Bulletins

PayPal is pushing further into 'buy now, pay later' with a monthly option

The move comes shortly after Apple said it would offer pay-later through its digital wallet.

PayPal headquarters

PayPal is expanding its "buy now, pay later" offerings.

Photo: PayPal

PayPal is pushing further into the "buy now, pay later" category with a product that will allow customers to use loans to spread larger payments into monthly purchases.


Called Pay Monthly, the new offering from PayPal comes a week after Apple shook up the category by allowing users of its digital wallet to spread purchases over six weeks. The monthly option will allow PayPal users to spread purchases of up to $10,000 over two years, according to a statement from PayPal released on Wednesday.

The payment plans are subject to credit approval, with interest rates that can reach up to 29.99%. The lender for Pay Monthly is WebBank, which also issues PayPal's line of business loans.

PayPal has for the past two years offered a pay-in-four option, splitting purchases of up to $1,500 into four interest-free payments over six weeks. It also offers PayPal Credit, a line of credit with promotional offers through merchants and a no-interest offer for purchases of $99 or more paid in full in six months.

The company noted in announcing Pay Monthly that it's offered various credit products through bank partners since 2004. PayPal's former parent company, eBay Inc., bought Bill Me Later in 2008 and rebranded it as PayPal Credit in 2014.

More than 22 million PayPal customers used its pay-later offering in the past year, according to Greg Lisiewski, vice president of Shopping and Pay Later at PayPal. "How consumers look to pay for larger purchases is evolving and there is a growing demand for flexible payment options," Lisiewski said in a statement. Lisiewski told Protocol in 2021 that the company was increasing its focus on merchants to compete in the pay-later space.

"Buy now, pay later" companies have struggled in the public markets this year, but that does not appear to be slowing the action in the sector. Payments giant Stripe struck partnerships in the past year with both Affirm and Klarna. Block finalized its purchase in January of Afterpay, an Australian pay-later provider, and is integrating its products with its Square and Cash App offerings.

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The CFPB said it has terminated a sandbox deal that gave earned wage access provider PayActiv “temporary safe harbor from liability” under key lending regulations.

The CFPB granted PayActiv “special regulatory treatment” in December 2020 to offer “earned wage access” products that would allow employees to obtain wages they already earned before payday.

PayActiv gets paid back through a payroll deduction from the employee’s next paycheck. The company makes money through fees.

The CFPB said it had informed PayActiv early this month that it was “considering terminating the approval order in light of certain public statements the company made wrongly suggesting a CFPB endorsement of its products.”

The company requested that the CFPB end the sandbox order after notifying the agency that it planned to modify its product fee model, the CFPB said.

The move underlined the CFPB’s increasingly critical view of sandbox deals that the agency said “proved to be ineffective.”

Safwan Shah, PayActiv’s founder and CEO, is credited with coining the term "earned wage access," which has been criticized by consumer advocates as being potentially predatory, especially when it comes to workers who don’t make much money.

Shah has argued that it benefits ordinary workers, citing a dieting principle: "The less you are paid, the more frequently you should be paid," he told Protocol in a 2021 interview. "If you're going to eat 500 calories, don't eat them in one sitting. Spread them throughout the day."

Correction: This story has been updated to correct the spelling of PayActiv's name. This story was updated June 30, 2022.

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