PayPal is seeking a potential stock-trading platform to allow end-users to trade individual stocks.
After exploring the facet of cryptocurrency trading last year, the financial technology goliath has been seeking methods to let end-users trade individual stocks.
The California-based firm recently employed a brokerage sector veteran, Rich Hagen. After parting ways with Ally Invest, Hagen now sits on the CEO’s chair of a formerly unreported sector of PayPal, dubbed Invest at PayPal. Hagen was also one of the founders of an online brokerage portal called TradeKing. Ally Invest later acquired said platform.
PayPal’s strategy to start a stock-trading platform
Rich Hagen will serve as a medium for PayPal to seek opportunities in the customer investment business. The company’s long-term goals include amalgamating several financial services and investment opportunities under the banner of PayPal.
The strategy towards providing an abundance of financial services comes amidst a retail trading resurgence. The first half of 2021, saw more than 10 million individual investors enter the market freshly. This record roughly matched the recorded level for the year 2020, according to JMP Securities. An assortment of viral events (like GameStop in January), government stimulus checks, and lockdown orders during the pandemic have prompted a renewed interest in the stock market.
Today, trading is one of the most sought out mediums to increase the revenue of businesses. Almost every company around the globe looks to boom their business incomes through the facet of trading. Companies that offer it reach beyond the limits of profitability.
Square, PayPal’s rival in business, serves its consumers with stock and cryptocurrency trading via the Square Cash App. Square’s CFO indicated that the app has seen a surge in revenue and engagement per end-user ever since.
Robinhood Inc., which emerged as a publicly traded company this year, has seen a boom in its growth curve with over 22.5 million consumers and increased revenue in this year’s most recent quarter.
For PayPal to venture into stock trading for its customers, it will partner with or purchase a prevalent broker-dealer. PayPal has already discussed the same with probable industry partners.
The trading service is most likely not going to be launched this year. The source that revealed this information maintains anonymity owing to the latency of PayPal’s plans. Further information about potential partnerships was also not revealed because the company has not yet initiated a press release regarding the same.
The stock market shares of the company leaped over 3% compared to its existing value, stated a CNBC report. Robinhood’s shares fell by more than 3%.
A wholesome and novel membership process is required, through FINRA (the industry’s primary regulator), if the company seeks to gain complete resonance as a brokerage firm. This process could take over eight months, from the commencement of the process. PayPal boasts a vast consumer base of over 400 million accounts across the globe.
The stock-trading launch from PayPal would be received very competitively in the market of the fintech industry, at a time like this. PayPal, Square, SoFi, and Robinhood offer an array of intersecting product ranges. All of the above elaborate on how they are a one-stop-destination for all finance-related needs for their consumers. Stock trading and cryptocurrency are viewed as methods to keep the end-users engaged on these monetary transaction portals.
Retail trading has received a lot of regulatory inspections, despite being a tool for user growth and income.
The US Securities and Exchange Commission (SEC) last week stated that it is enhancing its techniques of inquiry. SEC will also look into how brokerages utilize technology to engage with their consumers. The independent agency indicated that online brokerages use behavioural prompts to motivate investors to trade stocks and other securities. These online brokerages also prompt investors to take more risks.
