PayPal made a big splash with its entry into the buy now pay later market in Australia last week with an offer that comes with no late fees, but comparison sites running the rule over PayPal Pay in 4 say there are some features that consumer might not like so much.
These include PayPal not telling consumers what their credit limit is but cutting off access once the limit is reached, reporting defaults to credit bureaus and not being a signatory to the BNPL Code of Practice.
PayPal Pay in 4 is available to eligible PayPal Australian customers across its base of more than nine million accounts. It will be available as an option in the PayPal wallet for “customers with accounts in good standing, who have met eligibility criteria and are subject to suitability checks”.
Paypal said it is using its own data for suitability modelling, although in some cases it will do credit checks.
Goods are paid for over four equal, interest-free instalments. The first payment is made at the time of purchase and the remaining three will be made with automatic payments from the consumer’s PayPal account every two weeks.
Purchase amounts are from A$30 to $1500. Consumers can have multiple plans operating at the same time, although PayPal has not said what the limit is.
PayPal is not applying an additional charge for business that accept PayPal transactions.
PayPal will not charge late fees for missed payment. If a payment is missed PayPal will cut off the customer’s access to Pay in 4 until the balance is paid. In “extreme circumstances” a consumer’s access to all PayPal services may be cut off.
PayPal said it has made provisions to support customers in financial hardship.
The key difference from Afterpay, the BNPL market leader in Australia, is that Afterpay charges a late fee of $10 on a missed payment and a further $7 if the payment remains unpaid seven days after the due date. Zip and Klarna also charge late fees.
Canstar noted that ASIC research found 21 per cent of BNPL users missed a payment over a 12-month period, so removing the late fee could persuade consumers to switch to Pay in 4.
RateCity said an importance difference was that PayPal will report defaults to a credit bureau, which Afterpay does not do at the moment. PayPal may also conduct a credit check on some customers.
RateCity said it expects PayPal to give individual credit limits but “customers won’t be told what their exact limit is. The Pay in 4 option will no longer appear at the checkout once the limit has been reached”.
PayPal has not signed up to the Australian Finance Industry Association’s BNPL Code of Practice, which could have an impact on consumer protection.
Power Retail, a provider of “e-commerce intelligence tools”, said existing PayPal customers would find the offer very convenient because they will log into their account and choose the payment option they want.