(3 July 2017 – United Kingdom) PayPal’s lending business more than doubled its UK volumes in the last year and has now extended more than £400 million of credit to British businesses.
The online payment group’s growth in the UK mirrors a worldwide phenomenon, as large technology companies move into the lending territory dominated by traditional banks.
PayPal’s offering, named Working Capital, launched in the UK in 2014, following US a year earlier, allows small British companies that already use PayPal to borrow up to £100,000 and make repayments equal to an agreed percentage of their sales.
The service boasts extremely fast credit decisions — often in a matter of minutes — because PayPal already sees the cash flow patterns of its potential borrowers. It also claims to be cheaper than banks, because there is no interest, just a small fee at initiation.
“Technology companies like PayPal are finding new ways to serve customers where the products and services of the past are coming up short,” said Mark Brant, managing director at PayPal UK, citing statistics from the UK’s National Audit Office that claim there is a £6 billion to £9 billion gap between the funding SMEs demand and what banks will give them.
PayPal said a third of all its Working Capital advances were given to companies in areas that had lost more than 50 bank branches in the last year. Banks still remain the dominant lender in the UK, approving about £5 billion to £6 billion of new loans every quarter, according to data from banks’ representative body the BBA.
PayPal’s global lending business crossed the US$1 billion threshold in October 2015, then the US$2 billion mark in July 2016 and the US$3 billion mark this past May, with 115,000 customers globally.