PayPal has over nine million active accounts in Australia. It has created a customer-centric solution and provides buy now pay later (BNPL) services without fees.
PayPal’s “Pay in 4 service’ which was rolled out in October in US was offered in France and UK but the no-fee feature is exclusive to Australia.
The Pay in 4 will only be available as a checkout option to consumers who carry a PayPal account in good standing.
The news comes along with Apple's potential entry into the market and it has given a major challenge to local rivals AfterPay and Zip, whose share prices tumbled after the announcement.
Minimum value for ‘Pal Pay in 4’ purchases drop from $50 to $30
The eligible purchase amount is between $30 and $1,500. The minimum purchase value dropped from $50 to $30. Pay in 4 simply means customers can split the amount into four interest-free instalments. It needs one initial payment and three instalments and is accessible to nine million PayPal users.
It uses data and analytics engines ads, when needed. It will run credit cheques with an external credit bureau to assess if the customers are eligible or not.
The PayPal research found out that 96% of online shoppers were aware of the BNPL, however, 55% of them have not utilised the service. The late fees were a key factor. About 50% of people surveyed said they would not use a BNPL service that carries “high late fees”.
Andrew Toon, general manager of Payments at PayPal Australia said, “We are launching with no late fees in Australia because we believe it’s the right thing to do for our customers and it will deliver a better consumer experience. We are backing the strength of our systems to determine consumer suitability for PayPal ‘Pay in 4’ and we believe we have the right measures in place to support our no late fees approach.”
“Our business model does not rely on late fee revenues and we believe that many people who missed a payment do so by mistake, not designed. By removing late fees, we are providing our Australian customers with a secure BNPL service without the risk of being penalised for late payments,” he added.
The new service will be accessible to consumers in two ways: First, when an eligible consumer pays using PayPal, the new payment method will appear at the checkout of PayPal wallet.
The second option provided to consumers consists of businesses presenting the PayPal ‘Pay in 4’ as a payment option clickable on their websites.
“Our primary driver is to make the PayPal wallet the most versatile and useful digital wallet available by giving more payment choice and flexibility to our customers while maintaining the highly secured processes which they know and trust,” said Andrew Toon.
AfterPay currently charges a default fee of $10 to customers who missed a payment on their due date and creates provisions for future fines. PayPal’s new service can be beneficial for consumers.