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PayPal’s evolving strategy in a crowded BNPL market


Buy Now, Pay Later (BNPL) gained ground in recent years as an alternative form of credit for online retail purchases. As more and more big players continue to enter the BNPL industry, competition in the space is intensifying.

PayPal entered the sector by launching its first BNPL offering – ‘Pay in 4’ – in 2020, and expanded its suite of products by rolling out another BNPL product, ‘Pay Monthly’, in 2022.

PayPal users can choose an installment plan that suits them after the eligibility screening. ‘Pay Monthly’ consumers can divide the total purchase cost into monthly payments over a period of 6, 12, or 24 months, unlike the ‘Pay in 4’ model, where users have to settle payments for purchases over a six-week span.

Additionally, the ‘Pay in 4’ program lets customers pay for purchases between $30 and $1,500, while the new program, ‘Pay Monthly’, allows consumers to make purchases between $199 and $10,000, with the first payment due one month after the purchase is made. Customers can then make monthly payments until the purchase price and interest are paid in full.

The decision to branch out its BNPL offering came as studies were showing consumers’ rising interest in manageable and flexible ways of making payments when paying for larger purchases. 65% of Americans were saving up for a bigger purchase and 79% were considering creating and maintaining a budget, according to the research.

Despite competition from the likes of Klarna, Affirm, Afterpay, and Apple, PayPal has built a sizable footprint in the BNPL space in a relatively short time. The firm has managed this by providing flexible payment options to its existing wide customer base of brick-and-mortar stores and merchants that already use PayPal for transactions on their websites and apps.

However, amidst the continuing popularity of BNPL loans, late fees are becoming more common. Nearly 11% of users were charged at least one late fee in 2021, up from 8% in 2020, according to a Consumer Financial Protection Bureau report.

Additionally, a new survey also shows that missed payments are on the rise at BNPL firms, with nearly 42% of BNPL consumers having made a late payment on their loan.

I spoke with Steve Mikulcik, VP of Global BNPL at PayPal, about the ramifications of such a fast-growing industry, and whether it is still serving the purpose of facilitating consumers given the current circumstances of mounting debt and soaring losses.