PayPal’s buy now, pay later launch is kicking off the next wave of adoption. Here’s what it means for startups and banks competing in the space.


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Buy now, pay later is taking off amid the coronavirus pandemic, with e-commerce becoming more prevalent and consumers looking for ways to stretch their dollars.

And while startups like Affirm, Afterpay, and Klarna created plenty of buzz in the space, incumbents are stepping in, kicking off the next wave of point-of-sale financing. Earlier this year, Goldman Sachs partnered with JetBlue, offering buy now, pay later via its Marcus platform. And Amex has continued to expand its no-interest installment product, Pay It Plan It, to more cards. 

Most recently, PayPal announced it will offer a six-week interest-free installment product to all US merchants that offer PayPal as a way to pay at checkout. 

“The Pay in 4 installment product specifically is an interest-free buy now, pay later way for consumers to pay, and it will drive higher conversions without retailers taking additional risk or cost,” Doug Bland, SVP of global credit at PayPal, told Business Insider. 

“The backdrop of all of this is, given the challenging and uncertain times that we’re living in, we felt it was more important than ever to provide this solution, which will help both retailers and consumers alike,” Bland said.

Read more: Here’s how PayPal is looking to boost its credit business by leaning into a buy now, pay later frenzy

PayPal’s platform is used by 83% of the top 100 retailers in the US, according to Forrester. And analysts expect that scale to be beneficial for PayPal in the competitive buy now, pay later space.

“That kind of scale and penetration to us means not only is it easier for PayPal to compete with incumbents in the buy now, pay later space by putting the product in front of their user base,” Paul Golding, payments and lifestyle analyst at Macquarie Capital, told Business Insider.

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“It also means that as a product it’s likely more easily integrated with online marketplaces because the PayPal button and PayPal system is already integrated,” Golding said.

PayPal is launching during the second wave of buy now, pay later adoption

Fintechs like Affirm, Afterpay, and Klarna have been marketed as an alternative to credit cards or other traditional ways to pay online, like PayPal. That first wave of buy now, pay later adoption has since been followed by a second wave of industry incumbents like Amex and Chase offering their customers the ability to pay in installments as opposed to the monthly credit-card cycle.

Incumbents’ buy now, pay later-type products differ from the fintechs in that they are typically offered after the purchase, and the installment plans are then worked into credit-card statements.

“Phase two has been institutions like banks, issuers, and acquirers offering point-of-sale-like financing products after the purchase has been made and appears on the statement,” Golding said. “That product is more of the incumbent wave.”

But PayPal, already known as a buy button at checkout, will offer its buy now, pay later product in the same context as the likes of Affirm and Afterpay. 

Read more: From Affirm to Klarna, buy now pay later startups are …read more

Source:: Business Insider


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