Why does PayPal need your bank information when you will be paying with your credit card?

Answer 1

The logic of why it is relevant may be flawed with the innovation of online banking, but the reason if for personal verification. Let me explain. In the financial industry the credit/debit card is the most stolen piece of information. It is a big threat for e-commerce businesses. PayPal works in multiple ways to achieve their goal but one is creating a profile to insure that you are real and you are you. Years ago they had a certain spending limit of how much you use to through the system before adding a bank account. The reason for the bank account serves for a couple of reasons for paypal. One is when you normally create a bank account you have to do it in person, along with a social security number and other forms of verification. By utilizing what your bank already performed per banking law they can assume that you are real. The second is that there are almost no processing fees for certain bank transactions. This was their model which eliminated a lot of fraud. However like I said the model may not be relevant anymore because you can create a bank account online within 24 hours.

Answer 2

There are certain levels of precautions they need to take before they allow people to pay by credit card, as paypal is a middleman of sorts - if someone were to steal a card and use it to pay, paypal is then stuck in the middle of the innocent victim, the vendor, and the bank. By asking for additional details as well as a bank account, it's less risk on their part and lets them recover funds more easily if needed.