FinTech: PayPal Introduces “Pay in 4”, An Interest-Free BNPL Offering

September 1, 2020 | FinTech, News
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With the launch of  Pay In 4 in the U.S., the company expands its suite of Pay Later solutions.

PayPal (NASDAQ: PYPL) is getting into the Buy Now Pay Later sphere as consumers increasingly adopt the product, which is often used as a replacement for a credit card. On Monday, the payments giant announced “Pay in 4,” a short-term installment product that allows consumers to make a purchase and pay for it in four, interest-free installments. (Finovate)

How it works

When a purchaser opts for Pay in 4, the amount of her bill is paid upfront to the merchant by PayPal. The buyer then pays the amount of the bill to PayPal in four installments over six weeks through automatic repayments.  Note that the facility covers purchases in the range of $30 to $600 in value.

The buyer does not pay any additional fees, nor any interest. Even the merchant pays no fees for this funding facility, as it is included in the merchant’s existing PayPal pricing.

The risk of the default rests with PayPal.

Benefits for the merchant

PayPal’s platform results in significantly better business turnover and conversion for merchants claimed the company:

  • Used by over 80% of leading 100 US retailers surveyed
  • PayPal checkout converts 82% higher on average and checkout without PayPal
  • Merchants using PayPal credit saw a 21% increase in sales
  • Consumers are 54% more willing to buy when a business accepts PayPal
  • 25% of people abandon a transaction if a preferred payment provider was not available

COVID-19 a boost for BNPL

The suddenness of the recent economic downturn due to the COVID 19 pandemic caught many consumers on the wrong foot. With rising unemployment, according to Fortune, many consumers had to withdraw up to the hilt on their credit cards. In many cases, customers found that their credit limits had been slashed because of the deteriorating credit ratings.

However, consumers could get a breather with buy-now-pay-later schemes such as now being offered by PayPal.

“We’re continuously monitoring the macroeconomic environment and the implications COVID has had,” Doug Bland, SVP, Global Credit at PayPal, told Fortune. “We’re committed to providing our customers with a range of choices in flexible financing during this time, which is why we’re launching new products like Pay in 4.”

“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,” said Bland in a statement.

Related Story:      Losses Escalate At Swedish Fintech and BNPL Provider Klarna                                             

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