Logging in today at PayPal, I was greeted with a full-screen message promoting its debit card (see screenshot below). Note the prominence of the yellow Apply Now button compared to the Go to my account in the lower right. The company has offered a debit card option for more than five years and promotes it from time to time within its site.

Speaking of PayPal, the melodramatic headline on the front page of this month's Bank Technology News grabbed my attention (see upper-left corner of October issue here and inset):

Electronic Payments are a Knifefight.
PayPal's Bringing a Gun.

Evidently, there is at least one headline writer trying to make it look like a major war is brewing between PayPal and the banking industry. Sure, they are a tough competitor, but they also facilitate a large number of profitable credit card transactions that directly benefit issuers. And I don't see how PayPal is any more of a threat now than they were last year, or the year before. 

PayPal is not going away anytime soon. Rather than worrying about the "gun" the company is wielding, banks should be looking for ways to leverage the PayPal payments platform. For example, recent Facebook apps such as Geezeo's iWant (coverage here) or ChipIn (coverage here).