The days of simply paying by cash or card are well behind us. As we welcome device-led payments from Apple Pay and break down affordability barriers with buy-now-pay-later, the payment sector is certainly evolving right in front of us.
Buy Now, Pay Later (BNPL) schemes, in particular, have risen to fame, quickly becoming a staple at online checkouts.
Two emerging BNPL stars have been Klarna and PayPal, which not only offer similar credit options but sit next to each other at the bottom of the checkout in direct rivalry.
Below, we will look at these two companies and see what features, fees, and customer experience they provide to help you decide which BNPL option best suits your needs next time you checkout.
Buy-Now-Pay-Later (BNPL) Explained
BNPL services are much like their name says – you can buy an item now and pay for it over time, either in installments or by deferring the full payment.
It was initially popular among younger shoppers, but BNPL has evolved along with advancements in the digital payments space and the growing demand for more flexible payment options.
These schemes are now changing how people shop entirely, becoming a convenient alternative to credit cards.
The BNPL market has exploded in recent years, as in the UK, according to finder.com, it is “forecast to grow from £22.6 billion ($28.7 billion) in 2022 to £44.8 billion ($56.8 billion) by 2028.” And the global BNPL market was even larger, estimated at $753.53 billion in 2022, and expected to grow past $9,226.65 billion by 2032.
(Image Source: ideausher.com)
Companies like Klarna and PayPal are leading the charge in this area, with consumers opting for these BNPL services more often than before. Globally, the market will continue to grow as offerings will be made to meet the increasing demand for flexible payment solutions.
PayPal’s BNPL
PayPal’s Buy-Now-Pay-Later scheme offers consumers a flexible way to pay for purchases over time. Customers can choose to pay in three interest-free instalments or delay the full payment for up to four months on purchases over £99.
The service is seamlessly integrated with PayPal’s existing platform, allowing users to manage payments through their PayPal account. Just watch out for the catch – interest rates of 21.9% p.a. apply if payments are missed, along with potential late fees.
Advantages of PayPal’s BNPL
PayPal’s BNPL is widely accepted by online retailers, and the integration with existing PayPal accounts provides a streamlined user experience. The brand’s established trust and reliability add an extra layer of security for consumers.
PayPal also integrates with in-store POS systems, enhancing the checkout experience by offering seamless payment options.
Disadvantages of PayPal’s BNPL
The main drawbacks include the interest charges on missed payments and the potential impact on credit scores. Additionally, PayPal’s BNPL is only available to merchants that accept PayPal.
Klarna’s BNPL
Klarna’s BNPL scheme offers a variety of payment options, including the ability to split payments into three interest-free instalments or defer full payment for 30 days. Klarna also provides long-term financing options for larger purchases.
The service is known for its user-friendly app, which makes managing payments straightforward and offers a smooth shopping experience.
Advantages of Klarna’s BNPL
Klarna has a great app with flexible payment options, which include interest-free plans for many purchases. The service is widely accepted by many online and in-store retailers, offering a broad range of choices for consumers. Klarna’s integration with major shopping platforms also builds a better overall customer experience.
Disadvantages of Klarna’s BNPL
Klarna’s BNPL does come with potential late fees if payments are missed. Additionally, not all retailers offer Klarna as a payment option.