Consumers now have a range of promotional financing deals to choose from the online payments system PayPal that provides zero-interest installment loans to cover the price of their purchase. The terms vary — though they usually range from 6 to 12 months — but all tend to have one thing in common: They tend to attach to bigger ticket purchases, and have a minimum spend attached to them.
What PayPal Credit learned from talking to their customers and merchants — and looking at their spend data — is that those minimum spend floors are often too high for their customers, PayPal’s U.S. Vice President of Consumer Credit Susan Schmidt told PYMNTS.
Today (Sept, 18), and Schmidt says, just in time for the holiday 2019 shopping season, PayPal is rolling out a new promotion that will make it possible for their merchants to offer PayPal Credit customers zero-interest installment financing for any purchase of $30 or more. Called Easy Payments, the promotional financing offer will give customers with a basket size of between $30 and $99 an opportunity to finance that purchase interest-free for three months. Over that amount, Schmidt noted, PayPal Credit customers can use PayPal Credit’s previously existing financing plan — which stretches the payments out interest free over six months.
“Easy Payments will function very much like an installment loan, except that it is sitting on top of an existing line of credit,” Schmidt explained,“We’ve had a version of this feature available for years — our focus here has been how do we make it a slick, fast experience that is beneficial for both merchants and consumers. And so far, merchant response has been overwhelmingly positive.”
How It Works, And Whom It Works For
Schmidt said a large part of PayPal Credit transactions are for purchases below $99, demonstrating “there is clearly activity occurring here.” Moreover, PayPal Credit tends to serve more near-prime customers that other entities their size — as opposed to focusing entirely on prime and super-prime consumers. That means offering a range of financing options — in terms of both products and the types of transactions they can be leveraged again — is particularly important to how PayPal designs products.
“We care a lot about democratizing financial services. We see PayPal Credit as one way to provide credit access in other places where it might not otherwise be available,” Schmidt said.
On the front end — the consumer experience for PayPal’s new installment loan offering is similar to what Schmidt says the customer is familiar with today with a twist. As the consumer shops, their basket reflects both a total price — and what the monthly installment price of their entire basket will be.
At checkout, the customer can select the installment option and they’re done. Because the offer is for PayPal Credit customers who have already been approved for a line of credit, there is no additional application process.
On the backend, Schmidt noted, the addition of the feature is not much more technically complicated — as it is built off of a merchant’s existing integration with PayPal Credit.
“It is literally as simple as copy and pasting a single line of code into that existing integration,” she said, noting that once it is on, PayPal Credit manages the consumer’s digital, reusable credit line on the backend while the merchant just gets paid in full when the transaction is complete — barring a chargeback — which, she noted, are managed in the exact same way they are as they would have been with a regular PayPal purchase.
Merchants participating in the pilot, Schmidt told PYMNTS, have reported seeing increased basket sizes.
Which is why Easy Payments is rolling out for the holidays, but will not be limited to them.
The Seasons And Beyond
When forced to predict on holiday 2019, Schmidt noted that in many ways she expected to see the trends of the last holiday season or two showing up this year — likely in a more exaggerated form. That means the creep of the shopping season forward is expected to continue — and possibly even progress in 2019 such that holiday deals could well be on the shelves, particularly the digital ones, long before Pumpkin Spice is even off the menu.
It’s why, Schmidt noted, PayPal was so fast getting this holiday-shopping-related promotion out to the masses so early. It will be beginning to look a lot like Christmas sooner than anyone expects, and PayPal merchants ought to be ready.
However, Easy Payments, she said, won’t just be arriving early, it will also be staying late, more likely than not permanently.
Its current form, she noted, might change. Seeing the program out in the wild and in mass circulation over the next 18 to 24 months, she noted, will give them much guidance as to what else the offering needs.
“Our point of view is that we are going to learn from the merchants and the customers and probably what we’ll be doing is making tweaks going forward with a goal of optimizing the experience for both parties.”