PayPal is slashing check-cashing fees to help distribute stimulus funds
- PayPal cut its check-cashing fees to let users instantly deposit their incoming stimulus payments, and it's also automatically distributing stimulus funds for users who used the service the first time around.
- The stimulus payments could help digital payment firms like PayPal, as the first round proved successful by boosting platform user count.
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PayPal customers will be able to cash their upcoming stimulus checks free of charge using its cash-a-check feature, per PYMNTS. The firm's cash-a-check feature is only available for PayPal Cash Plus accounts, an all-in-one account that lets PayPal users hold balances, send payments, and shop in-store, and it can be linked to the PayPal Cash Card Debit Mastercard.
The payments giant also said that PayPal or Venmo customers who used its Direct Deposit feature for the first stimulus round will automatically receive their next stimulus payment through the same service, provided they qualify for the payment.
The second round of US stimulus payments is set to come as consumer spending trends downward. The $600 stimulus payments would be half of what was provided in the first round of payments—prompting President Trump to call for a significant boost in payment amount. Meanwhile, President-elect Biden is planning on passing yet another round of stimulus aid as soon as he gets into office in January. Additional stimulus payments will likely help payment providers increase payments volume, as the first round led to a boost in consumer spending earlier in the year.
The second round of payments comes at an opportune time, considering consumer spending has begun to decline. US spending decreased 0.4% on a monthly basis in November, signaling the first drop in overall spending in seven months, according to recent data from the US Commerce Department. The drop in spending might result from the phasing out of federal aid from earlier in the year as well as increased coronavirus cases and subsequent restrictions.
The stimulus payments could help digital payment firms like PayPal and Square, as the first round proved successful by boosting platform user count. Earlier in the year, PayPal and Venmo, Square's Cash App, and Zelle all stepped up to help distribute stimulus funds. Downloads of these apps during stimulus payment disbursement boomed as consumers leaned into the offering: PayPal and Venmo app downloads grew by 2 million and 2.5 million, respectively, from April to May. And now, as PayPal temporarily pauses check-cashing fees, it might further grow its active user base—which has been breaking records all year and currently stands at 361 million globally.
Cash App and Zelle, which both posted user gains this year, could see similar effects if they get involved with stimulus distribution or offer customers incentives. And they could also experience payments volume growth alongside the introduction of another round of stimulus payments, as customers could use those accounts to spend or send funds.
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