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PayPal Joins the Installments Business With the Launch of Its New ‘Pay in 4’ Solution

As retailers offer their customers more platforms on which to purchase product, they’re also expanding the ways that shoppers can pay for those items. PayPal is the latest payments company to introduce an installments solution, Pay in 4, which merchants can roll out to consumers in early Q4 2020.

Pay in 4 will follow the same format as most installment payment programs on the market. Users pay 25% of the purchase price up front and are then charged future payments on a two-week cycle for the next six weeks. Pay in 4 is available for purchases of $30 to $600 in value, and payments are interest-free, although PayPal has said that there may be a fee charged for late payments.

“In today’s challenging retail and economic environment, merchants are looking for trusted ways to help drive average order values and conversion, without taking on additional costs,” said Doug Bland, SVP of Global Credit at PayPal. “At the same time, consumers are looking for more flexible and responsible ways to pay, especially online.”

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Although installments are not a new concept, PayPal is aiming to leverage its position within the market as a reason to opt for its particular solution over its competitors’. An independent report by Forrester found that PayPal is currently the most commonly offered digital payment at retail, with 83% of surveyed businesses offering the solution. PayPal has made Pay in 4 free for all current users, as part of its existing price structure.

Consumers also favor the solution: 64% of respondents reported using PayPal within the last 3 months, compared to competitors like Apple Pay (17%), Visa Checkout (13%) and Amazon Pay (12%). The Forrester report found that installment plan services had lower adoption and familiarity rates than traditional digital payments, with Afterpay and Affirm both used by only 1% of respondents in the last 3 months.

Consumers are increasingly expecting to be able to pay how they like; PayPal reports that 25% have abandoned a purchase if their preferred payment method was unavailable.
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“With Pay in 4, we’re building on our history as the originator in the ‘buy now, pay later’ space, coupled with PayPal’s trust and ubiquity, to enable a responsible and flexible way for consumers to shop, while providing merchants with a tool that helps drive sales, loyalty and customer choice,” said Bland.

As Bland noted, this is an expansion of the company’s previous offerings in payment flexibility, although most of those services were previously available only overseas. It already offers installment solutions in Germany and France, as well as a Pay After Delivery service in parts of Europe, Canada and Australia. PayPal reports that its Paypal Credit solution is the most commonly used “buy now, pay later” tool in the market.

Despite the low mass-market penetration of installment payments, the Forrester report found that usage went up significantly among those who were familiar with the payment brands — 44% for Afterpay and 41% for Affirm. This suggests that once discovery is improved, usage rates will increase across the board. With PayPal already well-known by the majority of consumers, it may be able to skip this education phase.

The benefits for merchants include an increase in conversion rate and order value. PayPal noted that retailers that promoted PayPal Credit on their website saw a 21% increase in sales compared with those who did not. Similarly, PayPal merchants with any “buy now, pay later” messaging saw a 56% increase in average order volume.

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