PayPal’s Andrew Toon on the advantages and disadvantages of buy now, pay later – and how it might evolve from here

PayPal’s Andrew Toon on the advantages and disadvantages of buy now, pay later – and how it might evolve from here
Image: iStock / svetikd
This article is sponsored by PayPal.

Over the past few decades, the trends in consumerism have seen Australians wanting more choice and flexibility with online shopping. 

While, back in the 90s and early 00s, customers would use lay-by (a system that saw instalments paid off over time before being able to take the product home), nowadays, consumers are turning to “Buy Now, Pay Later” (BNPL) solutions, allowing them to buy what they need, when they need it.

In July, PayPal announced the consumer availability of PayPal Pay in 4 in Australia. The new buy now, pay later solution was designed to give consumers greater choice and flexibility in how they pay and to help businesses adapt to changing consumer expectations. 

PayPal, which has over nine million active accounts in Australia, is making PayPal Pay in 4 available with no late fees for consumers and at no extra cost for PayPal business customers while offering a secure, easy and convenient BNPL solution.

According to Andrew Toon, General Manager (Payments) of PayPal Australia, this service was created “to meet the expectations of our existing customers”.

“We know Australians want choice and flexibility in how they pay and we are committed to meeting customer expectations,” he told Business Insider. “​​We want to continue to make PayPal the most versatile and useful digital wallet in the market, by giving our customers more payment choices and flexibility while maintaining the high security they know and trust.”

Here, Toon talks about the advantages and disadvantages of BNPL, how these services have improved over the years, and what PayPal does differently by having its own BNPL service.

What are the advantages of BNPL Services?

PayPal Pay in 4 is available to eligible consumers across our base of over 9.1 million active accounts in Australia. Australians can use PayPal Pay in 4 almost anywhere they see the PayPal button, meaning that it’s available at hundreds of thousands of Australian and millions of global businesses—almost everywhere PayPal is accepted online—as a no-fee service for consumers.

What ‘no fees’ means is no late payment fees, no interest and no sign-up fees for consumers using PayPal Pay in 4. By removing late fees, we are giving Australians a secure BNPL service without the risk of being penalized for late payments

You can split the cost of items from as little as $30 up to $1500 into 4 equal interest-free payments consisting of an initial payment and three fortnightly instalments. Meaning PayPal Pay in 4 can spread out the costs of everyday items, through to bigger ticket purchases — anything from hair products to your car registration or a new TV.

PayPal’s trusted security and protections apply to eligible purchases made using PayPal Pay in 4. When Australian consumers pay using PayPal Pay in 4 on any website in any country, PayPal’s Buyer Protection offers them comprehensive protection if their eligible transaction has a problem such as if an item doesn’t arrive or is significantly not as described.

What are the disadvantages?

Our research found that 50% of Australian online shoppers would not use a BNPL service if it had high late fees. Consumers are also looking for a BNPL service that is secure, easy and fast to use. We have designed PayPal Pay in 4 to meet these consumer expectations.

How have BNPL services improved over the last few years?

Buy now pay later (BNPL), which is the digital reverse ‘layby’ where goods are received upfront and then paid off via instalments, was virtually unknown five years ago. Today, almost half of adult Australian consumers who shop online (45%) have used BNPL.

Where do you see BNPL services in the next five years?

Our research has shown that consumers would consider using BNPL for a wider range of goods and services, such as in the travel and tourism sector, for household bills and even for Government fees such as their car registration.

What does PayPal do differently with its own BNPL services?

The primary advantage of PayPal Pay in 4 is the very wide availability of the service as you can use it almost everywhere you can pay with PayPal; coupled with no fees for consumers and no additional fees for businesses beyond their existing account arrangements. (Standard merchant fee for PayPal Australia for domestic transactions is 2.6% + 30c).

We are backing the strengths of our internal systems to determine customer suitability and have removed late payment fees in Australia for our BNPL service.  PayPal is unique in that we have an enormous amount of data, across our 2-sided network that sees both consumer and merchant transactions, to make these suitability decisions. 

PayPal Pay in 4 will only appear as an option in the Checkout flow for consumers who have a PayPal account in good standing (i.e. no outstanding PP amount owing) and for eligible purchases valued between $30 and $1,500.

Why should SMBs consider using it? 

There are four reasons: 

  • Increased sales: Giving shoppers more spending power could help boost your average order values.
  • No additional costs: The Pay in 4 offering is included in your existing PayPal rate.
  • Easy promotion: Add Pay in 4 messaging to your site in a couple of clicks to enhance your offering. You’ll need to be on the latest version of PayPal to add PayPal Pay in 4 as a separate ‘button’ on your site.
  • An expansive network: Connect with PayPal’s ever-expanding network with millions of customers across Australia.