Celebrating the holidays can be financially stressful for many consumers due to financial strain. To ease this burden, PayPal is expanding its buy now, pay later program by introducing cash back rewards on BNPL purchases and extending functionality to in-store purchases.

Enhanced Capabilities

PayPal first launched installment loans five years ago, adding monthly payment options a few years later. These offerings were previously limited to e-commerce transactions but are now being extended to in-store purchases through its installment plans.

For the holiday season, PayPal is offering 5% cash back on all BNPL purchases—both online and in-store—through the end of the year as an incentive.

Strained Households

The difficult macroeconomic environment has stretched many household budgets to their limits. Around 60% of U.S. consumers are more concerned about their holiday spending this year.

Shoppers are becoming more strategic with their budgets and payment choices, often prioritizing where their dollar goes the farthest and taking advantage of loyalty programs and rewards. Many are also paying closer attention to payment methods that provide the best value for their money.

Buynow Pay Later Alternatives

With credit card debt at all-time highs, BNPL services have become an attractive alternative. These services often require minimal or no fees and typically don’t necessitate a credit check.

Buynow pay later (BNPL) providers like Klarna, Affirm, and Afterpay have reported rare delinquencies with Klarna noting a rate of less than 1%. Despite concerns about loan debt not being reflected in credit scores, consumers are likely to continue using these services for the holidays.

According to PayPal’s research, over 80% of shoppers who have used or considered BNPL plan to use it for holiday shopping.