Online shopping using installment payment services

8 December 2017

Shopping is an exciting experience bringing a bunch of emotions along with purchased items serving their intended purposes. However, shoppers may not always have those days, when every purchase is affordable all at once, and some customers give their nod to services providing installment payments, which appear more convenient as the large amount is divided into smaller parts. While this practice has become very common for physical stores, what options do Internet surfers have to shop online by paying in parts?

PayPal Credit

PayPal Credit, or BillMeLater, as it was previously known, was the pioneer in the online credit payments, providing access for additional financing to customers, who suddenly run out of their budget, but they have good credit history and are able to return the borrowed amount for a purchase. PayPal Credit is offered by a number of high-end retailers such as Wal-Mart, Best Buy, and others.

To put it more simply, PayPal Credit is a special credit line backed by Comenity Capital Bank, an industrial bank issuing credit cards for retailers, and using this credit line customers have the flexibility to make a purchase now and pay for it over time.

In order to start using PayPal Credit, a customer needs just to select this as a payment option during checkout when shopping online. The system will ask the user to provide his/her date of birth and Social Security number, after which the customer has to press “Agree with the terms” and file the application for a PayPal Credit account. PayPal responds back with the decision in a matter of seconds reporting to the given user if he/she is approved. PayPal Credit account is automatically linked to PayPal account and the shopper will see it as a payment method every time making a purchase online and going to checkout with PayPal.

PayPal Credit charges no annual fees, however, there are charges on late payments. If the customer fails to pay the full balance before the due date, PayPal Credit may apply APR (annual percentage rate) for standard purchase and APR for cash advance, which is 19.9%. For purchases over $99 customers have a period of 6 months to pay their debt in full.


KlarnaKlarna is a Swedish response to PayPal Credit, as from the time of its inception it has had an ambitious goal to replace a conventional use of credit cards with its founder calling the platform ‘a bank’. Klarna allows customers to try the items first and pay later, and as of today 40% of ecommerce sales in Sweden are processed by Klarna.

In order to start using the service, customer will just need to enter their email and shipping address when they shop online with any participating retailer without a strict requirement to register an account or provide card or bank details. Klarna bears all risks associated with the payment for a retailer, encouraging customers to spend more, as an increasing number of shoppers decline their online purchases because of long checkout process and no incentives provided by stores. After the item is sent to a shopper, Klarna pays directly to the store and sends an email message to a consumer providing the grace period of 14 days or longer, and within that time the shopper either pays the full amount or returns the purchase.

In order to ensure safety and guarantee return of the lent money Klarna implements a dedicated technology that scans the shopper to determine whether he/she is a legitimate individual with a good credit score. If a shopper fails to return the money, Klarna uses the services of a collection agency. Thus, according to Brian Billingsley, executive for North American operations of Klarna, notes that the overall loss rate of the company are comparatively lower than that of leading credit card firms.


AffirmAnother major player in the ‘buy now pay later’ services market is Affirm, a company, headquartered in San Francisco, providing installment loans to customers at participating online stores. Affirm is good for people wishing to buy an item without immediate access to cash or a credit card. The lending firm provides short-term and long-term loans for periods of three to twelve months.

In order to start using Affirm, users may go two ways: select it as a payment option at a checkout or apply for Affirm credit card by downloading the application or registering on the company’s website. In the first case a shopper needs to provide such details as phone number, name, Social Security number and email address. It will take some time for Affirm to conduct a credit check, after which the loan is either approved or declined. APR charged by Affirm ranges from 10 to 30%, and the loan amount vary between $1,000 and $10,000.

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