PayPal Holdings is rolling out its “buy now, pay later” service in Canada as consumers prepare for the holiday spending season. The service allows consumers to split eligible purchases from $30 to $1,500 into four equal, interest-free payments over six weeks, and is available with any merchant that uses PayPal in Canada.
As consumers face more financial pressure during the holiday season, PayPal is betting there will be a greater need for its BNPL tool. BNPL providers, such as PayPal, argue that these short-term loans can help consumers better manage their finances, yet critics contend that overspending remains a risk.
Already available in the U.S., PayPal’s BNPL business is sustaining 20 per cent volume growth quarter on quarter, according to the company’s latest earnings report.
According to retail expert Bruce Winder, the launch comes as Canadian consumer spending remains cautious as the holiday season approaches. Due to economic headwinds, Canadians are turning to discount stores like Amazon or Walmart, and focusing more on essential products, he says.
“We do believe that one of the primary use cases for BNPL is really helping consumers manage their cash flow,” said Michelle Gill, general manager of small business and financial services with PayPal.
The idea is that an instalment structure breaks down payments into smaller, more manageable chunks, aligned with consumers’ paychecks. Gill says younger consumers, in particular, feel more in control when using BNPL because it offers flexibility in how they pay and reassurance that the set instalment schedule will help them pay off what they owe on time.
Consumers are turning to BNPL both because they’re financially stretched — rent and food prices are high while wages have stagnated — and see it as a smarter way to manage their cash flow, Winder says. Consumers might think it will help stagger payments until the new year, when they have more cash coming in.
The risk with BNPL, however, is that consumers might take on more expenses than they can handle. “If you’re not disciplined, it can sneak up on you,” he said. It’s like alcohol, he says. “If you have one drink, you’re fine, but if you have five drinks, 10 drinks, then things start to get bad.”
PayPal joins major BNPL providers Affirm, Klarna and Afterpay, which already offer BNPL services within Canada, in what Michael Liquornik, president of Fin-Serv Advisors, a consultancy firm to the payments industry, calls a “crowded marketplace.”
The vast majority of merchants in Canada that see themselves benefiting from BNPL have likely already adopted the service, he says.
Read More: With debt concerns rising, PayPal jumps into Canada’s already crowded BNPL
