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PayPal Will Expand Business and Consumer Lending Outside the U.S.


he San Jose, Calif., company’s PayPal payments unit said Wednesday it will expand its small-business and consumer lending programs outside the U.S.

EBay will change the name of its Bill Me Later consumer-lending program to PayPal Credit and push it into the U.K. and Germany later this year. Its small-business offering, PayPal Working Capital, will expand to the U.K. and Australia.

The expansion of the services is part of PayPal’s transformation from a business primarily reliant on eBay buyers and sellers to a financial institution more closely resembling a bank. PayPal, which is on a pace to exceed eBay’s core marketplace business by annual revenue, has been pushing new products like its in-store checkout system to fend off competition from rivals including Amazon.com AMZN -2.32% and Square.

“We feel really good about our ability to lend,” said Gary Marino, PayPal’s senior vice president of global services. He said PayPal aims to lend to customers with superior credit ratings.

PayPal logged a 20% sales bump in the second quarter to $1.95 billion, more than double the growth rate of eBay’s namesake marketplace unit. With 153 million users it also has more active customers than the marketplace.

PayPal lost its chief, David Marcus, last month to Facebook FB -2.15%, and eBay said its search for a replacement could last several months. EBay Chief Executive John Donahoe is leading PayPal in the interim.

PayPal began offering business loans late last year, charging merchants a flat fee, rather than interest. Marino said PayPal had made $150 million in loans since then. Rates vary based on the size of the loan and how quickly merchants agree to return the funds, but generally are less than 10%.

PayPal also is expanding its maximum loans to $60,000, from $20,000, Marino said.

The consumer-lending unit, PayPal Credit, has been a winner for eBay since it bought the business six years ago for about $1 billion. The service offers instant loans to consumers online seeking to buy goods from specified websites, including Walmart.com and Apple.com. The loans can be costly, with annual interest rates of up to 20%.

Steve Allocca, PayPal vice president of global credit, said PayPal is considering ways to extend credit offline as well. “Auto loans strategically make a lot of sense to us,” Allocca said, adding PayPal had no immediate plans to introduce them.

source: GREG BENSINGER/Wall street Journal

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