PayPal moves deeper into the consumer finance market with their announcement today of Pay Monthly, a new option that provides consumers with flexible financing options for larger purchases that are too expensive for the PayPal Pay in 4 BNPL product. PayPal users can use Pay Monthly at any merchant that accepts PayPal today, and can opt for a debit card or direct bank account debit for monthly payments.
“How consumers look to pay for larger purchases is evolving and there is a growing demand for flexible payment options with 22 million PayPal customers using our pay later offering this past year,” said Greg Lisiewski, Vice President of Global Pay Later Products at PayPal. “Pay Monthly builds on our commitment to deliver leading payment solutions that offer customers choice to ensure checkout matches their needs and budgeting preferences.”
Brian Riley, Director of the Credit Services Practice at Mercator Advisory Group adds, “PayPal’s monthly payment option gives BNPL a creative spin. By offering a set of monthly options that extend from 6 to 24 months, it broadly expands the addressable market. Few consumers could shoulder a pay-in-four commitment for $5,000, but when you extend the term to 24 months, can keep the payment below a manageable $300. And merchants can be more confident – the provider is PayPal, not a struggling fintech.”
This is undoubtedly a win for merchants that accept PayPal, as it delivers a longer term financing option for consumers at the same discount rate that merchants pay for PayPal purchases, around 3.49%. While more expensive that a typical credit card purchase, the PayPal Pay Monthly product effectively gives any PayPal merchant the same financing capabilities that were only available to the largest merchants through proprietary retail credit programs, also known as “private label” cards. According to data provided by the company, PayPal has provided BNPL services to over 50% of households with over $125,000 in incomes, with over $14B of loans made since 4Q2020. While the new Pay Monthly product is certainly great for retailers, it remains to be seen if it will perform well for PayPal in this potentially challenging economic environment.
Overview by Don Apgar, Director, Merchant Services Advisory Practice at Mercator Advisory Group
