PayPal joins Buy Now Pay Later space with US launch of Pay-in-4 repayment scheme

Online payments provider PayPal Inc has become the newest player in the payment instalments game, launching its Pay-in-4 credit platform in the US market this week.

As the name implies, Pay-in-4 is a Buy Now Pay Later (BNPL) offering which allows consumers to pay for their items over four interest-free instalments instead of paying upfront in cash or by adding to their credit card balance.

US customers can use the service on purchases between $30 and $600, paying a percentage deposit with the remainder split into merchant repayments over a six-week period and manageable through the PayPal mobile app.

Like its BNPL rival Afterpay (ASX: APT), PayPal’s newest offering won’t hit customers with interest or any financial add-ons aside from late payment fees.

And the service is automatically included in a business’ existing PayPal pricing, meaning merchants won’t be required to pay additional fees to make it available to customers.

PayPal already offers instalment solutions in Germany and France, as well as a Pay-After-Delivery service in parts of Europe, Canada and Australia.

Its Paypal Credit solution is reported to be the most commonly used BNPL tool on the market.

Strategic launch

PayPal’s strategic launch of Pay-in-4 comes at a time when mandatory COVID-19 isolation requirements and fears over community transmission have seen a boost in online shopping.

Add to that a US consumer base which is increasingly reluctant to use cash reserves or build significant credit card debt and Pay-in-4 could see the digital payments giant add more coin to its swelling coffers.

PayPal Global Credit senior vice president Doug Bland said the timing of the launch could increase PayPal’s dominance in the surging BNPL market.

“In today’s challenging retail and economic environment, merchants are looking for trusted ways to help drive average order values and conversion, without taking on additional costs [while] consumers are looking for more flexible and responsible ways to pay, especially online,” he said.

“With Pay-in-4, we are building on our history as the originator in the Buy Now, Pay Later space, coupled with PayPal’s trust and ubiquity, to enable a responsible and flexible way for consumers to shop while providing merchants with a tool which helps drive sales, loyalty and customer choice.”

Robust platform

PayPal enables merchants to access their payment and commerce needs within one robust platform, while driving increased conversion.

Research shows PayPal Checkout – from the point when a consumer selects a payment type to completion of purchase within the same browsing session – converts 82% higher on average than a checkout without PayPal, while the company’s BNPL products help merchants attract new customers.

Approximately 80% of the top 100 retailers in the US let their customers pay with PayPal, and nearly 70% of US online shoppers have PayPal accounts.

Financial juggernaut

Pandemic-driven online shopping has turned PayPal into a financial juggernaut since the start of the year, posting record revenues of $7.24 billion and profits of $2.05 billion while a ballooning stock price has added $129 billion of market value.

The company is now worth more than Walt Disney Co, Netflix Inc and every US bank except JP Morgan Chase & Co, with one analyst adding “PayPal can grow 18-19% before it gets out of bed in the morning”.

An independent report by US market research firm Forrester found that PayPal is currently offered by 83% of the Top 100 retailers in the US as the digital payment of choice at point of sale.

Consumers also favour the solution, with 64% of those surveyed using their PayPal account within the last three months, compared to competitor products such as Apple Pay (17%), Visa Checkout (13%) and Amazon Pay (12%).

The report found that instalment plan services had lower adoption and familiarity rates than traditional digital payments, with Afterpay and Affirm used by only 1% of respondents in the last three months.

With over 26 million merchant partners worldwide, Mr Bland said Pay-in-4 is expected to buck this trend and achieve widespread acceptance, particularly as the US heads into the costly holiday season.