Celebrating the holidays is important to many consumers, but it can also be a source of financial stress. To help ease that burden, PayPal is expanding the capabilities of its buy now, pay later program and introducing cash back rewards on BNPL purchases.
The company launched its pay-in-four installment loans five years ago and added monthly payment options a few years later. Until now, these BNPL offerings were limited to e-commerce transactions. Going forward, PayPal will extend the functionality to include in-store purchases made through its installment plans.
As an added incentive, PayPal is offering 5% cash back on all BNPL purchases—both online and in-store—through the end of the year.
Strained to the Brink
One of the biggest challenges facing holiday shoppers this year is the difficult macroeconomic environment, which has stretched many household budgets to the brink. PayPal highlighted research findings showing that roughly 60% of U.S. consumers are more concerned about their holiday spending this year.
As economic pressures mount, shoppers are becoming more strategic with their budgets and payment choices. Many are deciding where to shop based on where their dollar goes the farthest and are paying closer attention to loyalty programs and rewards. Consumers are also becoming more payments-savvy, opting for payment methods that offer the most bang for their buck.
Considering BNPL for the Holidays
As credit card debt hovers near all-time highs, BNPL services have become an attractive alternative. They typically offer minimal or no fees and often don’t require a credit check.
While BNPL products have been a game changer for many consumers, concerns have emerged about the rising amount of BNPL loan debt that is not reflected in consumers’ credit scores. However, leading BNPL providers like Klarna, Affirm, and Afterpay report that delinquencies are rare—with Klarna noting a delinquency rate of less than 1%.
Despite these concerns, BNPL’s flexibility means that consumers are likely to continue using these services, especially as the holidays approach. PayPal’s research also found that over 80% of shoppers who have used or considered BNPL plan to use it for holiday shopping.
