International fintech giant PayPal has shown its hand in the Aussie buy-now, pay-later scene, announcing plans to launch a deferred payment option at the checkout for its Australian merchants.
The PayPal Pay in 4 solution launched in the US, the UK and France last year, and is expected to be available for all 9 million Australian PayPal customers by early-June, 2021 — just in time for end of financial year sales
Andrew Toon, general manager for payments at PayPal Australia, tells SmartCompany the new offering comes as a response to demand from business customers Down Under.
“They have inundated us with requests,” he says.
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It also follows a boom in e-commerce during the COVID-19 pandemic, which saw a surge in people shopping online, many for the first time. That also meant a surge in use of BNPL products, and in the share prices of the likes of Afterpay and Zip.
The new payment option will appear in the PayPal wallet at checkout, and e-commerce businesses will also be able to highlight the BNPL service using a distinct button on their own sites.
It will be interest-free for consumers, and businesses will also not be charged an additional fee.
It’s this latter point that could serve to undercut the other major players in this sector — fees for merchants offering BNPL range from 3% to 6%, and they have historically been a contentious topic.
Currently, a controversial ‘no-surcharge’ rule means BNPL players can prohibit merchants from charging more to consumers to help cover the cost.
The self-regulating BNPL Code of Practice, which was revealed in December 2019 and came into effect earlier this month, did not address the issue.
Through PayPal Pay in 4, late payments will still incur fees for consumers.
For purchases under $125, there’s a one-off $10 charge for late re-payment. For purchases over $125, consumers could incur a total of three $10 late fees, meaning total fees are capped at $30.
For comparison, missed payments through Afterpay — which makes most of its revenue from merchant fees — also incur an initial $10 fee, plus a further $7 after seven days.
For purchases under $40, the fee is capped at $10, and for purchases over $40, it is capped at 25% of the purchase price or $68 — whichever is lower.
However, it’s not that merchants using the PayPal BNPL solution are doing so for free. It’s simply wrapped up in the suite of services they get for being PayPal clients in the first place.
Toon stresses that the viability of the product does not rely on consumers missing their payments.
“We hope that nobody has to make a late payment fee,” he says.
It’s more about evolving the capabilities PayPal can offer to its customers — merchants and consumers alike.
“We look at our business holistically,” he explains, pointing to the instant-pay options using debit and credit cards, and the 211-day deferred payment option.
“These have all been delivered under the same agreement, the same integration and the same price.”
BigCommerce and Zip team up
PayPal enters the foray of the BNPL scene in the same week that e-commerce tech company BigCommerce announced it is expanding its partnership with Zip.
Following a successful rollout in Australia and New Zealand, the BNPL option will now be made available to BigCommerce’s UK and US merchants too.
In a statement, BigCommerce chief commercial officer Russel Klein said merchants need to “be thoughtful about decreasing barriers to purchase”.
That includes providing a range of payment options at checkout, he said.
The new PayPal service will be available for purchases of between $50 and $1,500, over four equal payments. Repayments will be automatically drawn every two weeks.
It will become available in the PayPal wallet for customers with ‘accounts in good standing’, and consumers will be subject to eligibility criteria and suitability checks.
The BNPL offering will not be available for purchases for gambling; for digital gift cards; or for person-to-person transfers.