The National Retail Federation’s “Big Show” came with big announcements for PayPal as it unveiled its new retail services aimed at increasing merchant revenue and adding customer value through new credit options and business consulting.
PayPal said the new services announced Monday (Jan. 12) help the company “move credit more towards the center of [its] brand” of offering payment solutions. PayPal Credit allows merchants the ability to offer its consumers the ability to pay for their purchases in flexible monthly installments and helps merchants create better credit offerings for their customer base. PayPal Credit is available for purchases of $99 and more and is most often used in the purchase of appliances, electronics and high-end retail.
“PayPal is making payments simpler than ever, delivering more value to retailers and driving significant revenue to their bottom lines. We are helping retailers drive sales by increasing Average Order Value (AOV) with the launch of a new PayPal Credit offering and also announcing consulting services that help expand product or international expansion,” said Steve Allocca, VP/GM of Global Credit. “Our global reach into 203 markets allows PayPal to collaborate with merchants and industry partners to create better and secure experiences for people online, in-store and on mobile devices.”
Although specifics on the degree to which Average Order Value increases were not disclosed, consumers who are presented with transactional credit options during checkout have a tendency to increase their spend. For instance, when the option to finance a computer or a phone is presented, consumers tend to go back and select upgraded features, which results in incremental revenue for that merchant.
PayPal Credit offers a simple application and approval process, one that they report requires 60 percent fewer data elements than the typical transactional credit process. The expansion of PayPal Credit is being positioned by PayPal as a more transparent and simpler option for its merchants that allows its customers to divide larger purchases into substantially equal monthly payments — helping the merchants and consumers better manage budgets and work off credit as it works for them. Promotional and payment terms are entirely at the discretion of the retailer. Repayment terms extend anywhere from 6 to 24 months and it is not uncommon for promotional terms to include 0 percent interest for some fixed period.
“For the first time, by leveraging new credit models retailers can customize PayPal Credit to offer a monthly payment option and decide on the number of months and interest rate that works best for their customers. They can also offer interest free options to customers shopping online who are approved in minutes,” Allocca said. “Providing customers with clear and flexible credit terms helps retailers to drive sales by increasing AOV and reducing shopping cart abandonment. And, businesses know their customers best, so it makes sense that they should have the freedom to choose which credit options they want to offer. Merchants are paid immediately and PayPal settles with the consumer.”
PayPal Credit leverages the BillMeLater credit and risk management engine that was acquired by PayPal in October 2008. The Apple store uses PayPal Credit to extend financing terms to customers who wish to finance their purchases with 0 percent down and a fixed payment term.
PayPal also announced its expansion of retail business consulting services aimed at providing a more “customer-centric” model to help its business partners achieve long-term growth. Business consulting services vary based on the size and type of merchant but typically focus on improving customer acquisition and sales conversion. PayPal’s global merchant base and 157-plus million registered consumer accounts provide it with a rich consumer and merchant base which can help merchants improve their offer and, ultimately, increase their sales.
“By helping merchants leverage best practices (reducing cart abandonment, improving conversion, making sales internationally) and offering custom engineered products — we eliminate friction and jumpstart sales. …We are making shopping easier and allowing retailers to connect with their customers in compelling ways to get paid. In the coming days, we will demonstrate even further the value PayPal brings to retailers through new customers, our partners, and new products and functionality,” Allocca said.