PayPal, the well-known digital wallet service provider, has made a noteworthy move into the Buy Now, Pay Later (BNPL) market space in 2021 with the launch of its new feature. This innovative service allows customers to split their purchases into several interest-free installments through PayPal, making larger purchases more accessible and affordable.
With the introduction of this feature, PayPal has made a significant entry into the BNPL market, which has been gaining popularity in recent years. By seamlessly integrating this service within its digital payments platform, PayPal has witnessed a surge in user adoption.
Customers can now make purchases with greater flexibility and control over their finances, which has become increasingly important in today’s world. As a result, “Buy Now, Pay Later has rapidly become a popular choice among shoppers, who are looking for a more manageable way to pay for their purchases.
What is PayPal BNPL
“Buy Now, Pay Later” offers two repayment plan options for customers. The first option, “Pay in 4”, is ideal for purchases that range between $30 to $1,500 and allows customers to split their payments into four bi-weekly installments. This option provides flexibility for customers who need to make more enormous expenditures that can be paid off over a period of 6 to 8 weeks.
The second option, “Pay Monthly,” offers 0% financing for purchases ranging from $199 to $10,000, which can be repaid over a period of 6, 12, or 24 months. Late fees are waived, thus giving customers flexibility if they miss a payment. Using “Buy Now, Pay Later” is simple and easy for customers.
They must select it at checkout when shopping at any of the 300,000 participating merchants. Eligibility for the service is determined in real time, and there is no need for a lengthy credit application. Once approved, customers can instantly split their purchases into installments, billed to their PayPal account.
BNPL Protections
Besides providing interest-free financing, “Buy Now, Pay Later” offers PayPal’s purchase protection, ensuring customers receive their items as described. PayPal’s Seller Protection also insures against unauthorized charges, providing further security for customers.
These added shields set this feature apart from other BNPL providers that lack integrated payment platforms. This payment option increases sales for merchants by making larger purchases accessible to more budget-conscious shoppers. Integrating seamlessly with PayPal payments simplifies customer checkout, thus reducing cart abandonment rates.
How significant is Buy Now Pay Later (BNPL, aka PayPal Pay later) for PayPal?
The short answer: it's not very significant in 2022.
However, their CEO called BNPL "probably one of the most successful things we’ve ever launched."
He might be right. Here's why.👇🏽
💵 WHAT… pic.twitter.com/SkhCoJExuJ
— Crossroads (@Kross_Roads) September 11, 2023
Early data shows that BNPL use increases average cart sizes by 27%. Merchants pay no additional fees and receive completed installments directly in their PayPal accounts. PayPal’s existing relationships with over 25 million merchants and 400 million customers worldwide give it an edge over standalone BNPL upstarts.
This option benefits from PayPal’s vast scale and established trust as the leading digital wallet. Leveraging this existing user base and partnerships will accelerate the adoption of Buy Now, Pay Later. To expand its reach further, PayPal is exploring the possibility of increasing its eligibility.
When assessing risk, one approach is analyzing alternative data like utility bill payment histories and social media payments. This could onboard more younger users who are typically declined by credit-based assessments. The mobile payment platform also plans to offer longer and larger installment plans up to $30,000 repaid over 60 months.
This will cater to more oversized ticket items like home renovations or solar panel installations and expand Buy Now, Pay Later‘s addressable market. Looking ahead, the virtual payment system might introduce interest charges on longer-term plans to generate revenue.
@ecommerin Did you know that the former founder of PayPal is also the mastermind behind the Buy Now, Pay Later movement. Despite being worth milliones, founder Max Levchin started his BNPL company Affirm after being denied a new car due to poor credit. Watch now to learn how he scaled the business to become a $4 billion powerhouse in online payments. #entrepreneurship #buynowpaylater #affirm #maxlevchin #paypal #shopping #founderstory
However, initially, the focus remains on gaining market share through a consumer-friendly 0% interest value proposition. If successful, Buy Now, Pay Later could fundamentally change how PayPal generates profits in the coming years.