The FT poses an interesting question which needs to be asked. "What exactly is PayPal these days? Is it a money transmitter as per what its license says? Or is it something else entirely? A deposit taking bank? An investment manager? A credit institution?" If it’s the latter, why is it licensed as a money transmitter?
You see that? PayPal is back to managing customer funds at its own discretion rather than passing them through to a licensed institution. Most importantly, PayPal accounts are no longer FDIC guaranteed because they don’t sit in the regulated banking system, but exist instead as unsecured claims against PayPal, a money transmitter. As an aside, the document also reveals that PayPal now operates a Luxembourg-based bank subsidiary through which it originates PayPal Credit services internationally. It also participates on a revenue share basis with a US chartered bank for credit product provision over in the US.