PayPal's 'buy now, pay later' service is rolling out in Australia — Apple is reportedly testing its own version, too

• PayPal has launched its own buy now, pay later offering to its 9 million Australian users.
• From Wednesday, PayPal customers will be able to ‘Pay in 4’, with no threat of late fees.
• “Our business model does not rely on late fee revenues and we believe that many people who miss a payment do so by mistake, not design,” said Andrew Toon, general manager of payments in Australia.

The entry of PayPal into the local market represents the single biggest disruption to the crowded Australian sector to date.

With nine million Australian customers, the $474 billion payment giant dwarfs not only Afterpay, but the entire buy now, pay later niche, as it launches its own version of the popular split payment option.

From Wednesday, PayPal customers will be able to ‘Pay in 4’, with no threat of late fees, placing enormous pressure on one of Afterpay’s key revenue sources, worth more than $70 million a year to it.

Andrew Toon, general manager of payments in Australia, said it was “the right thing to do” for customers.

“Our business model does not rely on late fee revenues and we believe that many people who miss a payment do so by mistake, not design,” Toon said.

“By removing late fees, we are providing our Australian customers with a secure buy now, pay later service without the risk of being penalised for late payments.”

Like Afterpay, PayPal’s option is ostensibly ‘interest-free’, although it will take its usual cut of up to 3% on domestic transactions from the retailer.

Still, from a merchant perspective, those fees are less than what many Australian rivals, Afterpay included, charge. With PayPal providing potential access to a far larger consumer base, it would appear to be an instantly attractive option, at least on paper.

Unlike most of its Australian competitors, PayPal will also engage an external credit bureau in combination with its own analytics and data to determine whether or not a customer is approved.

In order to use the service, a PayPal customer must have their account “in good standing” with purchases limited to between $30 and $1,500.

Should that be the case, customers will see the ‘Pay in 4’ option appear in their PayPal wallet. Retailers meanwhile can provide a direct link on their online stores.

It also ensures that the rollout should proceed relatively instantly, being available at any checkout where PayPal is already being used.

With “hundreds of thousands of Australian retailers” already signed up, it ensures PayPal’s footprint instantly dwarfs Afterpay, which counts less than 50,000 “partners”.

Big tech is coming for Afterpay’s lunch

It remains to be seen whether or not PayPal’s entry into the market is enough to shake the confidence of Afterpay, Zip and their ilk.

But it does mark the first of the big tech companies with their eye on the bubbly payment niche, and it won’t be the last.

It has been revealed that Apple is working on its own version, internally known as ‘Apple Pay Later’. The service will see investment bank Goldman Sachs issue loans as tech companies increasingly look to get involved in financial services.

The existing Apple Pay method generates $67 billion a year for the tech company already, as a cut of total transactions.

According to a Bloomberg report, Apple users would be able to select a four-payment interest-free option or a longer-term monthly instalment option, with an unknown interest rate attached.

Valued at $US2.43 trillion, the tech giant would be able to roll out its offering to around one in two Australians instantly.

Following the news, the share price of Afterpay and Zip both fell by around 9%.


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