PayPal ‘Pay in 4’ directly tackles buy now, pay rivals later | Payments Source

Responding to the success of its competitors in the “buy now, pay later” (BNPL) segment, PayPal launched a short-term installment loan product called “Pay In 4” to expand its Pay Later product suite.

PayPal’s Pay in 4 solution allows customers to pay for purchases between $ 30 and $ 600 over a six-week interest-free, zero-fee period in four installments, with automatic refunds (late fees apply if a customer missing a payment). Pay in 4 will be available to consumers on qualifying purchases at the start of Q4 2020.

The product deviates from the main PayPal credit BNPL installment product, which allows consumers to take out loans for a fixed term, typically for purchases over $ 99 for periods of three to 12 months. PayPal credit is also often sold with promotional interest rates of 0% over six month periods. This expansion is a broad recognition of the growing popularity of BNPL solutions, particularly among Generation Z and millennium consumers as well as expanding beyond traditional installment loans.

“In today’s challenging economy and business environment, traders are looking for reliable ways to help increase average order values ​​and conversion, without incurring additional costs,” said Doug Bland, SVP, Global Credit at PayPal, in a press release. At the same time, consumers are looking for more flexible and responsible means of payment, especially online. With Pay in 4, we are building on our history as the creator of the buy now, pay later space, coupled with the trust and ubiquity of PayPal, to empower consumers to shop responsibly and flexible while providing merchants with a tool that helps drive sales, retention and customer choice. “

The Pay in 4 product is for consumers who want to finance a purchase that may exceed their current purchasing capacity, but do not want to take on credit card debt or have a long-term financial commitment. Many consumers who use these deferred charge programs, such as the one offered by Afterpay in Australia, will see future payments made from their debit card. After payment reported that 89% of its US customers have their fees associated with a debit card.

Separate it, another BNPL provider, uses an existing customer’s credit card to finance a purchase, charging installments to the customer’s card over a short period of time.

A version of PayPal’s Pay in 4 solution is currently marketed in France under the name “Payment in 4”, where it was launched in July targeting small and medium businesses. The French product charges merchants for 2.1% of the transaction and requires the business owner to pay 25% of the purchase up front, with the remaining 75% billed in three monthly installments.

PayPal did not provide details of the fees paid by the merchant except indicating that they are included in the merchant’s existing PayPal pricing. Pay in 4 allows the merchant to be prepaid for customer purchases, less PayPal fees, without taking additional risk as they are supported by PayPal.

PayPal standard pricing and PayPal Checkout for US merchants is 2.7% of the transaction amount for in-store transactions and 2.9% plus a flat fee for online transactions when receiving funds from an account PayPal based in the United States. The fee is 4.4% of the transaction plus a fixed currency-based fee for online purchases, and 4.2% of the transaction for in-store purchases when funds come from a non-PayPal based account. in the USA.

The challenge facing PayPal is that the deferred debit segment of the BNPL market is experiencing dramatic global growth. Despite Pay Pal Having its best quarter this year since its IPO, it is under strong competitive pressure from foreign rivals in the US and overseas for the BNPL market. Earlier in August, Afterpay expanded to Canada and acquired Pagantis to expand into France, Italy and Spain with the aim of facing the industry pillar Klarna.

It was not until 2018 that After payment landed on the American coast. Originally designed to serve the e-commerce channel, After payment has redesigned its app to respond to in-store transactions from July. Since launching two years ago, Afterpay has built an active customer base of 5.6 million consumers in the US and launched in the UK in 2019 where it has built a base of 1 million active consumers. .

Likewise, Swedish Klarna, which also operates in the United States, started offering traditional installment loans and also added a four-payment deferred fee solution to its product line in recognition of consumer demand. Klarna Now offers American consumers three distinct products that provide 30-day full repayment, four interest-free payments, and six- to 36-month loans.

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