How PayPal is Going to Let You Buy Now and Pay Later

How PayPal is Going to Let You Buy Now and Pay Later

The last couple of years have seen a huge increase in the number of e-commerce transactions carried out, with an expected growth rate of over 16% in 2020 following on from 20.2% in 2019. Among the big names that are benefitting from this shift in how we shop is PayPal, so how could their recent announcement of a buy now pay later (BNPL) service affect this market?

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What Is Going to Change?

The number of BNPL services on offer around the globe has increased dramatically in 2020. This way of spreading out payments over a number of interest-free instalments has been a success, with PayPal joining the companies now offering the chance to pay like this.

This new payments scheme was announced in August and it is called “Pay in 4”. Initially to be rolled out in only the US, it will split out purchases of between $300 and $600 over four interest-free payments across six weeks.

Doug Bland is the senior vice president in charge of PayPal’s global credit division. He said that consumers are now searching for “more flexible and versatile ways to pay”, especially when purchasing goods on the internet.

The cost of the scheme won’t be passed onto merchants, and PayPal will also handle the credit risk associated with this sort of payment plan. In practice, this means that the retailer gets paid the full cost upfront and the consumer doesn’t pay anything extra provided that each instalment is paid on time.

Each of the four payments will be deducted automatically, while the account-holder will be able to see the instalments plan in the PayPal mobile app. It isn’t yet clear whether the success of this scheme in the US will lead to it being rolled out in Europe and elsewhere.

“Send money online with PayPal” (CC BY 2.0) by Monito – Money Transfer Comparison

What Could This Mean for PayPal?

PayPal has been a massive success since its launch in 2002. They currently have close to 300 million active users and the average user completes over 30 transactions each year. Yet, the digital payments and electronic wallet market has become more crowded in recent years, with the likes of Skrill, Neteller, and Revolut all now jostling for space.

PayPal is popular for other uses as well as for making online payments. For example, it is possible to use PayPal to take advantage of offers when signing up at an online casino, with Jackpot247, Leo Vegas and Roxy Palace among the casinos that accept this banking method. Rivals such as Skrill and Neteller can also be used in this way.

Customers can also link their bank cards to their PayPal account, for a greater sense of security. However, some people may feel that the rise in popularity of cryptocurrencies has opened up an attractive alternative that offers almost complete anonymity when spending online. Therefore, this new initiative could help them to stand out from the crowd once again.

The move towards offering a BNPL scheme could help PayPal to retain its place as the best-known e-wallet in the world. With competition in this industry heating up, this could turn out to be a smart move that leads to other companies in this sector following suit.