Separate from Pay in 4, PayPal has been offering point of sale financing for more than a decade. It bought Baltimore startup Bill Me Later in 2008 and rebranded it as PayPal Credit in 2014. PayPal Credit lets consumers apply for a lump-sum line of credit and has millions of borrowers today. Like a credit card, it levies high interest rates of about 25% and requires monthly payments. These consumer loans can have a high risk of default, and PayPal doesn’t own most of them—it offloads the U.S.
This past spring, as the pandemic was spreading quickly and concerns spiked about consumers defaulting on loans, PayPal pumped the brakes on lending. “Like many installment lenders, they essentially halted extending loans in March or early April,” MoffettNathanson’s Ellis says. “Squaredid the same.” PayPal senior vice president Doug Bland says, “We took prudent, responsible action from a risk perspective.
With Pay in 4, PayPal’s renewed push into lending is an indication the company is getting more aggressive in a volatile economy where many consumers have fared better than expected so far. Unlike PayPal Credit, PayPal will house these new loans on its own balance sheet. Bland says, “We’re incredibly comfortable in managing the credit risk of this.”
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