PayPal Pay in 4 launches – will it dethrone Afterpay?
Payments giant PayPal today launched its ‘Pay in 4’ buy now pay later service, which has been rolled out automatically to most of its 9.1 million Australian customers.
Afterpay is the current buy now pay later market leader in Australia with 3.5 million active book users.
How does PayPal Pay in 4 compare to Afterpay
Although they have many similarities, one of the biggest differences from Afterpay is that Pay in 4 will not charge any late fees. The existing merchant fees will remain the same.
However, PayPal will report defaulted customers to the credit bureau, which Afterpay does not currently do. PayPal can also perform a credit check on certain customers, before giving them access to the Pay in 4 option.
While Afterpay has a maximum credit limit of $ 2,000 per customer, PayPal doesn’t have a set maximum and instead will give customers individual credit limits. Customers won’t know what their exact limit is, however, the Pay in 4 option will no longer appear at checkout once their limit is reached.
PayPal has not adhered to the code of best practice for the self-regulating industry.
| PayPal ‘Pay in 4’ | After payment | |
| Customers | Available for the majority of the 9.1 million existing PayPal customers | 3.5 million in ANZ |
| Interest charged | No | No |
| Account Fee | Nothing | Nothing |
| Credit check | Select only customers. | No |
| Individual purchase price | $ 30 to $ 1,500 | Up to $ 1,500 |
| Maximum credit limit | Not disclosed. | $ 2,000 |
| Where you can use it | Wherever PayPal is accepted. | Affiliate retailers. |
| Payment plan | 4 payments over 6 weeks. | 4 payments over 6 weeks for new customers. |
| You missed a refund | Pay in 4 automatically frozen accounts, the entire PayPal wallet may be limited. | Afterpay account automatically frozen. Late fees apply. |
| Late fee | Nothing. | $ 10 per missed payment, plus $ 7 if not paid within 7 days. Late fees capped at 25% of purchase price or $ 68, whichever is lower. |
Source: RateCity.com.au
RateCity.com.au Research Director Sally Tindall said: “PayPal may be entering a crowded market, but it is coming in with an existing customer base of over nine million Australians. This will count for a lot.
“With millions of people to market to and with a new no-cost proposition, this new platform is likely to be a serious competitor in buy now, pay later space,” she said. .
“However, PayPal customers who default on their refund should be aware that if you default, it could end up on your credit report.
“The big question is whether PayPal’s new service will make people switch purchases now, pay vendors later, or encourage them to use multiple platforms at once.
“ASIC’s most recent industry report found that people experiencing issues using buy now, pay later were more likely to have multiple accounts.
“With over 20 buy now, pay later now services in the marketplace, customers can easily rack up a multitude of debt on a number of platforms.
“What we need is better regulation. Many buy now, pay later, vendors don’t know how much people are making or how much debt a customer already has and that is often part of the problem.
“The market should continue to warm with the upcoming launch of Commbank’s Step Pay. Other big payment giants are expected to pile up, with Apple apparently working on its own BNPL service in the US, ”she said.
Buy now pay later boom – Over 20 platforms now available in Australia
RateCity.com.au’s analysis of the Buy Now, Pay Later in Australia industry shows that there are currently 21 different platforms, when CBA will launch Commbank StepPay soon there will be 22.
How to avoid trouble with BNPL platforms:
- Read the terms and conditions and understand the fees you might have to pay.
- Set strict spending limits.
- Limit yourself to one platform and one purchase at a time.
- Don’t buy impulse. Sit down on any major purchase for at least 24 hours.
- If you are in trouble, pull the pin and call for help. Each platform should have a hardship policy to help you get out of trouble.