impact. on the industry. And with the hiring of Richard J. Hagen Jr, they certainly seem to be positioning themselves for this type of move. If so, then the question will be whether competitors like Robinhood, SoFi and others can even keep pace.
Do you think PayPal will offer stock trading? Let us know in the comments below.
About the Author
Kai Morris is a crypto and DeFi specialist and researcher. He holds an Honors BA in Law and Philosophy from the University of Essex, where he studied complex economic, legal and ethical theories relevant to the FinTech landscape. Kai is particularly interested in decentralization and privacy blockchains, as they are directly linked to our human rights and our development. He cares about blockchain, DAG and DeFi as a way to positively change our lived experiences. Kai is an investor in Ethereum and Monero.