PayPal explores stock trading platform to take on Robinhood and Square
Payment giant PayPal is reportedly looking into the launch of a stock-trading platform for US customers after it has hired a brokerage industry veteran to head its “Invest at PayPal” division.
According to a CNBC report, the California-based company recently onboarded Richard Hagan, former president of Ally Investment. Hagan’s LinkedIn page lists him as the CEO of PayPal’s unreported business that could take on Robinhood and other high-flying trading apps.
His job description on the professional network outlines that he is leading Invest at PayPal’s efforts to “explore opportunities in the consumer investment business.”
Hagen kicked off his new role at PayPal this month. Prior to that, he was leading Ally Invest, a digital financial services company. He also co-founded online brokerage TradeKing, which was acquired in 2019 by Ally Financial Inc. (ALLY) for $275 million.
It is unlikely, however, that PayPal’s foray into stock trading would be rolled out this year, sources told CNBC.
The expansion into the hot retail brokerage industry comes hot on the heels of PayPal’s move earlier this year to allow its 400 million users to buy and sell cryptocurrencies.
The payment giant apparently sees value in combining trading and crypto transactions with payments as the integration allows customers of its two-sided network, which includes both PayPal and Venmo, to keep or invest their money within the same ecosystem.
“If somebody is going to be putting their money onto our platform, we want them to be able to grow that money, to invest that money in not just things like crypto, but in individual stocks and other assets that we can digitize and allow people to invest in,” CEO Dan Schulman said in February.
PayPal’s interest in stock trading business comes after the COVID-19 pandemic helped draw in a different cohort of investors, many of them young and new to investing. The US brokerage industry is estimated to have added more than 20 million new accounts in the last two years, with Robinhood alone likely commanding nearly 50% of that figure.
Recent industry surveys also show that Main Street investors have ploughed a large chunk of Joe Biden’s coronavirus relief package directly into equities. Additionally, the fresh liquidity provided a boost for penny stocks embraced by individual investors active in online social media forums, such as Reddit’s WallStreetBets.
But while retail trading has ballooned in the past few months, US regulators are looking into recent dramatic price run-ups in heavily shorted stocks, as well as the activities of brokers.
Robinhood, mostly used by millennials to trade stocks and cryptocurrency, is particularly accused of employing aggressive marketing tactics to draw inexperienced traders, including the use of “gamification methods to control clients.”
Furthermore, PayPal is competing with its rivals, such as Revolut and Square’s Cash app on more fronts. Square Inc., a payments company founded and run by Twitter CEO Jack Dorsey, launched its free-stock trading service in 2019 and was awarded last year with a coveted license to deal in cryptocurrencies in New York.
