The PayPal app displayed on an iPhone
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PayPal is exploring a possible stock trading platform.
After deploying the possibility of trading cryptocurrencies last year, the payment giant has been exploring ways to allow users to trade individual shares, according to two sources familiar with the plans, and public details around a new executive contract.
The San Jose, California-based company recently hired brokerage industry veteran Rich Hagen as part of that move. After leaving Ally Invest, Hagen is now the CEO of a hitherto unknown PayPal division, called “Invest at PayPal,” according to his LinkedIn page. Hagen was a co-founder of online brokerage TradeKing, which was bought by Ally Invest.
His current job description describes PayPal’s efforts to “explore opportunities” in the consumer investment business. When asked for feedback, PayPal directed CNBC to comments from CEO Dan Schulman during the company’s investment day in February, where he talked about the company’s long-term vision and how it can include many more financial services, including “investment capabilities.”
PayPal’s move comes amid a renaissance of retail. More than 10 million new individual investors have entered the market during the first half of this year, roughly coinciding with last year’s record level, according to JMP Securities estimates. A combination of home stay orders during the pandemic, government stimulus checks and viral events such as the rise of GameStop in January have generated new interest in the stock market.
Trade has become a booming business for the companies that offer it. PayPal’s rival Square offers the trading of securities and cryptocurrencies through the Square Cash app, and its chief financial officer has said it encourages participation and revenue per user. Robinhood, which went public earlier this summer, has experienced explosive growth with more than 22.5 million customers and has doubled revenue from a year ago in the most recent quarter.
In order to offer stock trading to customers, PayPal may partner with or purchase from an existing intermediary broker as part of this plan. According to a source, PayPal has already held discussions with potential industry partners.
Still, a well-known source said the commercial service was unlikely to be launched this year.
PayPal shares rose more than 3% after the CNBC report, while Robinhood shares lost more than 3%.
If PayPal wanted to get full approval as the sole brokerage firm, it would have to complete a new membership process through the industry’s leading regulator, FINRA. This process can take more than eight months. PayPal has over 400 million accounts worldwide.
A launch of PayPal stock trading would come at a competitive time for the fintech industry. Square, PayPal, Robinhood and SoFi offer a list of products that overlap and describe the same mission of being a one-stop shop. Trading cryptocurrencies and stocks is seen as ways to keep consumers involved in these payment platforms.
While useful for user growth and revenue, the retail trade boom has also called for regulatory scrutiny.
The Securities and Exchange Commission said last week that it is stepping up its research on “gamification” and how they use technology to interact with their clients. The agency mentioned indications of behavior used by online brokers and investment advisors that can encourage investors to trade more stocks and other securities and take more risks.