Should You Offer PayPal Pay In 4 To Your Customers?

There are a lot of buy now, pay later apps out there for eCommerce business owners to choose from. Read on to find out how PayPal installment repayments work for customers, how to start a pay later program in your store, and whether PayPal Pay In 4 is the right BNPL solution for your business.

What Is PayPal Pay In 4?

PayPal Pay In 4 is a buy now, pay later option that allows customers to make a purchase now and pay for it in four interest-free installments. PayPal pays merchants the full purchase amount upfront, and customers pay off their short-term loans in six weeks.

Why Use PayPal Pay Later

Buy now, pay later options are soaring in popularity now, especially for online retailers. There are many reasons for this:

• Customers expect a certain level of flexibility when it comes to payment options.
• Most millennial and Gen Z shoppers are used to the “subscription lifestyle,” so they’re used to paying for the things they want in small, recurring increments.
• Uncertainty around employment (during 2020 and onward) makes shoppers less willing to make big purchases outright, but they feel safer making small, interest-free payments over time.
• Biweekly installment payments mimic payday schedules, so it’s easy to budget for short-term loans with a predetermined repayment timeline.
• A lot of individuals without a good credit score will not qualify for credit cards with reasonable interest rates, or they just don’t want to own one.

PayPal had BNPL numbers crunched over the course of 2020 and 2021, and they clearly show the benefits for customers and merchants.

According to a study commissioned by PayPal and conducted by Netfluential in November 2020, 51% of shoppers say they had abandoned online carts when a pay-later option wasn’t available. 32% of shoppers would make purchases they would’ve otherwise postponed if BNPL was not available.

PayPal Pay In 4 plans have tackled all the barriers to using BNPL. According to a 2021 study from BigCommerce and PayPal, consumers avoided BNPL because of potential late fees, debt, and a lack of awareness about how pay later programs work.

Pay In 4 messaging can be placed throughout your online store to grow BNPL awareness early on in the shopping experience. The simple checkout process breaks down the repayment structure in a transparent, visual way. Customers can see exactly how much interest they will pay (which is none.) Finally, the online payment system provider, in an attempt to keep up with Affirm’s BNPL offerings, eliminated all late fees for Pay In 4 users.

PayPal Pay Later is a great BNPL option for merchants because it’s free and easy for PayPal for Business users to offer. Compared to other BNPL providers that charge flat fees and variable fees from 3-6% of each purchase, Pay In 4 may be more cost-effective.

Also, PayPal is a well-known and trusted payment option, with a global community of active users, so merchants don’t have to advertise Pay In 4 as much as they would have to advertise less popular BNPL providers.

Merchants are always paid the entire transaction amount upfront and in full, minus any fees associated with your PayPal business account setup. PayPal manages the entire repayment process on their end, so you don’t have to take on any of the hassles associated with customer financing plans.

There are a few drawbacks of adopting Pay In 4 instead of a different BNPL solution. Right now, Pay In 4 is only available for online stores catering to U.S. buyers, and for purchases between $30 and $1,500. Additionally, Shopify does not currently support Pay In 4, so getting this option to work on a Shopify site requires a bit of leg work. It’s completely doable, though, so don’t write off PayPal just yet!

How PayPal Pay In 4 Works For Your Customers

Throughout the online shopping experience, your shoppers will see the most relevant pay later messaging, which dynamically updates according to the size of their cart. Once orders exceed $1,500, they are no longer qualified for Pay In 4, so they may only see PayPal Credit options.

You can place Pay In 4 messages as a banner on your website, in the footer menu of your site, and on specific product pages. Your customer should see a PayPal Pay Later checkout button at the checkout page. Depending on your PayPal business account setup, you can incorporate one-click buy buttons on product pages as well.

Here is an example of what the Pay In 4 loan application process looks like for your customers.

Step 1: Your customer clicks on the PayPal Pay Later button available at checkout. When they click on the Pay Later option, a PayPal popup window like the one below will open. Customers won’t have to navigate away from your site to start a Pay Later loan application.

Step 2: Customers who already have a PayPal account just need to enter the email address or phone number associated with it. PayPal sends a one-time code for users to enter in, or they can enter their account password. Those who do not have a PayPal account will have to sign up for one.

Step 3: Your customer will see their shipping address, along with all payment options that are tied to their PayPal account. They should make sure they have the correct shipping address. Then, they scroll past those options and choose Pay In 4. Your customer will see the payment breakdown and schedule at a glance. Then, they click “Continue”.

They will see a further breakdown of their repayment schedule. They click “Continue” again.

Step 4: Your customer confirms their billing address and clicks “Apply”. PayPal does conduct a soft credit check on applicants, which will not affect their credit score, and analyzes their PayPal account history to determine whether they are eligible for Pay In 4.

Step 5: If your customer is approved, they will choose an autopay option from the payment options associated with their PayPal account. This may include a bank account, debit card, or credit card. Then, they acknowledge that they have read the loan agreement and payment authorization. Next, they continue to payment.

If your customer was not approved, they will receive an email from PayPal detailing why they were not accepted.

Step 6: Customers pay 25% of their purchase at the time of checkout, and the next three installments are charged automatically every 15 days. PayPal will send a payment confirmation email after they confirm their purchase, along with details on their loan agreement.

Customers can see their remaining balance, and pay off their loan early if they wish to, from their PayPal account.

How To Add PayPal Pay Later To Your Shop

To add PayPal Pay Later to your shop, you must have a PayPal business account with a one-time payment integration set up. If you don’t have one, or you want to better understand your business account, read our complete guide on how and why to set up a PayPal business account.

PayPal Checkout transaction fees are 3.49% plus a fixed fee depending on the currency the payment was received in. PayPal Pay In 4 is a free add-on to the standard PayPal Checkout offering. If you decide on an advanced PayPal payment system, Pay Later is still free.

Only a business with an online presence that caters to U.S. buyers can offer Pay Later options. Buyers don’t have to pay in USD. If they choose to pay in another form of currency, they will have to pay a currency conversion fee, as Pay In 4 transactions are automatically converted to USD at checkout.

There are some business activities that PayPal will not support, or that you may need to get approval for. Non-profits, “get rich”, and website services are not allowed to offer Pay In 4. If you’re not sure whether you can offer Pay In 4, contact PayPal’s sales team.

If your online store lives on BigCommerce, WooCommerce, or another one of these major eCommerce platforms, there are pre-made Pay Later messaging assets and payment buttons available. You just need to enable Pay Later as a payment method, and display PayPal’s pre-designed messaging in whatever way you choose. You also have the option to strategically place and customize your pay later messaging with a little extra code.

For store owners using Shopify or another unsupported platform, PayPal has a Smart Payment button generator built specifically for non-developers. Smart buttons automatically include Pay Later options. Simply fill in the details of your product offering, copy the JavaScript code, and add it to the corresponding product pages of your website.

Shop owners using an unsupported platform will also have to code BNPL messaging on specific pages of their site using HTML or more advanced JavaScript options.

If you do need to manually add code to your site, make sure to test it out in your PayPal sandbox testing environment before launching it to your live site.  It might seem daunting, but once you get it right, the messaging is there forever. It’s worth the extra effort to introduce your customers to an appealing new payment method.

PayPal also has a dedicated technical support team and a huge developer community you can reach out to, if needed.

While customers pay for their purchase over time, the entire purchase amount (minus applicable fees) is available in your PayPal business account almost immediately. Even if a customer does not pay all their installments, you keep the entire purchase amount. That’s the real beauty of having a large third-party BNPL provider, from a merchant standpoint – they take on all financial risk.

PayPal Pay Monthly: PayPal’s Newest BNPL Option

If you’d like to offer your customers another BNPL option — one that allows your customers to pay on a monthly basis and over a much longer period of time than Pay In 4 does — you can now offer PayPal’s Pay Monthly option to your buyers. With Pay Monthly, your customers can spread out the cost of a purchase over six, 12, or 24 months. Naturally, payment is required on a monthly basis.

While shopping cart totals from $30-$1,500 USD are eligible for the Pay In 4 plan, Pay Monthly skews towards larger cart totals. Purchases of $199 to $10,000 USD are eligible for Pay Monthly. The first payment comes due one month after the purchase date.