Indeed, it’s the magic that made PayPal what it is today. Back when it was x.com, they were trying to figure out how to avoid being a bank, and they did it wit

Indeed, it’s the magic that made PayPal what it is today. Back when it was x.com, they were trying to figure out how to avoid being a bank, and they did it with something that violated credit card merchant agreements: by crediting accounts without correlated purchases (you can still do this today, depending on your card processor I think). That got noticed, so they just started holding the money instead. I never figured out how a company that holds your cash with exclusive rights to do anything they want with it has avoided banking regulation.