PayPal BNPL solutions: Everything you need to know about PayPal Buy Now Pay Later [aka PayPal Pay Later]

Picture this. You’re casually browsing an online furniture store when you suddenly come across a fantastic offer on a lounge chair you’ve been eyeing for a while.

Unfortunately, your primary credit card is maxed out, and there’s slim wiggle room on the other. The offer is too good to pass up, and you likely won’t see it again for a while.

But what if the retailer allows you to make a small down payment and pay the rest in equal installments over time?

That’s the offer of Buy Now Pay Later (BNPL) plans.

Highly popular among today’s shoppers, data from JD Power shows that 37% of all consumers have used BNPL in the past 90 days. The numbers are even higher among those under forty: 50% of consumers in this group used Buy Now Pay Later in the past 90 days.

In this article, we’ll explore PayPal’s Buy Now Pay Later service (PayPal Pay Later) and see how it benefits consumers and merchants alike.

Let’s dive in.

TL;DR

• PayPal Pay Later is PayPal’s BNPL program for online shopping with large retailers like Best Buy, Home Depot, Target, Apple, etc. The “Pay in 4” plan  enables shoppers to pay in four equal, interest-free payments, while Pay Monthly allows customers to make 6, 12, or 24 monthly payments.
• Implementing Pay Later at your ecommerce store is quite straightforward. Sign up for PayPal Business, set up PayPal Checkout, and enable dynamic messaging, or simply leverage Stax’s PayPal integration.
• The increasing popularity of BNPL payments is proof that they offer several benefits. Customers can enjoy the convenience, flexibility, and interest-free payments of PayPal Pay Later, while merchants enjoy upfront payments, more sales, and increased customer loyalty.

What is PayPal Buy Now Pay Later?

PayPal Pay Later is PayPal’s Buy Now Pay Later program for online shopping with large retailers like Best Buy, Home Depot, Target, and Apple.

Pay in 4

The Pay in 4 program enables shoppers to pay for a purchase in four equal installments—the first is the down payment, and the remaining three are paid over six weeks (every 15 days).

Pay Monthly

PayPal Pay Later also includes a monthly financing option called Pay Monthly, allowing customers to split their payments into 6, 12, or 24 monthly installments. However, this service isn’t interest-free. APR varies based on creditworthiness and current rates (check PayPal for the latest terms).

Here’s how the two compare:

*Can be interest-free for an additional cost

How to use PayPal Buy Now Pay Later

Implementing PayPal Pay Later at your ecommerce store is easy. Merchants using Stax for their payment processing needs can easily add PayPal buttons on their sites, allowing them to accept Pay Later payment options. Please note that merchants will need to go through underwriting with PayPal, which Stax will help facilitate. For others, here’s a step-by-step guide to setting up Pay Later:

1. Sign up for PayPal business. Merchants need a PayPal business account to offer the Pay Later option at checkout. If you only have a PayPal personal account, you’ll have to upgrade to a business account first.
2. Set up PayPal Checkout. Next, connect your online store to your PayPal account. You may also configure your custom PayPal Checkout once you have verified it’s the latest version.  
3. Activate dynamic messaging. Remember to enable PayPal Pay Later’s dynamic messaging so customers can be notified of promotional offers when they browse your store.  

For consumers

Using PayPal BNPL is as easy as:

• Choosing PayPal as your payment method at checkout.
• Selecting the payment option (Pay in 4 or Pay Monthly) you prefer.
• Choosing an installment plan (if you selected Pay Monthly in the previous step)
• Making the rest of the payments per schedule using autopay—from the PayPal app or online.

Application and approval process

Note that when a shopper applies for a Pay Later payment plan, PayPal conducts a credit check (a soft check for Pay in 4 customers). The decision comes through in seconds, and once approved, the shopper can proceed further. Decisions are based on proprietary and credit bureau data.

Eligibility criteria for consumers

To be eligible for Pay Later, a customer must fulfill the following requirements:

• Be at least 18 years of age
• Hold a PayPal account (or open one)
• Should not reside in a state where PayPal Pay Later isn’t available
• Ensure that the merchant and the product are both eligible for the offer

Benefits of using PayPal Buy Now Pay Later

The increasing popularity of BNPL payments is proof that they offer several benefits. Pay Later, in particular, provides the following advantages.

For consumers:

• Convenience and flexibility in payments. PayPal Pay Later allows consumers to shop from their favorite brands without breaking the bank. It makes purchases more affordable by enabling them to split payments over several weeks or months.
• Interest-free installments. Pay in 4 is interest-free, so consumers can have peace of mind without worrying about hefty interest charges. Pay Monthly can also be converted to an interest-free option for an additional cost.
• Enhanced purchasing power for consumers. Customers can afford to make more purchases when payment terms are more flexible. Breaking up payments over time certainly makes things easier.

For merchants:

• Integration with PayPal’s existing services. With a PayPal business account, merchants can easily set up PayPal Checkout (and Pay Later) without purchasing any additional services.
• Increased sales and order values. The flexibility in payments drives more conversions and boosts customer loyalty.
• Upfront payments. Merchants get paid in full when an order gets processed. PayPal handles the billing, resulting in fewer headaches.

Drawbacks and considerations

All said and done, Pay Later has its fair share of drawbacks. Let’s take a look.

• Primarily used online. While PayPal Pay Later is increasingly expanded to in-store sellers, it’s primarily geared toward online purchases.
• Potential for overspending and debt accumulation. The flexibility of BNPL payments can tempt customers to shop more. If you’re not careful, you may spend a lot more money than you can afford to repay. If you fall behind, PayPal may send you to collections.
• Impact on credit scores. As mentioned above, PayPal Pay Later can lead to overspending and debt accumulation. This is even more concerning because an escalation in debt collection activity can negatively impact a customer’s credit score.
• Fees and penalties for late payments. PayPal may not charge late fees for some plans, but policies vary and users may still incur bank or interest charges. Customers should ensure their bank account has sufficient balance. If these payments end up overdrawing the account, they will be liable to pay overdraft fees. If they use a credit card for repayment, they should always pay the installments in full to avoid any interest accruing.

Expand how your customers can pay with Stax + PayPal

With Stax, you can add PayPal to your checkout, giving customers access to PayPal, Venmo, and Pay Later options alongside traditional card payments.

This enables you to provide a more versatile checkout experience that works across devices and meets customers wherever they prefer to pay.

One integration, multiple payment methods

Instead of stitching together different tools, you can offer a range of payment options through a single setup. From digital wallets to installment payments, everything runs through a unified checkout designed to reduce friction and keep transactions moving.

You also get access to features like fast funding, built-in fraud safeguards, and PayPal’s purchase protections on eligible transactions

Final words

PayPal Pay Later may not be suitable for everyone but it can be very convenient for customers who aren’t eligible for other lending such as loans or credit cards. It can also be a great short-term, no-cost borrowing option if they need to buy something urgently but don’t have the funds to cover it immediately.

Making this payment option available to your customers can be a great way to increase sales while boosting customer loyalty and retention. Stax allows you to benefit from our PayPal integration, so you can make Pay Later easily available to your customers. To learn more, contact us today and request a consultation.

Quick FAQs about PayPal Pay Later

Q: What is PayPal Buy Now Pay Later, and how does it work?

PayPal Buy Now Pay Later is a payment service that allows consumers to make a purchase and pay for it over time. It offers two main options: Pay in 4, which splits the cost into four interest-free payments, and Pay Monthly, which divides the cost over 6, 12, or 24 months with interest. This service is available with major retailers like Best Buy, Home Depot, and Apple, among others.

Q: How does Pay in 4 differ from Pay Monthly in PayPal’s BNPL service?

Pay in 4 allows customers to break down their payment into four interest-free installments, suitable for purchases between $30 to $1,500. On the other hand, Pay Monthly is designed for larger transactions ranging from $199 to $10,000, with interest rates varying from 9.99% to 35.99% based on creditworthiness.

Q: What are the eligibility criteria for using PayPal Pay Later?

To be eligible, users must be at least 18 years old, have a PayPal account, and reside in a state where PayPal Pay Later is available. Additionally, the merchant and product must qualify for the offer. A soft credit check may be conducted for Pay in 4, which does not affect the credit score.

Q: What are the benefits of using PayPal’s Buy Now Pay Later for consumers?

The service provides convenience and flexibility, allowing consumers to manage their budgets better through staggered payments. Pay in 4 offers interest-free installments, and Pay Monthly can also be interest-free for a fee. This enhances purchasing power and makes it easier to afford more significant purchases.

Q: How can merchants implement PayPal Pay Later on their ecommerce sites?

To offer PayPal Pay Later, merchants need a PayPal business account. They should set up PayPal Checkout on their online store and activate dynamic messaging. Integrating with existing services like Stax can simplify the process, allowing the addition of PayPal buttons for easy access to Pay Later options.

Q: What are the potential drawbacks of using PayPal Pay Later?

While convenient, PayPal Pay Later is only available for online purchases, which limits its use compared to other BNPL services that work in-store. Additionally, the ease of use can lead to overspending and possible debt accumulation, which may negatively impact credit scores if not managed responsibly.

Q: Are there any fees associated with late payments in PayPal Pay Later?

While PayPal does not charge fees for missed or late payments directly, users must ensure sufficient funds in their accounts to avoid overdraft fees from their banks. If using a credit card for repayment, it’s advisable to pay off installments in full to prevent interest charges.

Q: How does PayPal ensure the security of transactions made through Pay Later?

PayPal includes purchase protection for transactions made using Pay Later. This means consumers are safeguarded against unauthorized transactions and can dispute charges if necessary. Merchants also benefit from receiving upfront payments, reducing the risk of financial losses.

*About Pay in 4: Loans to CA residents are made or arranged pursuant to a CA Financing Law License. PayPal, Inc. is a GA Installment Lender Licensee, NMLS #910457. RI Small Loan Lender Licensee. 

*Pay Monthly is subject to consumer credit approval. Term lengths and fixed APR of 9.99-35.99% vary based on the customer’s creditworthiness. The lender for Pay Monthly is WebBank. PayPal, Inc. (NMLS #910457): RI Loan Broker Licensee. VT Loan Solicitation Licensee.

Eric Simmons

Eric Simmons is a growth marketing and demand generation expert serving as the Senior Director of Growth Marketing at Stax.

During his tenure here, Eric has been instrumental in propelling the company's remarkable growth, leveraging his expertise to achieve substantial milestones over the past 6 years.
His expertise covers full-funnel demand generation strategy and marketing operations across various channels.

Eric holds an MBA and BBA from Rollins College.