PayPal is looking into a stock-trading platform.
According to two sources, the payments giant is exploring how to allow users to trade individual stocks after introducing the ability to trade cryptocurrency last year.
Rich Hagen, a veteran of the brokerage industry, was recently hired by the company in San Jose, California. According to his LinkedIn page, Hagen has been named the CEO of "Invest at PayPal," a previously unknown division of PayPal. Hagen co-founded online brokerage TradeKing. Ally Invest bought it.
The current job description of PayPal's CEO Dan Schulman outlines the company's efforts in "exploring opportunities" in consumer investment. PayPal reached out to CNBC for comment and pointed them to Dan Schulman, CEO of the company, who spoke at February's investor day about the long-term vision of the company, as well as how it might include more financial services such "investment capabilities".
PayPal's decision comes amid a retail trading revival. According to JMP Securities estimates, more than 10 million individual investors entered the market during the first half of the year. This is roughly the same level as last year's record. New interest in the stock markets has been fueled by a combination of government stimulus checks, stay-at-home orders during the pandemic, and viral events such as the rise of GameStop's January launch.
Companies that offer trading have seen a boom in their business. Square, a PayPal competitor, offers cryptocurrency and stock trading via the Square Cash App. Its CFO stated that it drives engagement and revenue per user. Robinhood, which was listed earlier this summer, has experienced explosive growth, with more than 22.5million customers and a doubled revenue in the most recent quarter.
It is possible that PayPal will partner with or purchase an existing broker-dealer in order to provide stock trading services to customers. One source claims that PayPal has already had discussions with potential industry partners.
One source said that it was unlikely that trading services would be launched this year.
Following the CNBC report, PayPal shares jumped by more than 33% while Robinhood shares fell more than 3%.
PayPal would have to go through a new membership process to be approved as a broker firm if it wanted to do so. This process can take up to eight months. PayPal is home to more than 400 million accounts around the world.
The launch of stock trading by PayPal would be a competitive mover in the fintech sector. Square, Robinhood and SoFi all offer similar products and have the same goal of being a one stop-shop for financing. These payment platforms offer a variety of ways for consumers to stay engaged, including stock trading and cryptocurrency.
The retail trading boom is beneficial for revenue growth and user growth, but it has also prompted more regulatory scrutiny.
Last week, the Securities and Exchange Commission stated that it was intensifying its investigation into "gamification" and how companies use technology to interact and communicate with customers. Online brokerages and investment advisers may use behavioral prompts to encourage investors trade more securities and take on greater risks.
