PayPal vs Klarna: US payment giant launches rival ‘buy-now, pay-later’ service

Payments giant PayPal is going head-to-head with European fintech Klarna following the announcement today that it’s launching a rival ‘buy-now, pay-later’ option.

PayPal’s Pay in 3 is identical to Klarna’s offering, and similar to those of Laybuy and Afterpay/Clearpay, letting you split payments over a number of months interest-free.

The US payments group announced a handful of launch partners including Crew Clothing, French Connection and Robert Dyas who will be rolling out the service in the UK from late October.

However, given the breadth of PayPal’s payment processing coverage among retailers, and unlike Klarna which only focusses on pay-later, Pay in 3 will likely be adopted by many more later this year.

Unlike Klarna though, it seems PayPal’s Pay in 3 is only available on purchases of at least £45 and up to £2,000, which could limit some of its appeal for smaller and much larger spenders.

“During the coronavirus pandemic, we have seen the number of people in the UK shopping online increase dramatically. At the same time, many more consumers are looking to spread the cost of those purchases,” said PayPal’s UK director of enterprise accounts Rob Harper.

“We have developed PayPal Pay in 3 to meet that need, building on our heritage as a responsible lender through PayPal Credit, which we launched in the UK in 2014, and has served more than 2m customers to date.”

Harper pointed to the upcoming months of Christmas shopping and Black Friday on 27 November as two reasons as to why PayPal had chosen to launch its consumer credit offering now.

Pay in 3 is just the latest move of PayPal into the world of credit, with its SME-focused PayPal Working Capital passing a £1bn milestone in the UK last year.