What is PayPal Pay in 4 and how does it compare to Afterpay?

PayPal is introducing a buy now pay later service in Australia. Find out how it works and how it stacks up against Afterpay.

PayPal is taking on the likes of Afterpay and Zip, announcing it plans to roll out its own buy now pay later service – PayPal Pay in 4  – to more than 9 million PayPal Australia accounts by early June 2021. The service is already available in the USA.

“Australian consumers are looking for more choice and flexibility and PayPal Pay in 4 gives them yet another way to purchase securely using PayPal,” said Andrew Toon, general manager, payments, PayPal Australia.

“Shopping habits are changing at an unprecedented rate. During the pandemic we saw more than two million Australians start shopping online for the first time,” added Mr Toon.

What is PayPal Pay in 4?

It is essentially a buy now pay later service which allows you to purchase an item without paying for it in full upfront. Instead, you pay it off in four equal, interest-free instalments.


PayPal Pay in 4 on Device
Image source: PayPal

How does PayPal Pay in 4 work?

PayPal Pay in 4 lets you split eligible purchases, from $50 to $1,500, over four equal, interest-free instalments. The first payment is made at the time of purchase and the remaining three will be made with automatic repayments drawn every two weeks.

For example, let’s say you purchase an item for $500, you will pay $125 upfront and then make $125 repayments each fortnight. So, essentially you have to pay for the purchase in six weeks. Afterpay, Klarna and Sezzle are set up this way as well, while other buy now pay later platforms work differently.

According to PayPal, Pay in 4 will be available as an option in the PayPal wallet for “customers with accounts in good standing, subject to eligibility criteria and suitability checks”. You’ll just need to use the standard PayPal button to pay for your purchase and Pay in 4 will appear at checkout in the PayPal wallet as a payment option. Businesses can also present PayPal Pay in 4 as a distinct payment option on their website.

PayPal’s Buyer Protection will also apply for transactions made using PayPal Pay in 4, which means that if a product does not arrive PayPal can refund the full purchase price, including delivery.

How much does PayPal Pay in 4 cost?

Like most buy now pay later platforms PayPal Pay in 4 won’t charge you a fee unless you miss a payment.

  • For purchases under $125 there is a $10 late payment fee, charged one time only per plan and therefore capped at $10.
  • For purchases over $125 there is a $10 late payment fee per missed payment with a cap of $30 (3 x $10).

Where can I use PayPal Pay in 4?

PayPal Pay in 4 will be available for consumers to use at hundreds of thousands of Australian, and millions of global businesses, where PayPal is accepted, according to the announcement.

It will not be available for certain purchases including gaming, gambling, digital gift cards or for certain transactions including person-to-person transfers.

How does PayPal Pay in 4 compare to Afterpay?

Afterpay is currently one of the most popular buy now pay later options in Australia. According to Power Retail, 77% of Australia’s top 100 online retailers offer Afterpay. As mentioned earlier, PayPal Pay in 4 will work the same way as Afterpay by allowing purchases to be repaid in four equal, interest-free instalments.

Both also charge no fees if payments are made on time but will charge late fees on missed repayments. It’s worth noting that research by the Australian Securities & Investments Commission (ASIC) indicated that 21% of buy now pay later users who were surveyed missed a payment in the 12 months to June 2019. ASIC also found that missed payment fee revenue for all buy now pay later providers in its review totalled over $43 million in the 2018–19 financial year. This is an increase of 38% compared to the previous financial year.

So how do the fees stack up? While both charge a late fee of $10, Afterpay charges a further $7 if the payment remains unpaid seven days after the due date. This can really bring up the costs, as you can see in the table below which shows the potential late fees on a $500 purchase based on a number of different hypothetical scenarios.

Potential Late Fees on a $500 Purchase: Afterpay vs PayPal Pay in 4

Afterpay PayPal Pay in 4
Pay on time $0 $0
Miss one payment, repay 5

days after due date

$10 $10
Miss one payment, repay 10

days after due date

$17 $10
Miss two payments, repay 5

days after due date

$20 $20
Miss two payments, repay 5

days after due date

$34 $20

Source: www.canstar.com.au. Prepared on 11/03/2021.

The cap on the fees also vary between the providers. With PayPal Pay in 4 late fees are capped at $10 for purchases under $125 and $30 for purchases over $125. With Afterpay a cap of $10 applies for each order below $40 and late fees are capped at 25% of the original order value or $68 (whichever is less) for each order of $40 or above.


Cover image source: William Potter (Shutterstock.com)

This article was reviewed by Editor-at-Large Effie Zahos before it was published as part of our fact-checking process.


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