PayPal is not, and likely would never become, a bank in the U.S.
But if it did, its customer account balance totals would actually make it the 21st-largest bank in the nation, according to research from S&P Global Market Intelligence cited by the Wall Street Journal.
When compared to the deposit accounts of major U.S. banks, the high volume of money in PayPal's systems suggests that nonbank financial services providers will keep providing strong competition to legacy banks.
Nonbank entities such as PayPal offer similar services to traditional financial institutions but consumers typically use them differently. PayPal users can store money in their accounts and then use the service to transfer money and buy products either in-store or online. And PayPal also provides loans and credit cards through partner banks.
But customers don't use PayPal like a bank. The average balance in PayPal accounts is $70, while legacy banks typically hold much larger sums, according to the Wall Street Journal.
As players such as PayPal continue to strive to become integral in customers' everyday lives, they could become more of a threat to banks. PayPal recently debuted an ad campaign and new slogan that focuses on how their technology could make money more accessible 24 hours a day. All of this is an effort to improve brand awareness and convince customers to test new services.
PayPal also updated its app to highlight specific features, such as mobile order-ahead and peer-to-peer payments, in an effort to get users to try these services. The growing variety of PayPal features could threaten legacy institutions or at least cause them to adjust their approaches if customers begin using PayPal and similar services to manage more of their money.
The rise of PayPal and other disruptive services have been changing the face of the world of payments, and that disruption is likely only going to grow in the next several years.