- Global payments giant PayPal is joining the competitive buy now, pay later (BNPL) fray in Australia with plans to roll out its own “Pay in 4” service in June
- The tech company’s BNPL service will roll out to over nine million PayPal Australian accounts, offering interest-free payment instalments for purchases between $50 and $1500
- Importantly, the service will be integrated into PayPal’s existing secure payments platform with no added cost to businesses
- This means any business already offering PayPal’s services to consumers will be able to offer Pay in 4 at no added cost
- PayPal will charge a capped $10 late fee on missed payments for purchases under $125, while purchases over $125 will cop a $10 fee for each missed payment, capped at $30
- The Australian launch comes after PayPal launched the service across the U.S. last year, bagging 45 million BNPL customers in just six months
- Though Pay in 4 poses a direct challenge to current market leaders like Afterpay and Zip Pay, today’s market reaction to the news has been mixed
- Zip shares are lower by 4.21 per cent to $8.41 per share in early afternoon trade, but Afterpay shares are surging 7.71 per cent higher at $115.45 per share
Global payments giant PayPal is joining the competitive buy now, pay later (BNPL) fray in Australia with plans to roll out its own “Pay in 4” service in June.
The company announced today the BNPL service will roll out to over nine million PayPal Australia accounts, offering interest-free payment instalments for purchases between $50 and $1500.
The service will be integrated into PayPal’s existing secure payments platform, with consumers able to easily access the Pay in 4 service through a digital button that will appear at checkout in their PayPal wallet.
Business can also present Pay in 4 as a distinct payment option on their website.
Importantly, PayPal will not charge any additional fees to merchants letting consumers pay with the new BNPL service. This means businesses already offering PayPal as a payment option to consumers can integrate the new payment method into their checkout system completely free of charge.
PayPal Pay in 4 will split purchases into four payments automatically drawn from accounts every two weeks. Like its competitors, PayPal will only charge consumers a fee if payments are missed.
For purchases under $125, consumers will cop a single $10 late fee for missed payments. For purchases over $125, PayPal will charge $10 per missed payment for up to three payments, capping the total late payment fees at $30.
PayPal Australia General Manager Andrew Toon said the COVID-19 pandemic saw more than two million Australians start shopping online for the first time, signalling an unprecedented change in consumer shopping habits.
“Australian consumers are looking for more choice and flexibility and PayPal Pay in 4 gives them yet another way to purchase securely using PayPal,” Andrew said.
“PayPal’s digital wallet is the only solution that provides multiple ways to pay all in the one place — instantly with debit or credit card; 21 days later with our Pay After Delivery option; and now in four interest-free instalments using PayPal Pay in 4,” he explained.
“Our Australian business customers have been requesting buy now pay later functionality from us, and we’re excited that we can offer PayPal Pay in 4 to them at no additional cost.”
The Australian launch comes after PayPal launched the service across the U.S. last year, bagging 45 million BNPL customers in just six months.
Fierce BNPL competition
PayPal’s launch into the Australian buy now, pay later space challenges the likes of Afterpay (APT) and Zip Co (ZIP), which currently dominate the payment instalments market, for a share of the lucrative market.
But given PayPal’s strong presence in Australia as a secure payments business, the tech giant is hoping to gain an edge over its competitors by offering some unique services to its existing customer base.
Firstly, PayPal’s existing standard fee for a business making a sale through the PayPal platform is 2.6 per cent and a 30-cent transaction fee.
For comparison, Afterpay’s fee is reported to be a similar 30-cent transaction fee but with a commission between 3 per cent and 7 per cent based on the size of the business customer.
So, not only is PayPal’s tech already being used by major businesses across the country, its BNPL service looking to be slightly cheaper to use than the current BNPL market leaders.
On top of this, PayPal business customers also have the option to add Pay in 4 messaging services to their site, which will break down the instalment payments in real-time as the customer browses through different products.
This way, the consumer knows what each fortnightly payment will be before even reaching checkout.
How has the Australian BNPL sector reacted?
While the PayPal BNPL service poses a direct challenge to the company’s biggest buy now, pay later business, there has been a mixed reaction to the news on the ASX today.
As expected, Zip Co has fallen on the PayPal news, down 4.21 per cent to $8.41 per share in early afternoon trade. However, at the same time, Afterpay is riding the momentum from a stellar tech rebound on the NASDAQ overnight and sitting a neat 7.71 per cent higher at $115.45 per share.
Meanwhile, smaller competitor MoneyMe climbed almost 3 per cent by midday but quickly reversed its gains to trade 0.69 per cent in the red at $1.44. Openpay is teetering slightly green, up 0.8 per cent at $2.51.