PayPal: The silent SME lending competitor
The digital payments facilitator has become a major provider of small to medium-sized loans in Australia.
Recognised globally as an online payment giant, PayPal has been slowly but surely taking slices out of other areas of fintech in Australia and overseas. In the last two years, it has written $85 million of small business loans to Australian small- to medium-sized (SME) enterprises.
Businesses can apply for an unsecured loan of up to $97,000 if they're a member of PayPal's payments network. This allows sales funds to be instantly distributed.
PayPal's global general manager of small and medium business lending Darrell Esch explained the benefits of developing this kind of product from within a global company.
“This program was started as a little startup ... but with the benefit of strong capital in our parent, as well as our ability to leverage all the pockets of expertise," he told the Australian.
“It was sort of the best of both worlds — the ability to act like a crappy startup inside of a big company,” he said.
PayPal has released several innovative products that are disruptive to banks products and services. By leveraging its fintech roots from its beginnings in 1998, it continues to be essential to many customers everyday lives.
In September 2015 it introduced its peer-to-peer payments service to Australia, allowing its customers to pay back friends and family after being prompted via text, email, chat or social media.
PayPal also partnered with Tyro in mid-2015 to allow SMEs to accept mobile payments from PayPal customers in-store.
Esch told the paper that the unsecured business lending model was profitable, but also mentioned the benefit to PayPal's merchants.
“It creates the effect of growth in the network and we also see that once merchants take this program, their attrition from PayPal is cut in half. So we’ve really done it as a membership, value-added play."