PayPal News

To expand its payment options beyond buy now, pay later (BNPL), PayPal has introduced a service it calls PayPal Pay Monthly that allows consumers to spread payments over longer periods.

It also allows users to finance larger purchases. A typical BNPL purchase is broken up into four equal payments that are made every two weeks. Pay Monthly will allow consumers to make purchases of between $199 and $10,000 and make payments for up to 24 months.

After a customer selects Pay Monthly in the PayPal app, they will complete an application at checkout and, if approved, will be presented with up to three different plans of varying lengths. Depending on their credit standing, consumers will be offered an interest rate between 0% to 29.99%.

Similar to a personal loan

PayPal said it is responding to the growing demand for more flexible payment options. Annie Millerbernd, a personal loan expert at NerdWallet, says the new product is actually a personal loan.

“No matter how you brand it, borrowing money and repaying it in monthly installments, plus interest is a loan,” Millerbernd told ConsumerAffairs. 

But she notes Pay Monthly is a little different than a typical personal loan. The amount that consumers can borrow is smaller, and the repayment terms are shorter.

“It’s not surprising that PayPal would want to offer longer-term, interest-generating loans, because the buy now, pay later industry has had a tough few months,” Millerbernd said. “With reports of revenue struggles at some companies and regulators watching the industry, not to mention Apple’s pay later product announcement, it can’t hurt to diversify.”

Popular during the pandemic

BNPL plans grew in popularity during the early days of the pandemic and are now offered by a wide range of fintech apps. But there have also been problems with some consumers getting overextended.

Last September, Credit Karma released research showing that 44% of Americans had used a BNPL plan. Of those consumers, 34% said they have fallen behind on payments.

PayPal Pay Monthly may offer consumers more flexibility, but like any loan product, it should be used carefully. Before choosing it, Millerbernd said consumers should compare options, including the option to pay out-of-pocket instead of borrowing the money.

PayPal said it is eliminating late fees for missed payments when customers use its buy now, pay later (BNPL) service. In the U.S., the new policy on new purchases with Pay in 4 will take effect on Oct. 1.

The company said it is adopting the policy to help consumers who are looking for ways to manage their finances and avoid fees. It cites a recent study showing that a third of consumers believe that having no late fees is an important feature in choosing a buy now, pay later payment option.

Pay in 4 is PayPal’s way of letting consumers make purchases on the installment plan. Instead of putting the purchase on a credit card that charges interest -- often with growing balances -- the purchase is divided into four interest-free equal payments made every two weeks. After the fourth payment, the item is paid for.

BNPL is an increasingly popular feature with young consumers. The study found that 57% of Gen Zers and millennials think the payment option is a smarter way to shop, with many saying it gives them more control over their budgets.

"We know that eliminating late fees delivers an even better buy now, pay later experience that provides incredible value to our consumers and merchant partners,” said Greg Lisiewski, vice president of Buy Now, Pay Later Products at PayPal. "This change is closely coupled with PayPal's mission and values as we seek to remove hurdles that provide financial services to customers of all types while helping our merchant partners succeed in the changing retail landscape."

How merchants benefit

PayPal says merchants also stand to benefit from its Pay in 4 service. It says businesses that offer the service gain additional business from half the customers who use it.

Samsonite, a luggage manufacturer, began offering Pay in 4 shortly after the service launched last October. The company said it experienced a 25% increase in average order value when customers used it.

"We're very excited about PayPal's decision to no longer charge late fees, as it provides value for our consumers while also giving them the reassurance that a missed payment will not incur additional financial penalties," said David Oksman, vice president Marketing & Ecommerce, Samsonite. 

Pay in 4 is available through merchants that accept PayPal and have enrolled in the BNPL program.

PayPal has announced that it’s teaming up with Walmart to allow customers to withdraw cash from their PayPal account at any Walmart store across the country.

The new service will let the companies’ shared customers take out or deposit cash to their PayPal account at Walmart’s service desks, ATMs, or cash registers. Customers will need to have their PayPal app or a PayPal Cash Mastercard to make transactions. Each transaction will come with a service fee of $3.

The payment giant noted in a statement that this is the first time PayPal app users will be able to take out cash from their account balance in a brick-and-mortar environment.

“We are committed to working together to make it simple and easy for people to use PayPal cash in and cash out money services at every Walmart location in the U.S. We look forward to working hand-in-hand to help people and families with their financial services needs,” Dan Schulman, PayPal President and CEO, said in a statement.

Providing “great value”

For its part, Walmart says it is committed to expanding access to products and services like these.  

Daniel Eckert, Walmart’s senior vice president, noted that 90 percent of U.S. consumers live within 10 miles of a Walmart store. He said the new service will offer “great value to the many people who rely on Walmart and PayPal to help manage and move their money.”

The ability to deposit cash through the new system is immediately available, while the ability to take cash out will be available at all Walmart locations across the U.S. by early November.

Earlier this year, PayPal made another move into the mainstream banking space by partnering with Venmo to launch a MasterCard debit card that allows users to make in-store and online payments with their Venmo balance.

PayPal has also previously partnered with Apple, Facebook, and Skype with the goal of launching additional offerings to customers.

Back in 2015, PayPal split away from eBay in an effort to focus on its electronic transactions business. Since then, the company has vigorously pursued agreements with other companies and institutions to increase the number of people who use its service.

In February of 2015, the U.S. Treasury said that it would start accepting payments via PayPal at its Pay.gov site, giving consumers more options on how they can pay fines, penalties, or loan repayments. Even more recently, the company teamed up with MasterCard to offer consumers more tap-and-pay options.

Now, it looks like the online payment company is looking to strike a deal with Amazon. Bloomberg reports that the two companies are discussing the possibility of letting consumers pay for Amazon purchases by using their PayPal accounts. While a verified plan has not been announced, officials say the deal is very possible.

“We’re closing in on 200 million users on our platform right now. At that scale, it’s hard for any retailer to think about not accepting PayPal,” said CEO Dan Schulman.

Potential deal

The potential deal could be pretty attractive to Amazon users who are leery of submitting their credit card information to buy products. In a best-case scenario, the move would allow for more sales on Amazon’s end and create more point-of-sale presence for PayPal.

However, while consumers would enjoy more freedom, some may question whether the deal is actually necessary for Amazon. Back in April, the company announced its own PayPal-like program that would allow customers to use their Amazon accounts to pay for products sold by associated merchants.

However, as Schulman pointed out, the 197 million active users on PayPal may be hard to ignore, despite Amazon’s desire to control payments on its own. Thus far, Amazon has declined to comment on the matter.

PayPal has agreed to pay $15 million in refunds on top of  $10 million fine for signing up consumers for its online credit plan without their permission, the Consumer Financial Protection Bureau (CFPB) announced.

The CFPB said that PayPal deceptively advertised promotion benefits that it failed to honor, signed customers up with permission and made them use PayPal Credit or its predecessor, Bill Me Later, without consent. 

PayPal said it was working to improve its processes.

“PayPal Credit takes consumer protection very seriously. We continually improve our products and enhance our communications to ensure a superior customer experience. Our focus is on ease of use, clarity and providing high-quality products that are useful to consumers and are in compliance with applicable laws,” a PayPal spokesperson said in an email to ConsumerAffairs.

“PayPal illegally signed up consumers for its online credit product without their permission and failed to address disputes when they complained,” said CFPB Director Richard Cordray. “Online shopping has become a way of life for many Americans and it’s important that they are treated fairly. The CFPB’s action should send a signal that consumers are protected whether they are opening their wallets or clicking online to make a purchase.”

Consumers writing to ConsumerAffairs would agree with Cordray.

"I love PayPal but I made the mistake of accepting PayPal credit and debit," said Gayle of Palm Coast, Fla., one of the many consumers who have complained about the service. "I have been trying to close the account online for months, and it wouldn't let me, even with $0 balance and waiting until the payment had processed. I finally called customer service. After four conversations (with helpful agents) and one dropped call, I finally accomplished the task. What a mess!"

Since 2008, PayPal has offered PayPal Credit to consumers across the country making purchases from thousands of online merchants, including eBay. The CFPB alleges that many consumers who were attempting to enroll in a regular PayPal account, or make an online purchase, were signed up for the credit product without realizing it.

The company also failed to post payments properly, lost payment checks, and mishandled billing disputes that consumers had with merchants or the company. Tens of thousands of consumers experienced these issues.

"Deceptive and misleading"

One of them was Chris of Elk Grove, Calif., who posted a ConsumerAffairs review about her experience.

"I ordered and paid for an item using my PayPal account. I thought I was signing in and paying for my purchase - just by following the on-screen prompts. What I didn't realize was that I was signing up for a PayPal Credit account," Chris said. "I did not find this out until I received a bill in the mail about 2 weeks later. It was only for $7.00 but I thought the transaction was complete. I then noticed the $7.00 was for a monthly reoccurring fee for the credit account I had unknowingly opened."

Chris then tried to close the account. She called PayPal and talked to a service rep, who refused to cancel the $7 payment.

"The way PayPal's payment website is designed, it makes it extremely easy for a casual user to sign up for a credit account without the user's knowledge. In my opinion it is a deceptive and misleading business practice. ... I always thought Paypal was reliable and an asset to internet merchandising but I will try to avoid PayPal in the future," Chris vowed.

Settlement terms

Under the proposed settlement announced today, PayPal would be required to:

Pay $15 million in redress to victims: PayPal would reimburse consumers who were mistakenly enrolled in PayPal Credit, who mistakenly paid for a purchase with PayPal Credit, or who incurred fees or deferred interest as a result of the company’s inadequate disclosures and flawed customer-service practices.

Improve disclosures: PayPal would be required to take steps to improve its consumer disclosures related to enrollment in PayPal Credit to ensure that consumers know they are enrolling or using the product for a purchase. 

Pay $10 million civil penalty: PayPal would pay $10 million to the CFPB’s Civil Penalty Fund.

Bitcoin is still not welcome but the U.S. Treasury says it will now accept some payments via PayPal and Dwolla.

The Pay.gov site accepts payments for all kinds of things, including fines, penalties and loan repayments. It even accepts contributions, should you feel the need to give more money to the government.

The government's goal is to move further away from paper-based transactions and more toward electronic ones, which it considers more efficient and secure.

In 2014, the Treasury Department's Fiscal Service office handled $3.73 trillion in revenue by processing 400 million transactions through such programs as Pay.gov. Almost 98 percent, or $3.69 trillion, were settled electronically.

Ebay's PayPal says it will begin accepting bitcoins, a major endorsement of the fledgling virtual currency system. With 152 million registered PayPal users and the world's biggest Web martketplace, Ebay's entry could spur wider use and acceptance of bitcoin by consumers and businesses. 

It could also make Ebay a big transactional player in such fast-growing businesses as Uber and Airbnb, which use Ebay's Braintree as their mobile payment processor. Ebay acquired Braintree last year to expand its mobile-transactions business.

Tens of thousands of PayPal merchants used Braintree as their payment processor, potentially enabling them to accept bitcoin payments for everything from a $2 cup of coffee to an $895 pair of Paul Andrew boots at Neiman Marcus.

Dish Networks, Overstock and Expedia also accept the virtual currency, as do 63,000 smaller businesses. There are estimated to be about 5 million digital "wallets" currently in use. Although an individual could have more than one wallet, the number of wallets is generally considered to translate roughly to the approximate number of users worldwide.

Imaginary currency

Bitcoins are "imaginary" units of currency that exist in online public ledgers that are kept confidential through cryptography. Governments, which are accustomed to having exclusive rights to print money, are somewhat dismayed by the prospect of a global currency that is completely beyond their control but so far have done little to impede its growth.

It's relatively easy for consumers to set up a bitcoin account at sites such as Blockchain and Coinbase. But consumers should be aware that there are no protections similar to the Federal Deposit Insurance Corporation and no help is available for consumers who lose their virtual funds.

Most bitcoin wallets are linked to consumers' bank accounts and it's also wise to be aware that if a consumer loses control of his virtual wallet, evil-doers could clean out the connected bank account.

There's also the little matter of volatility. Bitcoin prices have swung from more than $900 to as low as $341 this year. Today's price is $465.77. 

What is it about tech-company executives and their tendency to conflate “nagging” with “producing a product that people actually want to use?”

Last November, for example, a couple of high-ranking Yahoos embarrassed themselves by criticizing rank-and-file Yahoo employees who agreed with the countless Yahoo customers who've said Yahoo's “new and allegedly improved Gmail-knockoff” email system is absolutely awful.

(Disclaimer: we always thought that if you're a business whose customers hate your new product offering, changing that one product might be easier than changing all your customers' minds. This might explain why we've never been hired as a high-ranking tech executive.)

David Marcus, president of PayPal, takes his nagging farther than any Yahoo exec dreamed of doing. Marcus discovered that PayPal employees haven't been using the new PayPal app to pay for purchases, which upset him so much he suggested they find new jobs. Here's what he wrote in an employee-wide email sent on Feb. 10:

“It’s been brought to my attention that when testing paying with mobile at Cafe 17 last week, some of you refused to install the PayPal app (!!?!?!!), and others didn’t even remember their PayPal password. That’s unacceptable to me, and the rest of my team, everyone at PayPal should use our products where available. That’s the only way we can make them better, and better.”

The “only” way? Listening to actual customer feedback somehow isn't an option? Maybe not, since PayPal customers aren't likely to be as enthusiastic about PayPal as Marcus would prefer. A properly enthusiastic PayPal employee is one who violates various federal and state-level anti-hacking laws to force companies to accept PayPal (and give PayPal a cut of the proceeds), whether said companies want to or not:

“Employees in other offices hack into Coke machines to make them accept PayPal because they feel passionately about using PayPal everywhere. I don’t see these behaviors here in San Jose.”

Lazy bums. Sounds like the San Jose PayPallers' collective work ethic is almost as dismal as that of our own colleagues: we're all allegedly passionate about consumer journalism here, yet none of us hack into other websites to make them accept our articles. Apparently this is a character flaw.

“In closing, if you are one of the folks who refused to install the PayPal app or if you can’t remember your PayPal password, do yourself a favor, go find something that will connect with your heart and mind elsewhere.”

So if you want to work for PayPal, it's not enough that you complete your assigned tasks in an effective and timely manner, nor is it even enough that you use PayPal for your everyday non-business purchases.

No.

You must set aside any notion that PayPal is merely a “job,” or even your “career”; PayPal is, like joining the priesthood or a nunnery, a calling which must “connect with your heart and mind” in addition to your smartphone app sending three percent of all purchases to expand the profit margin of the PayPal company.

PayPal is upgrading its iPhone and Android apps today, making it easier to pay for purchases in stores. It's supposed to make it easier to use various stored accounts, like bank accounts and credit cards, to make purchases.

PayPal executives say that most mobile wallets -- like Google Wallet -- haven't taken off because they're simply too cumbersome, making it more convenient to pull out a credit card or just pay cash. 

That may still be true but PayPal has added or reshuffled several features that it thinks will make the app more popular. For one, it's now easier to send money to friends or pay for certain items iin stores. 

Users will also be able to place and pay for orders ahead in participating restaurants and shops like Jamba Juice, which was one of the first to test the new system. Special offers and coupons will also be more prominently feature, the company said.

PayPal is also making Bill Me Later a payment option.