PayPal Enters “Buy-Now, Pay-Later” Wars With Klarna For UK Market

As if running much of the web's financial infrastructure wasn't enough, U.S. tech giant PayPal is now launching a "buy now, pay later" (BNPL) product for its British customers. With this new "Pay in 3" option, the company is taking on the likes of Sweden’s Klarna, whose rival BNLP program, or point-of-sale loans, has recently increased in popularity.

Now, when qualifying British PayPal customers make purchases between £45 and £2,000, they won't have to pay immediately. Instead, PayPal will be giving them the option of three installment payments. Conveniently, the "Pay in 3" option will appear in the customer’s PayPal wallet, so that they can manage their payments online, or via the PayPal app. Once the BNLP option is selected, customers will not have to pay fees or interest for on-time payments. These payments will be monthly and automatic.

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PayPal's BNPL program offers significant benefits to retailers as well. Not only does "Pay in 3" cover the full cost of the goods at the point of sale, meaning that retailers get their money very quickly, but PayPal touts their BNPL service as a way for businesses to drive more sales and revenue. Retailers including Crew Clothing, French Connection, Robert Dyas, and Ryman, have already signed up for the service, which doesn't charge any additional fees to merchants, thus making "Pay in 3" a potentially attractive alternative to rival Klarna.

According to Rob Harper, U.K. director of enterprise accounts at PayPal, this new product is just what their customers need. "During the coronavirus pandemic, we have seen the number of people in the U.K. shopping online increase dramatically. At the same time, many more consumers are looking to spread the cost of those purchases."

Harper also listed Black Friday and upcoming Christmas shopping as two big reasons why PayPal has chosen to launch its consumer credit offering now. Likewise, reports show that BNLP services are the fastest-growing online payment method in the U.K., growing twice as quickly as bank transfers and more than three times the rate of annual growth in digital wallets.

PayPal, having already successfully released a similar product in the U.S., boasts over 24 million active accounts in the U.K. The "Pay in 3" option is the company's latest pay later offering from PayPal Credit, which launched in the U.K. six years ago. And with smartphones becoming the new wallet for many consumers who are forgoing traditional payment methods in-store, PayPal seems to be paying attention to the future.