PayPal plans to set up a stock trading company

PayPal Holdings Inc (Nasdaq: PYPL) is considering building a platform for stock trading, according to two sources. After giving users the ability to trade cryptocurrencies last year, the company is now looking for ways to enable people to trade individual stocks. According to one of the sources, PayPal recently hired Rich Hagen, a veteran of the brokerage industry, to help them with this move. Hagen is now the CEO of a previously undisclosed division of PayPal known as Invest at PayPal. He recently left Ally Financial Inc. (NYSE: ALLY), which bought TradeKing, an online brokerage company founded by Hagen. Hagen's new job description on LinkedIn describes PayPal's efforts to explore investment opportunities for consumers. JMP Securities estimates that over 10 million investors have entered the investment market since January. House arrest orders caused by the pandemic, viral events like GameStop in January, and the government's economic checks have sparked interest in the stock market, and PayPal is keen to get involved. PayPal could partner with an existing broker to offer their customers an option to trade stocks. According to sources, the company has already had some discussions with potential partners. PayPal's competitor Square Inc (NYSE: SQ) offers trading through its Square Cash app. The company's CFO said the app increases user engagement and revenue per user. Robinhood Markets Inc (NASDAQ: HOOD) has also seen growth over the past year. The most recent quarter shows that sales have doubled. The company now has 22.5 million users. However, according to sources, the company is unlikely to offer this service later this year. In order to gain approval as a brokerage firm, the company would have to go through an entirely new membership process with FINRA, the broker industry's main regulator, which could take more than eight months. Introducing stock trading would mean a lot of competition as other companies like Robinhood, Square, PayPal, and SoFi offer the same activities. For these platforms, stock trading and cryptocurrency are ways to retain customers. While retail stock trading has been good for growth, it has also been scrutinized by regulators. The US Securities and Exchange Commission (SEC) has said it plans to take a closer look at the ways brokerage firms use technology to interact with their customers.