PayPal Holdings (PYPL) – Get Report said on Monday that beginning early next quarter, it would offer no-interest installment loans to consumers, an effort to compete with smaller companies like Klarna and Afterpay. AFTPF
“Pay in 4, a short-term installment offering for customers in the U.S., can help merchants drive conversion, revenue and customer loyalty without taking on additional risk or paying any additional fees, while enabling consumers to make a purchase and pay over four interest-free installments,” PayPal said.
The loans will apply to purchases between $30 and $600 over a six-week period. Consumers pay no fees. Pay in 4 will appear in consumers’ PayPal wallet, so they can manage their payments in the PayPal app.
Last month, PayPal reported strong second-quarter results. The company reported a 22% increase in revenue to $5.26 billion, with earnings up 49% to $1.07 a share. Analysts were expecting revenue of $4.99 billion on earnings of 88 cents per share.
The numbers represented the company’s strongest quarter to date.
“Our second quarter-performance highlights the benefits of PayPal’s diversification and scale, and our resulting earnings power,” Chief Financial Officer John Rainey said in a statement. The San Jose, Calif., company generated $2.2 billion of free cash flow, the executive said.
For the third quarter, PayPal expects revenue to grow 23% from the year-earlier period, as earnings advance 25% to $3.88 a share. Analysts are expecting earnings of $3.39 for the quarter.
PayPal at last check traded little changed at $204.60. The shares had soared 89% year to date through Friday.