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How will PayPal’s arrival impact BNPL investors?
US payment giant PayPal has announced that it will bring its ‘Pay in 4’ option to the Australian market by June, but is unlikely to impact the BNPL players as much as investors would expect, an industry expert explains.

How will PayPal’s arrival impact BNPL investors?
US payment giant PayPal has announced that it will bring its ‘Pay in 4’ option to the Australian market by June, but is unlikely to impact the BNPL players as much as investors would expect, an industry expert explains.

Around six months ago, PayPal started rolling out its ‘Pay in 4’ offering in the United States, the payments giant announced that it was extending this credit to 9 million Australian customers.
The announcement of PayPal’s arrival follows a poor month for BNPL sector, with Afterpay shares falling 32 per cent from their peak in February, while ZIP fell from a high of $13.92 to a low of $8.78.
PayPal said it would roll out its new ‘Pay in 4’ system at the end of the financial year in June following customers wanting more choice and flexibility with their purchases.
“Our Australian business customers have been requesting buy now, pay later functionality from us, and we’re excited that we can offer PayPal Pay in 4 to them at no additional cost,” PayPal Australia’s general manager payments, Andrew Toon, said in a release announcing the new service.
“Shopping habits are changing at an unprecedented rate, and during the pandemic we saw more than 2 million Australians start shopping online for the first time. We will continue to support Australian businesses of all sizes to adapt to rapidly changing consumer behaviours by evolving our service to meet their needs.”
Like other buy now, pay later services (BNPL), Pay in 4 lets customers pay off larger purchases across four equal fortnightly instalments. It can be used for purchases between $50 and $1,500.
Both BNPL and PayPal offer similar late instalment fees for consumers, but PayPal states it will offer merchants around 1 percentage point less than many of the BNPL sector.
Analysts have pointed to PayPal’s current reach of nearly 400 million customers and lower merchant fees as the main threat to the Australian BNPL sector.
However, RMIT senior lecturer Dr Angel Zhong said the market had previously reacted last year to PayPal’s impending arrival and is not expecting a major change in investor sentiment towards the sector.
“There is uncertainty in PayPal’s game in the BNPL space. In fact, PayPal hasn’t done so well in this space. PayPal actually launched something similar in the spirit of BNPL services in 2010 and 2016, but it did not work well,” Dr Zhong explained.
“Also, it is also about consumer perception on PayPal as more of online payment services offering, whereas the existing players in BNPL do well in both online and physical stores. I do not think PayPal’s entrance would lead to substantial drop in BNPL stocks.”
However, the behavioural financial expert opined that retail investors rarely act rational to new competition in the market.
“If a big competitor enters into a saturated market, it is bad news for existing players. If a big competitor enters into a relative new market, it could be good news as it is raising more consumer awareness of this new service. The raising awareness could spillover to existing companies,” Dr Zhong explained to nestegg.
“In terms of whether investors react rationally, research evidence shows that retail investors in aggregate lose money in trading, in which irrational reaction partly explains the losses.”
The market shrugged off the new arrival, with Afterpay shares opening up 8.3 per cent higher at $116, while ZipPay also had a strong start opening at $9.20 or 4.78 per cent higher.
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