powering smart financial decisions

Payments giant PayPal to enter the buy now, pay later sector - how does it stack up?

Payments giant PayPal to enter the buy now, pay later sector - how does it stack up?

Competition in the buy now, pay later sector has just stepped up a notch with PayPal announcing it’s joining the club.

PayPal’s ‘Pay in 4’ option will go live in June and will be automatically available to its 9+ million customers in the PayPal wallet.

Retailers will also be able to integrate the buy now, pay later (BNPL) option onto their own websites.

But how does PayPal’s option stack up against the existing BNPL providers?

PayPal 'Pay in 4'Afterpay
Interest chargedNoNo
Account feesNoneNone
Max credit limitDetermined on case by case basis$2,000
Max individual purchase $50 - $1,500Up to $1,500
Where you can use itAnywhere PayPal is acceptedAffiliated retailers
Payment plan4 instalments over 6 weeks4 instalments over 6 weeks for new customers
Late fees$10 for purchases under $125. $10-$30 for purchases over $125$10 per missed payment, plus $7 if not paid within 7 days. Late fees capped at 25% of the purchase price or $68, whichever is lower

RateCity.com.au research director, Sally Tindall, said: “PayPal’s ‘Pay in 4’ service might have lower late fees than some of the other providers, but that doesn’t mean customers will be immune from getting into trouble.

“It’s not just late fees getting people into trouble. One of the biggest issues is that some people end up overspending using these platforms leaving them with not enough money to pay for essentials.

“The repayments on these platforms typically come out automatically and can therefore blow a hole in people’s budgets.” she said.

Unlike Afterpay, PayPal has not set a standard limit on how much people will be able to borrow, saying it will decide this on a case-by-case basis. “ASIC’s most recent report into the sector found people getting into trouble using buy now, pay later were more likely to have more than one account.

“Another major player in the market could give some people the opportunity to get into more debt unless proper checks and balances are in place. 

“It’s not yet clear how PayPal will assess their existing customers’ ability to repay. The devil could be in the detail.

“We believe all buy now, pay later providers should assess a customers’ ability to repay not just the debt they’re signing up to but all existing debts they might have.

“With over 9 million existing customers to tap into, PayPal’s new buy now, pay later function is likely to give Afterpay and Zip a run for their money.

“The buy now, pay later space is becoming increasingly crowded, particularly with the recent release of CBA and NAB’s no interest credit cards, which make up around 30 per cent of each banks’ new credit card applications.

“While the appetite for buy now, pay later is still growing in Australia, it’s hard to see all of these platforms sticking around,” she said.

Paypal has told RateCity.com.au it is still considering if it will sign up to the newly established buy now, pay later Code of Practice.

Key BNPL services available in Australia – excludes personal loan payments plans.

BNPL providerWhere you can use itPayment scheduleBorrowing limitAccount feesLate fees

“Pay in 4”

Anywhere PayPal is accepted4 instalments over 6 weeks.Single purchases up to $1,500. Total amount varies per person.No interest or monthly fees.$10 per late payment, capped at $30.
AfterpayAffiliated retailers4 instalments over 6 weeks

(8 wks for customers who regularly pay on time).


No interest or monthly fees.$10 per late repayment and an additional $7 if you don’t pay in 7 days. Max fee 25% or $68 whichever is lower.
humm (Little Things)Use at affiliated retailers as well a majority of BPay billers.5  or 10 weekly or fortnightly instalments.


$8 monthly fee charged on payment plans 5 months or greater.$6 for each late payment.
Zip PayAnywhere + BPAYFlexible repayment schedule (weekly, fortnightly or monthly) provided you pay a min $40 / mth.


$6/mth if you have money owing.Late payment fee of $5 after 21 days of not paying the minimum.
Klarna Use in most stores via the Klarna app (excludes supermarkets).Pay in 4 fortnightly instalments. Can extend for 10 days as a one time courtesy.


Up to $7  fee to extend for 2 weeks (dependent on purchase price).$3 - $15, depending on purchase price, per late payment. Max fee is $45. A grace period is provided before the late fee is charged.

Did you find this helpful? Why not share this news?

This article was reviewed by Research Director Sally Tindall before it was published as part of RateCity's Fact Check process.



Related news