PayPal enters Australian buy now, pay later space

PayPal BNPL Australia buy now pay later
PayPal is launching its Pay in 4 platform in Australia to rival local BNPL giant Afterpay.

Global online payment giant PayPal is joining the Australian buy now pay later (BNPL) market, going up against local rival Afterpay (ASX: APT) with the launch of its ‘Pay in 4’ credit platform.

In an announcement on Wednesday, the Nasdaq-listed giant said its BNPL solution will be available to its 9 million Australian customers in early June, ready for use by the end of financial year sales.

PayPal launched its BNPL platform in the US market last September, and its entrance in the Australian market is a sign of the growing competition in the space.

PayPal’s biggest rival in Australia would be $33 billion Afterpay, which has grown swiftly since listing five years ago.

Next in line is $4.7 billion Zip Co (ASX: Z1P), which has also been rising up the ranks particularly in the last year.

Other players in the Australian BNPL space include Sezzle Inc (ASX: SZL), Splitit Payments (ASX: SPT), Openpay Group (ASX: OPY) and Humm Group (ASX: HUM), plus a few smaller scale providers including ASX newbies Laybuy Group Holdings (ASX: LBY) and US-focused Zebit (ASX: ZBT), which hit the boards late last year.

PayPal’s merchants will not pay more for BNPL platform

As the name suggests, PayPal’s Pay in 4 scheme allows customers to pay off items in four equal instalments. Customers can borrow up to $1,500 in a single transaction, which is interest-free. Although PayPal charges fees for missed payments like other BNPL platforms.

The service is expected to be available at checkout as a payment option in the PayPal wallet and businesses will be able to show the option on their websites.

It will not cost merchants any more to offer Pay in 4, as the service is already accounted for in its existing fees paid to PayPal. This is what will likely make it competitive with other BNPL operators, which typically charge a bit more.

PayPal has posted rapid growth in the US BNPL market since launching last year and said this expansion is in response to strong demand from Australian customers.

“Our Australian business customers have been requesting buy now pay later functionality from us, and we’re excited that we can offer PayPal Pay in 4 to them at no additional cost,” PayPal Australia general manager of payments Andrew Toon said in a statement.

“During the pandemic we saw more than 2 million Australians start shopping online for the first time. We will continue to support Australian businesses of all sizes to adapt to rapidly changing consumer behaviours by evolving our service to meet their needs,” he added.

As well as the US, PayPal already offers payment instalment solutions in Germany, France and the UK.

Afterpay prepares for European launch

When PayPal first announced its BNPL products last year, Afterpay downplayed the threat with chief executive officer Anthony Eisen telling media that the two companies’ platforms were sufficiently different and that competition from traditional and newer players “will not change our strategy or diminish our global opportunity”.

The news is yet to dampen Afterpay, which was still trading 7.4% higher in afternoon trade on Wednesday on its announcement that it had completed its acquisition of Pagantis in preparation for its expansion into Europe.

Although, it is worth noting Afterpay shares had already fallen sharply in recent days seemingly in response to rising bond yields.

Pagantis was acquired by Afterpay’s European subsidiary Clearpay, which expects to go live with its services initially in Spain, France and Italy.

The Australian giant first announced its intentions to expand into Europe last August, to “capitalise on strong consumer and merchant demand and to increase its global footprint”.

“Entering into such internationally relevant markets like the US and the UK and seeing our growth outpace what we experienced in our more mature Australian market, validates the appeal of our product on a global scale,” Mr Eisen said at the time.

“Acquiring Pagantis provides us with the necessary regulatory licencing, resourcing and infrastructure to expedite the launch of Afterpay into key countries in Southern Europe and beyond.”

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