How Buy Now, Pay Later Solutions are Shaping the Future of Shopping

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Retail has been through a hurricane of change in recent decades. First, brick-and-mortar retailers faced the challenge of rising demand for online shopping options.1 Then came a new trend of subscription models2, further changing the shopping experience for customers and forcing retailers to adapt to survive. All this change can be tough for retailers to navigate, but it’s also driving innovative new solutions that can help their business. Look no further than PayPal’s pay later products, a suite of flexible payment solutions that could very well shape the future of shopping.

An edge for retailers during tough times

PayPal’s pay later products were developed with the goal of helping retailers convert more customers without taking on incremental costs at a risky time.

“Pre-COVID, retailers were already struggling to survive and adapt. Layer in the pandemic, and there’s a lot of economic uncertainty. We asked ourselves what we could do besides our tried and true product of PayPal Credit3 to help retailers drive sales by offering customers greater choice and flexibility.” 

Greg Lisiewski, Vice President of Global Pay Later Products at PayPal

The result is Pay in 4, a short-term installment offering that an eligible shopper can choose for an individual transaction during checkout.4 Pay in 4 and PayPal Credit are included in the PayPal Checkout experience, meaning there’s no additional cost or risk for retailers. With Pay in 4, customers make a payment at the time of purchase, with the remaining three equal payments due every two weeks until the purchase is paid off six weeks later.  A customer can buy a $200 pair of sneakers today, for example, with an option to split the purchase into four interest-free payments of $50. 

For customers making larger purchases — let’s say, $1,200 limited edition sneakers, — PayPal Credit, also included in the PayPal Checkout experience, can offer customers the freedom to pay over time. PayPal Credit customers can also enjoy six months special financing on purchases of $99 or more (see consumer terms).  

Buy now, pay later goes frictionless

Remember layaway, the brick-and-mortar purchase option that allowed customers to reserve an item with a seller and pay for it in installments? “Buy now, pay later has been here for a long time with different names,” says Lisiewski, “But it’s the same core value prop. Technology has democratized it, and it’s allowed us to bring a better customer experience.”

PayPal’s pay later products offer a new set of benefits to online shopping without disrupting or complicating the checkout experience customers already know and trust. And this seamless integration benefits retailers as much as shoppers. 

“Pay later options simplify the process of a retailer getting into this space and converting,” Greg says. “And on the customer side, they come to expect and know that they want to take advantage of these features and they can count on PayPal to provide the option.” In fact, 64% of customers say they’re more likely to make a purchase at a retailer that offers interest-free payment options.5

Shoppers are more online than ever 

Digital ad spending is at an all-time high6. In fact, for the first time in history, it’s actually eclipsed traditional ad spending.7 The COVID-19 pandemic has only accelerated the shift toward online shopping, pushing more retailers online as customers withdraw from in-person shopping.8

Today’s customers are shopping on phones, computers, tablets, and even watches. Offering pay later options that scale easily to every website can help keep users from bouncing and abandoning their cart during the checkout process. 

PayPal’s pay later options also come complete with integrated dynamic messaging, which displays messaging for the most relevant pay later offer based on what the customer is shopping for. In fact, businesses with pay-over-time messaging on their site have seen a 56% increase in PayPal average order value.9

2019 PayPal internal data

And 60% of Millennial consumers agree that seeing a pay-over-time offer message early in their shopping experience makes them feel more confident about being able to pay for their purchase.10

The next evolution of online shopping

Dramatic changes in shopping behavior have always been the driving force behind retail’s best leaps forward. The demand for smooth checkouts and safe transactions have shaped the age of ecommerce, and now it’s time for the next level of evolution.11 

PayPal’s pay later products are an effective response to a rising demand for the freedom to pay over time. “The real advantage from a customer perspective is that as retailers accept Pay in 4 and PayPal Credit, shoppers know it’ll be available everywhere for their holiday shopping,” Greg says. “They can use these pay later options everywhere and then manage all of their payments centrally through PayPal.” 

With shoppers moving online en masse while simultaneously tightening their budgets12, PayPal’s pay later options are nicely designed to meet the moment. With the potential dual benefits of more spending power for customers and more sales for retailers, these products could very well reshape the future of shopping. And as we enter what could very well be the biggest online holiday shopping season ever, the evolution is already underway. 

Start offering Pay Later options to customers on your store with the PayPal Checkout extension


1The Future of Retail 2020, Andrew Lipsman, Insider Intelligence Inc, December 19,2019 accessed December 4, 2020

2Can Subscription Ecommerce Catch up to Subscription Media, Peter Vahle, Insider Intelligence Inc, May 22, 2019 accessed December 4, 2020.    

3PayPal Credit is subject to consumer credit approval.

4About Pay in 4: Consumer late fee may apply for missed payments and varies by consumer’s state of residency. Loans to California residents are made or arranged pursuant to a California Finance Lenders Law License. PayPal, Inc. is a Georgia Installment Lender Licensee, NMLS #910457. 

5Online study commissioned by PayPal and conducted by Logica Research in May 2020 involving 2,000 customers, half were PayPal Credit users and half were non-PayPal Credit users May 2020.

6US Media and Entertainment Digital Ad Spending 2019, Ross Benes, Insider Intelligence Inc, July 25, 2019 accessed December 18, 2020.

7Digital Ad Revenue Gains Remains Elusive for Magazines and Newspapers, Ross Benes, Insider Intelligence Inc, April 10, 2019 accessed December 4, 2020.

8US Ecommerce Growth Jumps to More than 30%, Accelerating Online Shopping Shift by Nearly 2 years, eMarketer Editors, Insider Intelligence Inc, October 12, 2020 accessed December 4, 2020.

9Average lift in overall PayPal AOV for retailers with PayPal Credit messaging vs. those without, 2019 PayPal internal data.

10Online study commissioned by PayPal and conducted by Logica Research in May 2020 involving 2,000 customers, half were PayPal Credit users and half were non-PayPal Credit users May 2020.

11Social media shopping has become more popular during the pandemic, Nina Goetzen, Insider Intelligence Inc, November 17, 2020 accessed December 4, 2020  

12While Another Recession Looms, Consumers Continue to Seek Deals, eMarketer Editors, Insider Intelligence Inc, April 19, 2020 accessed December 4, 2020 

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