PayPal becomes a Bank, no longer under FSA

By Chris Dawson May 15, 2007 - 8:12 am

PayPal announced this morning they are to become a bank headquartered in Luxembourg known as PayPal Europe SÃ rl & Cie, SCA (PayPal Luxembourg). All European PayPal accounts will be transferred to the new Bank on 2nd July.

The Bank of PayPal should gain a huge boost in momentum against their nearest competitors which in the UK are Nochex and more recently Google Checkout. Nochex has remained a smaller player, although popular – Checkout is merely a “Checkout flow for existing payment methods”. The irony is in the near future it could be possible to click through Google Checkout with your PayPal bank card – it’s already possible to use Google Checkout with your PayPal credit card (although it’s an affiliate card though GE Capital Bank Limited). Many larger retailers don’t accept PayPal services but the change from an electronic money issuer to a banking institution could make them a more attractive proposition.

The change also means that they’ll no longer be regulated by the FSA but will be regulated as a bank by the Commission de Surveillance du Secteur Financier (CSSF), the Luxembourg equivalent of the FSA.

It remains to be seen which services will be affected by the changes. The despised ten day clearing time for eCheques should clear more promptly. PayPal Website Payments Pro (very similar to a full merchant account) may become more attractive to large retailers. PayPal will also have more flexibility to introduce new features such as debit cards allowing you to spend funds held in your PayPal account.

You can find more information on the PayPal website.

  • 14 years ago

    I’ve now received an email from PayPal informing me of the upcoming changes, the only additional news is that if I’d rather not deal with a bank in Luxembourg I’m at liberty to close my account!

    If you do not wish to continue your relationship with PayPal, you may close your account at any time by logging in to your account, clicking Profile, and following the instructions from the “Close Account” link.

    I think on balance I’ll keep my account 😀

  • Des
    14 years ago

    Does this mean VAT exemption on Paypal fees for VAT registered sellers??

  • 14 years ago

    There is no VAT on Paypal fees: financial institutions are exempt from VAT.

  • Neil
    14 years ago


    I work at PayPal’s UK pr agency. Just to say that PayPal in the UK will, as you say, be regulated from Lux. However it will remain a voluntary member of the UK’s Financial Ombudsman Service so UK PayPal customers will still have recourse to that if they can’t sort an issue out directly. Hope that helps.


  • mia chapman
    14 years ago

    well to me the protection for buyers that paypal is suposed to protect is rubbish….ive lost 3200 usd due to paypal and there so called protection scheme and the one thing that is annoying is a bank comminicates paypal just hides from problems…i hope you are happy paypal and believe me i will goto every press office in the united kingdom and show my case!!

  • 14 years ago

    I dont suppose the average person cared or really new what difference this would make.
    I know I have used Paypal a few times and never even realised the change.

    If it makes the business more competative, then i am all for that, especially as other financial organisations seem to be goin through a bad time.

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