PayPal has released an upgrade designed to buy now, pay later (BNPL), offering more attractive amidst stiff market competition.
The payments giant announced that it is expanding its service with a new Pay Monthly plan, which will allow US customers to spread payments over periods of up to 24 months.
The service is available for purchases valued anywhere between $199 and $10,000, with interest rates ranging from 0% to 29.99% APR, depending on the length of the payment plan.
The Battle for the BNPL
The BNPL market launched into the spotlight earlier this month when Apple revealed plans to enter the space with its pay later program, which will give customers a way to split any Apple Pay payment into four installments.
Given the size of Apple’s install base and the ubiquity of Apple Pay-enabled online payment systems and POS terminals, the company looks set to grab a sizable share of the market.
In the face of competition from Apple, PayPal moved to differentiate its service with much longer payment plans. Apple requires users to pay off BNPL loans (up to $1,000 in value) within six weeks, while PayPal now offers a two-year term and supports much more expensive purchases.
However, there is significant concern from some sectors about the long-term impact of BNPL on personal finances, particularly those of younger and less tax-savvy buyers. The concern is that the wide availability of BNPL encourages frivolous purchases that shoppers cannot afford, trapping them in a spiral of interest payments and lowering their credit rating.
However, PayPal sees the situation differently, choosing to emphasize the flexibility that BNPL offers shoppers amid severe inflation and a sharp rise in the cost of utilities.
“As the macroeconomic environment continues to evolve, consumers are looking for ways to stretch their finances and gain greater control over their purchases,” said Apur Shah, who leads BNPL at PayPal.
“There is no one size fits all when it comes to shopping – and the same goes for the buy now, pay later industry. We believe that having a complete portfolio of BNPL plans – in addition to our PayPal Credit revolving credit product – allows consumers more choice to select the option that best fits their preferences and budget needs.”