Quick Verdict
PayPal (PYPL) is generally considered NOT COMPLIANT due to its credit products, BNPL (Buy Now Pay Later) services, and interest-bearing financial offerings. Unlike Visa/Mastercard which are pure network operators, PayPal directly offers consumer credit and earns interest income.
PayPal's Business Model
PayPal earns revenue through several channels:
- Transaction fees: Cut of every payment processed (~70% of revenue)
- PayPal Credit / Pay Later: Interest and fees on consumer credit (~15%)
- Braintree: Payment processing for businesses
- Venmo: Peer-to-peer transfers with monetization features
The PayPal Credit and Pay Later products are where the Islamic finance problem lies. These products explicitly charge interest to consumers who carry balances.
Financial Screening
- Debt / Market Cap: ~6% ✅
- Interest Income / Total Revenue: ~8-12% ❌ (exceeds 5% threshold)
- Business Activity: Consumer lending and BNPL — ❌
This is why PayPal fails where Visa might have a debate — PayPal's interest income from its own lending products exceeds the 5% revenue threshold, making it a clearer-cut exclusion.
The BNPL Question
Buy Now Pay Later products are a growing area of Islamic finance concern. The key question is: does BNPL charge riba? It depends on the structure. Zero-interest BNPL (where the merchant subsidizes installments) may be permissible. Interest-charging BNPL is clearly not. PayPal charges interest on many of its BNPL and Pay Later products.
Screening Agencies' Verdict
- Zoya App — Not Compliant ❌
- MSCI Islamic Index — Excluded ❌
- Most halal ETFs — Not held ❌
Bottom Line
PayPal's direct involvement in consumer lending and its meaningful interest income make it a clearer exclusion than Visa or Mastercard. If you're looking for fintech exposure, consider companies focused on pure payment processing, digital wallets, or infrastructure without consumer credit products.
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