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 currently the 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 will not be notified of their exact limit, 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|
|Credit check||Select only customers.||No|
|Individual purchase price||$ 30 – $ 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.|
RateCity.com.au Research Director Sally Tindall said: âPayPal 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.
âWith 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 space now, pay later,â she said. .
âHowever, PayPal customers who default on their refund should be aware that if you default, it could end up on your credit report.
âThe 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 the same time.
âASIC’s most recent industry report found that people experiencing issues using buy now, pay later were more likely to have multiple accounts.
âWith 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.
âWhat 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.
âThe 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, âshe said.
Buy now pay later boom – Over 20 platforms now available in Australia
RateCity.com.au analysis of the Buy It Now and Pay On Pay industry in Australia shows that there are currently 21 different platforms, when CBA launches 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.