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PayPal’s entrance to the crypto market will reshape the banking ecosystem as we know it

PayPal’s decisive entrance to the digital asset space a few months ago, with their recent crypto checkout addition, should ring the alarm bells in boardrooms of banks throughout the nation. Crypto is here to stay, and banks that won’t act fast to include digital assets as part of their offerings will be left behind, suffering from a serious gap in their market positioning. By transforming cryptocurrencies into a concrete form of payment (as opposed to just a highly speculative investment), PayPal contributes to the institutionalization of crypto as a legitimate asset, removing any doubt regarding the long-term sustainability of digital assets.

PayPal’s move is a direct threat on bank’s bread and butter: by luring customers to securely buy, sell, store, and use their Bitcoin, PayPal establishes its position as a trusted brand for safeguarding digital assets. From spending over two decades in financial tech firms - I see this move as the first step in PayPal’s long-term strategy, turning into a new global bank, offering full-fledged financial services on both digital assets and FIAT currencies alike. In this new digital-asset front, banks are not facing just PayPal: Crypto custody firm Anchorage has already obtained a banking license from the OCC earlier this year, and considering PayPal’s clout and direct investment in the blockchain space, it would be surprising if the payments giant doesn’t do the same.

Another payment company which has been very aggressive in adopting crypto and facilitating its usage is Square, with its massively popular Peer-to-Peer app Square Cash. The company itself reported that over 3 million users bought or sold cryptocurrencies during 2020 using its app. Considering its wide user base, it seems like a safe bet that Square will try to expand its sticky user experience into full-blown financial services that will eventually aim to replace traditional banks. They may start off with small business owners (which already use Square’s point-of-sales payment rails) and eventually expand this offer to their customers. One indication for this strategy is Square’s appetite for crypto: the company purchased $170 million worth of Bitcoin in February, following a $50 Million purchase in October.

The reason that PayPal and Square can profoundly reshape the financial services landscape, in my view, is that their transformation into a new breed of banks is actually quite a natural evolution: Millions of consumers already trust these two companies with daily purchases and money transfers. With a genuine digital DNA and deep customer orientation, it only makes sense that once PayPal begins offering financial services, many consumers will turn away from their traditional banks and go with the young, innovative, purely digital alternative.

Just like millions of other Americans, I too ditched my traditional cable service and switched to Netflix. That cord cutting trend that reshaped the home entertainment market, resembles the possible shift in the banking eco-system: banks that don’t evolve to include digital assets as part of their offering may very well be the next victim of rapid digital transformation. Millennials and early adopters will be the first to try out this service, and as long as they’re satisfied with the overall experience, they’ll pave the way to the rest of the market.

With roughly 50 million Americans holding Bitcoin, banks can no longer afford to sit on the fence on crypto: As digital assets become massively used, banks that jump on the blockchain bandwagon will get a significant first mover-advantage, offering current and new customers to open and securely manage a crypto account. On the flip side, banks that keep hesitating from taking the plunge into the digital-asset space will eventually lose market share.

PayPal and Square’s latest moves may very well be the tipping point in the market acceptance of crypto. Realizing consumers will start casually using crypto to buy and sell day to day items, banks have a unique opportunity to lure them to deposit digital assets, where bank customers can manage these assets, keep them safe, withdraw them, or transfer them—just as they do with their Dollar account.

And that’s the real opportunity here: According to PayPal’s official announcement, it won’t let users take out their crypto without converting it to fiat currency first. Banks, on the other hand, can let customers open and manage their crypto accounts and withdraw their digital assets anytime. With the notion that crypto is going mainstream, and the right technology to safeguard digital assets, banks can seize the market with a new business line in a rapidly growing market.


Comments: (1)

Ambrish Parmar
Blog group founder
Ambrish Parmar - Thought leader and Start-up Advisor - London 25 June, 2021, 09:51Be the first to give this comment the thumbs up 0 likes

Hi Mark, thank you for sharing your post. Ambrish - site founder.

Mark Mayerfeld

Mark Mayerfeld



Member since

15 Jun 2021


Tel Aviv

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This post is from a series of posts in the group:

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