PayPal expects to accelerate the adoption of its online payment services in Europe after obtaining a European banking licence.
The licence, granted by the Commission de Surveillance du Secteur Financier (CSSF) in Luxembourg, kicks in on 2 July. As a result of obtaining the licence, PayPal will move its European headquarters to Luxembourg from the UK, a PayPal spokeswoman announced.
Until now, PayPal has operated in Europe as an electronic money issuer, which prevented it from selling its services directly to merchants in individual countries due to regulatory restrictions. Instead, it has had to conduct its European sales efforts in cross-border fashion from the UK.
PayPal's announcement comes about a month after rival Google launched the competing service Google Checkout for merchants in the UK. It also announced it intended roll this out to merchants in other countries. Previously, it had only been available to US merchants. Launched in June 2006, Google Checkout is seen as a viable competitor to PayPal, which was founded in 1998 and acquired by eBay in 2002.
The new licence notwithstanding, PayPal has no plans to offer traditional banking services in Europe, but intends to simply take advantage of its new status to become more aggressive in its direct sales operations, the spokeswoman said.
Despite what it considers a successful run in Europe so far, PayPal sees a big growth opportunity as demand for online payment services increases in the European Union, she added. PayPal began operating in Europe in 2004 and has about 35 million accounts and 100,000 websites there.
PayPal, based in San Jose, California, doesn't have a banking licence in the US, where it instead operates as a licensed money transmitter on a state by state basis.
Jeremy Kirk in London contributed to this report.