The new feature of Paypal in the UK shows the potential for the BNPL’s growth around the world.
Due to Covid-19, several industries have been heavily impacted and struggle to plan a sustainable recovery path. However, some markets are prospering in these hard times, online shopping has taken its peak. Another factor contributing to this is the general increased interest in online shopping, with Statista reporting that 67% of Millenials prefer it rather than the traditional retail option.
The Recent Popularity Of “Buy Now, Pay Later” Services
The program “Buy Now, Pay Later” (BNPL) has gained lots of popularity recently. BNPL lets consumers buy without the cost of credit card interest, repaid within the established timeframe allows them to not pay any interest.
It is a great option if you don’t have a credit card or you don’t want to put this particular purchase on your credit card. Worldwide there are 20 firms offering the “Buy Now, Pay Later” option, among them Sezzle, Klarna, Paypal Credit, Splitit, Affirm, GoCardless, Viabill, and others.
How Does The Paypal “Pay in 3” Work?
Paypal caught the opportunity and like Klarna in Sweden and Afterpay in Australia will provide for consumers in the UK a “Buy Now, Pay Later” shopping service. It is called Paypal ‘Pay in 3’, which allows the users over three interest-free installments per month for purchases of between £45 and £2,000, however, these values may vary from merchant to merchant. Thie program started at the end of October, available at Paypal wallet to manage finances online or through the Paypal app.
The Paypal ‘Pay in 3’ program lasts 2 months, the repayment can however be made anytime. First payment due at the time of purchase, the further 2 payments to be paid in the upcoming month to avoid any additional interest. Additionally, the customer can have multiple Paypal ‘Pay in 3’ plans. If you are late with the repayment, you will be charged a late fee of £12. Before granting usage for ‘Pay in 3’ the financial position of the customer has to be assessed. Those regulations hopefully prevent overspending and bad financial choices. In case of a decline, you can reapply 35 days after your last application.
How Are The Transactions Made?
Transactions can be made in all currencies that PayPal supports, not just GBP. For transactions not in GBP, PayPal will automatically convert the transaction amount to GBP at checkout. Currency conversion charges will apply as set out in your PayPal User Agreement.
To withdraw from PayPal’s “Pay in 3” plan, purchased items have to be returned to the merchant in compliance with the applicable law and the merchant’s refund policy. The merchant will send Paypal a notice of the return, and they will refund the payments made up to that point. There are 14 calendar days to withdraw, starting from the day after you make your purchase with PayPal ‘Pay in 3’.
The BPNL Services Showed A Huge Success Abroad
As for those Swedish and Australian firms, this type of loan offer has been a large success, Paypal hopes to raise interest for this new feature as well. People in the UK have shown a big interest in this type of payment, revealed by a 39% annual increase in “Buy Now, Pay Later” popularity, as compared to 2019. Already few retailers including Crew Clothing, French Connection, Robert Dyas, and Ryman have signed up for this offer. With more than 89% of young people frequently impulse buying, as reported by Invesp, the BNPL services have tremendous opportunities to grow quickly, especially among young people who often do not have a large sum of money in their bank account towards the end of the month.
Paypal Credit’s ‘Pay in 4’ featuring buy now, pay later lender type, launched in August in the US and was met with great success. It boosted online shopping, making this month the busiest shopping season of the year.
Paypal About To Overtake Its Competitors In The UK?
Currently, Bill Me Later / PayPal Credit is the most commonly used BNPL service. Paypal is well known across the world and has good chances to overtake its competitors in the UK thanks to its brand recognition. The company has 24 million active users in the UK by far outhustling the second place, which belongs to Klarna with only 10 million customers.
‘Pay in 3’ maybe even more successful for UK inhabitants than for Americans, as Brits get their paychecks once a month, whereas Americans once a fortnight. Paypal Credit has already taken over the UK, gathering over 2 million users since 2014.
Although Paypal and Klarna assure of the securities undertaken to prevent from falling into debt, it still raises the question of whether young users won’t be triggered to impulse buy. Buy now, pay later and other digital payments will be for sure one of the topics of the legendary annual event hosted by the Euro Banking Association, the EBAday, happening at the end of November.
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