PayPal goes beyond 'Pay in 4' with new buy now/pay later option

Despite the popularity of PayPal's Pay in 4 and similar buy now/pay later offerings, sometimes a purchase is too big to split into four payments.

To address this need, PayPal has released Pay Monthly, which is targeted at purchases between $199 and $10,000 to be repaid over the course of up to 24 months. 

Consumers choose Pay Monthly at checkout, and complete an application. If approved, they are presented with three plans of varying length with risk-based APR ranging from 0% to 29.99%. Consumers compare and select the option that suits their budget. 

“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,” Greg Lisiewski, vice president of global pay later products at PayPal, said in a press release Wednesday.

PayPal cited data from the Morning Consult State of Banking, which found 65% of Americans are saving for a big purchase and 79% want to create and maintain a budget. 

WebBank, a Utah-based industrial bank, is the issuer of PayPal Monthly. PayPal has partnered with banks since 2004 to offer consumer credit products. It also offers merchant credit, with retailers paying off loans through future payments. 

Online payments

PayPal 'Pay in 4' takes direct shot at buy now, pay later rivals

Responding to rivals' success in the “buy now-pay later” (BNPL) segment, PayPal launched a short-term installment lending product called “Pay in 4” to expand its Pay Later product suite.

By Michael Moeser

August 31

With Pay Monthly, consumers choose between debit card or bank account for repayment and manage and track payments through PayPal's app or website. PayPal says there are millions of merchants at launch, including Outdoorsy, Samsonite, Fossil and Advance Auto. 

PayPal's Pay in 4, which was released in 2020, allows consumers to pay for purchases between $30 and $600 over a six-week period with zero interest and no fees over four installments. 

PayPal faces competition for BNPL from fintechs such as Klarna and Affirm, which are facing regulatory pressure from a Consumer Financial Protection Bureau probe into BNPL's impact on consumer credit and the potential risk as BNPL migrates to everyday purchases such as gas and groceries.

Card networks and large card issuers have also become more active in BNPL over the past year as more consumers seek installment lending to finance purchases.