With the more adaptable "PayPal Pay Monthly" service, PayPal broadens the scope of its "pay later" possibilities.

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PayPal Headquarters. Source: iStock Images

PayPal is launching another buy now, pay later offering this morning, after the 2020 launch of its "Pay in 4" payment scheme, after Apple shocked the purchase now, pay later industry by announcing that it would now be a rival to established companies. According to the U.S. payments juggernaut, the new service, PayPal Pay Monthly," is designed to allow users greater flexibility when making payments. Users using "Pay Monthly" can divide the entire cost into monthly payments over 6 to 24 months rather than paying off items over six weeks as they previously had to.

Customers may use the product to make more significant purchases as well.

The new program lets users make purchases between $199 and $10,000, with the first payment due one month after the transaction had completed, in contrast to PayPal's "Pay in 4" program, which allows customers to pay for products between $30 and $1,500 (increased from $600 at launch). Following then, customers will make regular payments until the users pay the total purchase price and interest.

Online consumers will be given a choice to "Pay Monthly" at the checkout to use the service. They will then complete an application after clicking through. If accepted, they will be presented with up to three options, each with a different term and a risk-based annual percentage rate (APR) ranging from 0% to 29.99%. PayPal states that its lender for the service is WebBank and that a consumer's credit eligibility determines the APR.

Customers will evaluate the many possibilities offered to them and select the strategy best fits their financial situation. They can choose to pay back using a debit card or a bank account and keep track of the payments using the PayPal website and app. There are no late fees, similar to PayPal's "Pay in 4" offer. While the "Pay in 4" service, as its name suggests, divides purchases into four installments, the "Pay Monthly" service may provide a customer the choice to pay back the purchase over a 6-month, 12-month, or 24-month period.

In response to studies showing that American online buyers sought greater flexibility when making larger purchases, PayPal decided to broaden its selection of "buy now, pay later" (BNPL) items. It highlighted a recent Morning Consult poll that revealed 79 percent of Americans wanted to establish and follow a budget, and 65 percent of Americans were saving up for a more significant purchase. According to PayPal, this increased demand for a better method of segmenting purchases into more manageable installments.

Greg Lisiewski, vice president of global pay later products at PayPal, said in a statement that the way people look to pay for larger purchases is changing and that there is a rising desire for flexible payment choices. This past year, 22 million PayPal users used our later pay service. He continued to guarantee that customers' requirements and budgeting choices are met at checkout, "Pay Monthly builds on our commitment to creating outstanding payment options that offer customers choice."

Despite competition from companies like Affirm, Klarna, Afterpay (bought by Block), Zip and Sezzle (who merged earlier this year), and others, PayPal currently has an increasing share of the BNPL market. Part of the reason for this is that PayPal is not a new player in the market; when it debuted "Pay in 4" in August 2020, it already had other Pay Later options, such as Easy Payments and PayPal Credit's revolving credit line. Additionally, it has a large user base to promote and millions of merchants that have already integrated PayPal into their websites and applications, reducing the expenses associated with client acquisition that other firms must deal with.

This has aided the business in creating a BNPL presence. Over 105 million global BNPL transactions and over $15 billion in total BNPL payment volume (TPV) have been processed by PayPal since the first quarter of 2020. They have recorded over 50 million BNPL loans and $6.5 billion in TPV since Q4 2020.

The BNPL market is still evolving. Thus the race is not yet over. While digital wallets like PayPal have been growing into installments, some BNPL providers are launching more conventional payment methods. Apple, a competitor of PayPal and a digital wallet, has just entered this industry by integrating its "pay later" feature with a widely used payment service. Regulators are also paying attention to BNPL companies because they are concerned about the number of debt users may accrue by using the pay later choices without fully comprehending the expenses and fees involved with that decision.

According to PayPal, adding the new "Pay Monthly" option as a payment option won't need complicated integration and will be made instantly available for merchants at no additional cost or risk. When offering clients the appropriate Pay Later alternatives and encouraging them to make a purchase, merchants will now have the option of adding their dynamic message.

Consumers will be able to use the service starting today, and it will eventually be made available to all customers in the United States. Millions of PayPal merchants will sell it, like Outdoorsy, Samsonite, Fossil, Advance Auto, and others.

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