• PayPal has signalled it will launch its ‘Pay in 4’ instalment product in Australia in June.
• The product will offer a buy now, pay later option to its nine million local customers on eligible transactions between $50 and $1500.
• With lower merchant fees, potentially lower late fees, and a larger customer base, the move will prove a competitive challenge for Australia’s fast-growing sector.
• Visit Business Insider Australia’s homepage for more stories.

Well, it’s finally happening. Global giant PayPal is taking on Australia’s field of buy now, pay later platforms at home with its own payment instalment product.

On Wednesday, the $283 billion payments company announced it would launch its ‘Pay in 4’ in Australia from the beginning of June, allowing its nine million customers to split purchases of up to $1,500 over four equal fortnightly payments.

“Australian consumers are looking for more choice and flexibility and PayPal Pay in 4 gives them yet another way to purchase securely using PayPal,” Australian general manager of payments Andrew Toon said.

“PayPal’s digital wallet is the only solution that provides multiple ways to pay all in the one place – instantly with debit or credit card; 21 days later with our Pay After Delivery option; and now in four interest-free instalments using PayPal Pay in 4.”

It will not be permitted to be pay for gaming, gambling, digital gift cards or on person-to-person transfers. Customers meanwhile will be subject to suitability assessments using PayPal’s own data. A company spokesperson said it was currently assessing the Australian sector’s voluntary code of conduct, and considering whether it would sign on.

Already available in the United States, Britain and France, the move will take on Australia’s platforms in their own market, one of the world’s fastest growing. It comes, according to Toon, as a result of popular demand from PayPal’s Australian business customers.

“Shopping habits are changing at an unprecedented rate and during the pandemic we saw more than two million Australians start shopping online for the first time,” he said. “We will continue to support Australian businesses of all sizes to adapt to rapidly changing consumer behaviours by evolving our service to meet their needs.”

The competitive challenge comes as the buy now, pay later sector specifically, and technology companies more broadly, go through a revaluation, with both Afterpay and Zip stock down around 30% off their February peak.

It’s interesting then to compare how PayPal will shape up. Much like Afterpay and rivals, PayPal’s interest-free payment option does incur late fees. Those who miss their repayments on a $125 transaction or less will cop a one-time $10 fee, while anything above that can incur up to three of those per transaction.

On the face of it, that appears superior to Afterpay, which charges $10 on purchases under $40 and as much as 25% or $68 on transactions over it. Other platforms however offer different models meaning PayPal may or may not provide a more reasonable option.

For example, depending on the transaction size Klarna charges between $3 and $15 per late instalment but without a cap. Zip meanwhile charges a flat $5 per month for customers who fail to make their minimum repayment on balances.

On the merchant side of things, PayPal makes all the same promises that its product will “attract new customers and increase average order size”.

However, it also looks to have Afterpay beat in terms of the cut it takes. PayPal doesn’t charge any additional cost for businesses beyond its standard 2.6% rate on domestic transactions plus a 30 cent fee. In even the smallest transaction allowable, that’s still well below Afterpay’s 4.17%, Zip’s 4%, and Klarna’s more than 5.49% take.

So too will PayPal’s nine million customer base instantly dwarf existing buy now, pay later platforms. Afterpay, the country’s largest, has 3.4 million active users, while Zip has 2.5 million total. Klarna has a little more than 500,000.

Even if they continue to grow at their current explosive rate, none will have numbers comparable to PayPal for years. Consider PayPal’s success in the US, where it has signed up 45 million customers to its BNPL product in the space of six months, well above what dedicated platforms have been able to achieve.

There’s a non-negligible chance it could outgrow Afterpay in due course.

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