Could PayPal's mobile apps do away with traditional banking?

PayPal's existing and announced mobile strategies could make traditional banking obsolete.

PayPal has headlines recently in the world of mobile transactions for a few reasons. Earlier this fall, the Internet payment giant offered the ability to donate money to causes and the ability to deposit checks straight into your PayPal account from your phone in an update to its iPhone and app.

Today, the eBay-owned company outlined three new features that it has planned for the next major release of its mobile apps: mobile express checkout, a mobile payments library for subscription-based services, and location awareness to help users find merchants that accept its mobile checkout (so far this service seems to be aimed specifically at iPhone users).

All of these advances reflect a world in which mobile payment and money management is becoming mission-critical for banks, businesses, and consumers alike.

Most major banks now let you view and manage your money through dedicated smartphone apps or mobile-optimized websites. For smartphone owners, the idea of banking without convenient access to your money, online bill paying services, and information about nearby branches and ATMs seems very passé and so 20th century.

But PayPal managed to squeak that banks out of the picture almost entirely when it announced direct to PayPal deposits by simply endorsing a check and snapping a photo of either side of it (granted, the process is limited in how much you can deposit this way and is no faster than transferring money from a bank account to PayPal, but it still lets you make deposits without visiting a bank or ATM or even having an account with one).

With that in mind, not to mention the company's recent endorsements and incentives to use Green Dot's Moneypak as a way of instantly loading cash into your account, PayPal clearly identified itself as a direct to custom financial institution (complete with debit cards that offer cash back for purchases made using a credit card processing device).

Now the company is going beyond simply cutting out the bank by doing away with the need for a debit card at all. Have a smartphone and a PayPal account? You can shop directly with that – no need for a bank or a card of any sort.

Adding a location-based service to tell you where you can buy sans card offers an added convenience to this simplified financial existence as does enabling pre-approved chain and split transactions for anything from magazine subscriptions (electronic or physical) to monthly bills (my monthly Netflix payment springs to mind as one of the first PayPal-enabled bills I might be see in the future). Since PayPal already also allows you to pay for purchases from eBay, iTunes, Amazon, and other online retailers and to send money to anyone with an email address, the company could manage to replace debit cards for the next generation in the way that debit cards and online banking replaced checks for our generation.

As friction-free as PayPal promises to make out lives (and I'm not knocking these ideas by any means), there is still something comforting about being able to walk into a branch of your bank and have a human able to explain and (hopefully) resolve problems – not to mention the of knowing that a transaction take more than an email address or password because it requires at least your driver's license photo. And, despite all of what PayPal may offer, that may be reason enough to keep your bank in the picture even if it is alongside ubiquitous mobile transactions.

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