PayPal

Type: Public digital-payments company. PPP participant as borrower-facing platform and servicer, not lender of record.
Legal entities: PayPal Holdings, Inc. (NASDAQ: PYPL). PPP loans through PayPal were made by WebBank, the Utah industrial bank that is also the lender behind PayPal Business Loan, PayPal Working Capital, and the LoanBuilder product.
Founded: Origins in Confinity/X.com (1998–2000); independent public company since the July 2015 spin-off from eBay.
HQ: San Jose, California.
CEO: Dan Schulman through the pandemic (2014–2023); Alex Chriss since September 2023.
Role in PPP: National borrower-facing application and servicing channel. WebBank held the lender-of-record seat, the SBA fee row, and the PPPLF borrowing; PayPal owned the customer interface and recognized PPP servicing-fee revenue.

Pandemic-role map

Reader shorthand: borrower-facing platform; WebBank was the lender of record.
What PayPal did for borrowers: took PPP applications from its merchant base through PayPal.com/PPPloan and the LoanBuilder infrastructure, in both the 2020 and 2021 rounds, and later ran the forgiveness portal.
Where responsibility sat: PayPal's own January 12, 2021 investor notice stated, "The lender for the Paycheck Protection Program Loan through PayPal is WebBank, Member FDIC." PayPal's 2021 Form 10-K states that PayPal did not own the receivables associated with loans originated through PPP.

Before the pandemic (2015–early 2020)

PayPal entered the pandemic with an installed base of small online merchants and an existing small-business credit stack (PayPal Working Capital and the LoanBuilder/PayPal Business Loan product) in which WebBank supplied the legal lending seat while PayPal owned the customer relationship, data, and servicing experience.

During the pandemic (March 2020 – mid 2021)

On March 31, 2020, PayPal announced relief measures for its "more than 24 million merchants around the world," including fee waivers and deferred repayments on business loans for some of its most affected small-business customers. At the end of 2020 its own merchant loan book stood at $1.4 billion, down 51% from $2.8 billion a year earlier. The 2020 Form 10-K attributed the drop mainly to fewer originations after changes to its risk parameters, "as well as a shift towards merchants borrowing through" the PPP, whose loans PayPal did not own.

Fee waivers, deferrals and tighter credit

Three of the March 31 measures ran "through at least April 30, 2020": no chargeback fees when a customer filed a dispute with a credit card issuer, no fees for instant withdrawals from a business account, and 20 days instead of 10 to answer a customer dispute. Business-loan and cash-advance customers could "request to defer repayment, with no additional cost." PayPal's next quarterly filing warned that waiving fees and deferring repayments "may negatively impact our results of operations." It gave no cost figure.

The 2020 Form 10-K lists the credit changes: "reduction of maximum loan size, tightening eligibility terms, and a shift from automated to manual underwriting." Merchant net charge-offs ran at 18.9% in 2020, against 7.4% in 2019. Starting in the third quarter of 2020, PayPal modified the loans of about 13,000 merchant accounts, with $354 million outstanding at modification, and extended their payment terms by a weighted average of 37 months. It accounted for them as troubled debt restructurings.

The PPP channel

On April 10, 2020, PayPal announced it was providing access to PPP loans after SBA approved it "as one of the first non-bank institutions." The lender was WebBank. Dan Schulman, PayPal's president and chief executive, said: "This is a race to save jobs in the present and for the future." He thanked "Congressional leaders for ensuring the CARES Act allowed companies like PayPal to help distribute funds quickly."

PayPal's first-quarter 10-Q set out the arrangement. A partner bank funded the loans, the receivables "will not be purchased by PayPal," and PayPal would receive "a fee for providing origination and loan servicing" and keep the operational risk. The 2020 Form 10-K added that PayPal had agreed, "under certain circumstances, to indemnify the chartered financial institution," and that no significant indemnification costs had been incurred. By the 2022 Form 10-K the retained risk was "operational and audit risk," and the indemnity covered the bank "and its assignee of a portion of these loans." That filing also reported no significant costs.

PayPal's third-quarter 2020 10-Q put its originations at about $2.1 billion through the program's August 8, 2020 expiration. Its October 28, 2020 comment letter to the California DFPI said PayPal, in conjunction with WebBank, had facilitated about $2.1 billion in PPP loans for about 76,000 small businesses. Its January 2021 release described the 2020 book as "more than 75,000 businesses, with an average loan size of $28,000." PayPal began taking applications for the reopened program on January 19, 2021, again with WebBank as lender. Its July 2021 earnings release said PayPal had provided access to about $1 billion in 2021 loans for about 43,000 small businesses.

SBA's loan-level PPP data (release of September 30, 2024) list WebBank as the originating lender on 75,943 loans for $2.16 billion approved in 2020. They list 43,239 WebBank loans for $1.03 billion approved in 2021: 17,116 first draws and 26,123 second draws. Of WebBank's 119,182 loans, 112,176 show forgiveness, totaling $2.97 billion. PayPal's own counts come within about 1,000 loans of WebBank's in each year. That match suggests the PayPal channel made up nearly all of WebBank's PPP lending.

PayPal's PPP fee revenue was $157 million in 2021, including revenue recognized when loans were forgiven. Of that, $93 million came in the third quarter. We found no separate PPP fee figure in the 2020 filings. By the first half of 2022, the revenue was "de minimis."

Staff

PayPal employed about 23,200 people at the end of 2019, 26,500 at the end of 2020 and 30,900 at the end of 2021. Its 2021 proxy statement says the company "pledged to continue paying employees unable to work because of the impacts of COVID-19." A workforce reduction approved in the first quarter of 2020 was delayed, "primarily as a result of COVID-19," and brought restructuring charges of $109 million in 2020 and $27 million in 2021. The California EDD's WARN report lists PayPal notices dated November 2, 2020, for 56 layoffs in San Jose, and January 14, 2021, for 196. Schulman's total compensation was $23,362,072 for 2020, against $25,825,473 for 2019; the proxy says his 2020 salary of $1,038,462 included an extra pay period.

The fourth-quarter earnings release summed up 2020 as "Strongest performance in PayPal's history," with revenue of $21.45 billion, up 21%.

The money lines

The two sides of the channel were paid differently:

WebBank (lender of record): estimated SBA processing fees of about $214.5 million (lender_fees.csv), and Federal Reserve PPPLF borrowings against the PPP book (peak outstanding about $2.75 billion).
PayPal (servicer): its 2021 Form 10-K disclosed $157 million of PPP fee revenue in 2021 and stated that PayPal did not own the PPP receivables.

After the pandemic (mid 2021 – present)

PayPal is not a subject of the House Select Subcommittee's December 2022 fintech-PPP report. We found no PPP enforcement action against PayPal and no FTC, DOJ, or SBA action about the PayPal PPP channel. The emergency product wound down into forgiveness administration (PayPal help page).

PayPal began another workforce reduction in the first quarter of 2022, with $121 million of restructuring charges that year. In April 2022 it announced that, from June 17, 2022, it would remove the $15 cap on the instant-transfer fee for merchant accounts, the fee it had waived for business accounts in 2020. On January 31, 2023, Schulman told employees PayPal would cut "approximately 2,000 full time employees, which is about 7% of our total workforce." The California EDD's WARN report lists a PayPal notice for 319 layoffs in San Jose dated the same day.

PayPal's small-business lending pages continue to identify WebBank as the lender for PayPal Business Loan and PayPal Working Capital. Bernardo Martinez, who signed the March 24, 2020 fintech coalition letter as Funding Circle's U.S. managing director, is profiled separately.

WebBank — the lender of record behind the PayPal channel
Square — seller-base peer (Celtic Bank, then direct)
Intuit / QuickBooks Capital — installed-base peer (Cross River, then direct)
Bernardo Martinez — Funding Circle U.S. MD, ex- and later PayPal

Sources

In this archive

WebBank homepage, brand-partner list (stored captures of May 21, 2020 and Aug. 5, 2021)
Lender-fee and PPPLF tables: lender_fees.csv; ppplf_by_lender.csv

External references