August 2, 2007, 12:00 AM

PayPal adds Pay Later option

PayPal merchants initially will be able to offer 90 days same as cash. Additional promotional financing options are coming.

PayPal merchants can offer consumers a 90-day grace period before they have to make payments in a newly announced enhancement to the PayPal Express Checkout service. PayPal says the Pay Later payment option will increase sales for online merchants, especially of higher-ticket items.

PayPal, a unit of eBay Inc., has offered a promotional financing product called Buyer Credit for three years, mainly to eBay shoppers. Transactions with Buyer Credit are 50% to 250% higher than the typical PayPal purchase on eBay, and 50% of shoppers who use Buyer Credit say they would not have made the purchase were it not for the promotional financing offer, says Chris George, senior director of financial products at PayPal.

While Buyer Credit is a virtual credit card, providing the consumer with a line of credit that can be used for multiple transactions, Pay Later offers credit just for a particular purchase. The shopper enters a date of birth and the last four digits of a Social Security number and the credit provider, GE Money Bank, makes a credit decision based on such factors as the consumer’s credit, the type of merchant and the amount of purchase. That process takes one to two seconds, George says. The shopper need not have a PayPal account.

The Pay Later option is similar to the Bill Me Later payment service that I4 Commerce Inc. provides to more than 500 online merchants. PayPal has the advantage of having data about millions of PayPal account holders to use in the credit-decision process, George says. More than 153 million consumers worldwide have PayPal accounts and slightly over half of them are in the U.S. Pay Later initially will be available only in the United States.

On a Pay Later transactions, merchants pay the standard PayPal transaction fee, which ranges from 1.9% to 2.9% depending on the retailer’s PayPal volume. Asked whether PayPal was subsidizing the Pay Later option by offering the same rates on deferred payments as on payments funded almost immediately, a spokeswoman said the terms of the deal between PayPal and credit provider GE Money Bank were not being made public.

Three retailers are live with Pay Later, including, No. 178 in the Internet Retailer Top 500 Guide. “We’re really excited to be one of the first sites to offer deferred payments through PayPal and give our customers even more choice when they make purchases,” says Dave Gaeta, director of marketing for “We see this as a great new tool to generate even more sales for our business.” The other two online merchants offering Pay Later are electronics retailer and, which sells musical instruments and accessories.

The Pay Later option is available on purchases between $50 and $1,500. More promotional financing offers are planned, such as no payment for six months, deferred interest for 12 months, and fixed monthly payment plans, George says. Those additional features will be available in the coming months.

Pay Later is being added to PayPal Express Checkout, an online wallet that lets consumers register payment cards and their PayPal accounts in order to speed completion of an online purchase.

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