As Point-of-Sale Credit Grows, PayPal Adds Pay in 4, a New Installment Option

PayPal Holdings Inc. is expanding its portfolio of installment-payment options by introducing Pay in 4, a short-term financing program. PayPal says the new option, which allows consumers to pay for a purchase over four interest-free payments, can help merchants drive customer conversions, hike revenue, and enhance loyalty without taking on additional risk or paying any additional fees.

Consumers can use Pay in 4 to pay for purchases between $30 and $600 over four interest free installments across a six-week period. Pay in 4 appears in a consumer’s PayPal wallet, enabling her to manage the installments in the PayPal app. Merchants receive payment for the purchase upfront. 

PayPal says it is including Pay in 4 in its standard merchant pricing, so there is no additional cost to merchants to accept the product. This is a key point of differentiation from competing installment-payment products, the company says.

“In addition, the PayPal platform—used by over 80% of the 100 leading U.S. retailers—enables merchants to access all their payment and commerce needs within one trusted platform, while driving increased conversion, as PayPal Checkout converts 82% higher on average than a checkout without PayPal,” claims a PayPal spokesperson.

Installment payments offered at the point of sale are gaining traction with consumers. A report issued by Forrester earlier this year says that more than 40% of consumers who are aware of installment-payment options from merchants or third-party providers, such as Melbourne, Australia-based AfterPay and San Francisco-based Affirm, will use them. In addition, a recent PayPal study reveals that 56% of customers agree that they prefer to pay a purchase back with installments rather than a credit card.

Still, the percentage of merchants accepting installment payments remains relatively low, according to Forrester. AfterPay holds the largest share of the market with 15% of merchants surveyed accepting it. Affirm clocked in at 7% and PayPal’s existing PayPal Credit at 5%, according to Forrester. In terms of consumer usage of installment products, just 1% of AfterPay and Affirm users used the product for purchase in the past three months, according to Forrester. No data was available on PayPal Credit usage.

Businesses that promoted PayPal Credit on their site saw a 21% increase in sales compared to those that did not, while merchants with pay-over-time messaging on their site saw a 56% increase in overall PayPal average order values, PayPal says. Merchants can also add dynamic messaging to deliver relevant, in-context pay-later options early in the shopping journey, from the home page to product pages to checkout, PayPal adds.

PayPal says it will use a multipronged strategy to promote Pay in 4. The goal of the campaign is to convey the value of Pay in 4 as part of PayPal’s suite of pay-later products. Pay Pal says it is working with both existing and new merchants, as well as marketplace partners like BigCommerce, Swappa, and WooCommerce to educate them on the new offering. 

“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. At the same time, consumers are looking for more flexible and responsible ways to pay, especially online,” said Doug Bland, SVP, Global Credit at PayPal.