According to two sources, PayPal Holdings Inc (NASDAQ: PYPL) is exploring a stock-trading platform. After giving users the ability to trade cryptocurrencies last year, the company has now been finding ways to let people trade individual stocks.
Richard Hagen is the new CEO of Invest at PayPal
According to one of the sources, PayPal recently hired Rich Hagen, a brokerage industry veteran, to help them with the move. Hagen is now the CEO of a previously unreported division on PayPal known as Invest at PayPal. He recently left Ally Financial Inc (NYSE: ALLY), which bought TradeKing, an online brokerage Hagen founded.
Hagen’s new job description on LinkedIn details PayPal’s efforts to explore opportunities in the consumer investment business.
Over 10 million investors have entered the investment market since January, according to estimates given by JMP Securities. Stay-at-home orders caused by the pandemic, viral events such as GameStop in January and government stimulus checks have caused an interest in the stock market, and PayPal wants to take part. PayPal might partner with an existing brokerage dealer to offer a stock trading option to its customers. According to sources, the company has already had a few discussions with potential partners. PayPal’s competition, Square Inc (NYSE: SQ), offers trading through their Square Cash App. Its CFO has stated that the app drives user engagement and revenue per user.
Robinhood Markets Inc (NASDAQ: HOOD) has also seen growth in the last year. Their most recent quarter shows that their revenue has doubled. The company now has 22.5 million users.
PayPal is not likely to start the trading service this year
However, sources say that it is unlikely that they will offer this service within the year. To get approval as a brokerage firm, the company would have a completely new membership process through FINRA, the brokerage industry’s main regulator, which could take more than eight months.
A stock-trading launch would face much competition as other companies like Robinhood, Square, PayPal, and SoFi offer the same activities. For these platforms, stock trading and cryptocurrency are ways to keep customers engaged.
Although retail stock trading has been good for growth, it has also been under regulatory scrutiny. The Securities and Exchange Commission said it is stepping up its inquiry into how brokerages use technology to interact with customers.