PayPal Debuts Buy Now, Pay Later Feature

Need to Know

• PayPal’s new short-term installment offering is called Pay in 4.
• The company’s buy now, pay later tool allows merchants and partners to get paid upfront, and lets customers pay for purchases between $30 and $600 over a six-week period.
• Pay in 4 is part of PayPal’s suite of Pay Later products, and will launch in the fourth quarter of 2020.

Analysis

As holiday shopping season approaches (believe it or not), PayPal is hoping to encourage more consumers to commit to online purchases with Pay in 4, a new buy now, pay later tool that the company announced on Monday.

Pay in 4, which is part of PayPal’s suite of Pay Later products, allows consumers who are making purchases of between $30 and $600 to pay for those purchases in installments, over a six-week period. Participating merchants, meanwhile, will be paid upfront.

“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,” Doug Bland, SVP of global credit at PayPal, said in a press release announcing Pay in 4.

“At the same time, consumers are looking for more flexible and responsible ways to pay, especially online. With Pay in 4, we’re 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 that helps drive sales, loyalty and customer choice.” 

Customers who use Pay in 4 pay no additional fees or interest, but PayPal will perform some credit evaluation before the use of Pay in 4 is approved. Bland noted, however, that because loan sizes for purchases with a cap of $600 are relatively modest, PayPal expects to approve the majority of applicants.

PayPal, which is used by roughly 80% of U.S. retailers, has been recently focused on offering more flexible payment options to its users. The company allows payments via credit and debit cards, Venmo, alternative payment methods, rewards points, and PayPal Credit, and this flexibility leads to higher conversions for businesses: PayPal Checkout converts at a rate 82% higher than a checkout experience without PayPal. Like the options listed above, Pay in 4 will appear in a customer’s PayPal wallet, meaning payments can be managed directly within the PayPal app.

With the launch of Pay in 4, PayPal joins a growing cadre of companies that are offering buy now, pay later financing options to its merchant partners and customers. The adoption of buy now, pay later tech has escalated during the ongoing COVID-19 pandemic, as individual financial instability combined with an increased volume of consumers shopping online has led to the need for more flexible payment options.

Earlier this month, Citi introduced Citi Flex Pay, which allows consumers to use buy now, pay later financing options when making purchases on Amazon; in June, BNPL field-leader Splitit partnered with Mastercard (Mastercard’s chief competitor, Visa, inked a deal with Splitit earlier this year, as well). Individual merchants are embracing buy now, pay later tech, as well: Fender, H&M and Apple are among those who currently offer BNPL functions to their consumers.

PayPal, which counts more than 300 million consumer and merchant accounts across more than 200 markets, plans to launch Pay in 4 in the final quarter of 2020.