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PayPal (PYPL) Rolls Out Pay Monthly, Bolsters BNPL Efforts

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PayPal (PYPL - Free Report) has unveiled a buy now pay later solution (BNPL) called PayPal Pay Monthly to deliver an enhanced payment experience to merchants and their customers.

Notably, the new solution lets customers break the total cost of their purchased item into monthly payments over 6-24 months without any late fee.

The solution is applicable for purchases worth between $199 and $10,000. It backs these purchases by PayPal Purchase Protection.

Customers will have the option of making payments either by using their debit cards or from their bank accounts. Further, they will be able to track and manage their payments via the PayPal app as well as online.

Pay Monthly is available at several retailers and brands like Outdoorsy, Samsonite, Fossil and Advance Auto.

We note that customers can avail the new service by completing an application at checkout. On approval, they will receive three plans with an annual percentage rate (APR) of 0-29.99%.

Pay Monthly is currently available in the United States.

The latest move is in sync with the company’s commitment to delivering a seamless, flexible payment experience through the constant strengthening of the portfolio. This is likely to continue driving the company’s momentum among customers.

This, in turn, will likely help the stock rebound in the near term.

Coming to the price performance, PayPal has lost 59.8% on a year-to-date basis compared with the industry’s decline of 53.6%.

Growing BNPL Efforts

The latest move bodes well for PayPal’s growing BNPL efforts. The move will strengthen the company’s global footprints.

Apart from the launch of Pay Monthly, the company’s acquisition of Paidy — a Japan-based BNPL solution provider — remains noteworthy.

The introduction of the Pay in 4 service — PayPal’s first BNPL solution in Australia — is another positive. The service is free of any interest, payment fees and sign-up fees.

PayPal also stopped charging late fees for missed payments on BNPL products. Customers availing of Pay in 4 in the United States, Pay in 3 in the U.K., and Pay in 4X in France are not charged late fees for missed payments.

We believe that all the endeavors make PayPal well-poised to capitalize on the growth prospects in the BNPL market.

Per a report from Precedence Research, the global BNPL market is expected to hit $3.3 trillion by 2030, witnessing a CAGR of 43.8% between 2021 and 2030.

Rising Competition – A Risk

We note that PayPal, which currently carries a Zacks Rank #5 (Strong Sell), faces stiff competition from players like Block (SQ - Free Report) , Affirm (AFRM - Free Report) and VISA (V - Free Report) , which are also making strong efforts to bolster their presence in the booming BNPL market.

You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Block offers Square Installments, which enable small business clients such as hairdressers and car part sellers to offer the flexibility of payment in installments to their customers.

Block recently purchased the Australian BNPL giant Afterpay, which enables merchants to offer a pay later option to their customers. Notably, Afterpay has nearly 1 lakh global merchants across various verticals like fashion, homewares, beauty and sporting goods.

Affirm is riding on its strategic partnerships. Its collaboration with Amazon to provide installment payment services to shoppers on the latter’s platform remains noteworthy. Affirm’s partnership with Shopify is another positive.

Affirm, with its partnership with Peloton, made its foray into Australia, which, in turn, aided its presence in the Asia Pacific region.

Meanwhile, VISA provides a BNPL facility called Visa Installments, which includes three installment models — Pre-Purchase, During Purchase and Post-Purchase, to help customers with flexible payments.

VISA offers its BNPL solution in countries like the United States, Canada, Russia, Australia and Malaysia.