Everything You Need to Know about PayPal Buy Now Pay Later [aka PayPal Pay Later]

Picture this. You’re casually browsing the Bed Bath & Beyond online 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 a 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.

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

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

No wonder, American consumers used BNPL for purchases worth a whopping $16.6 billion in the 2023 holiday season—a 14% increase YoY. 

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. Pay in 4 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 PayPal Pay Later’s convenience, flexibility, and interest-free payments while merchants enjoy upfront payments, more sales, and increased customer loyalty.

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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, Apple, etc. 

Pay in 4

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

The best part? These installments are entirely interest-free and have no fees associated with them.

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 ranges from 9.99 to 35.99% depending on the shopper’s creditworthiness).

Here’s how the two compare:

	Pay in 4	Pay Monthly
Number of installments	4	6, 12, or 24
Frequency of payments	1st payment at the time of purchase, then every 2 weeks	Monthly
Suitable for	Smaller purchases—$30 to $1500	Larger purchases—$199 to $10000
Fees	No sign-up or late fees	No sign-up or late fees
APR	0%	9.99 to 35.99%*
Credit check requirements	Soft credit check required for certain customers; no impact on credit scores	Subject to consumer credit approval
Repayment method	Confirmed bank account, credit card, or debit card	Confirmed bank account or debit card
Purchase protection	Included	Included

*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 quite straightforward. Merchants using Stax for their payment processing needs can easily add PayPal buttons on their sites, allowing them to accept Pay Later payment options. For others, here’s a step-by-step guide to setting up Pay Later:

1. Sign up to 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 payment plan in Pay Later, PayPal conducts a credit check (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 (e.g. Missouri, Nevada, etc.)
• 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 and not worry about hefty interests racking up. 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.

Benefits of PayPal Pay Later
For Merchants	For Consumers
Integration with PayPal’s existing services	Convenience and flexibility in payments
Increased sales and average order values	Interest-free installments
Upfront payments	Enhanced purchasing power

Drawbacks and Considerations

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

• Online only. Almost every other Buy Now Pay Later program (Klarna, Afterpay, Affirm) is available for online and in-store shopping. However, PayPal Pay Later works for online purchases only.
• 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. Although there are no fees for missed payments, late payments, insufficient funds, etc., 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.

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 Pal Later easily available to your customers. To learn more, contact us today and request a consultation.

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