Microsoft Launches PayPal BNPL Solution In US, Europe And Beyond

August 1, 2023
Microsoft has announced that PayPal Pay Later can now be used to pay for Microsoft items in the US, Europe and Australia, while Microsoft has also expanded its tie-up with Venmo.

Microsoft has announced that PayPal Pay Later can now be used to pay for Microsoft items in the US, Europe and Australia, while Microsoft has also expanded its tie-up with Venmo.

In the US, UK, France, Spain, Italy and Australia, Microsoft customers can now use PayPal’s buy now, pay later (BNPL) solution when purchasing items from the Microsoft Store.

In the US, Australia and France, PayPal will offer Pay in 4 plans on purchases of up to $2,000 or €2,000 respectively.

While in the UK, Spain and Italy, PayPal will offer Pay in 3 plans on purchases of up to £2,000 and €2,000 respectively.

An additional feature will launch in the US only, whereby Microsoft customers can sign up to a monthly repayment plan on orders of between $199 and $10,000.

This feature, known as PayPal Pay Monthly, is a traditional credit agreement with interest applied.

When checking out via the Microsoft Store, customers can use a PayPal calculator to estimate their repayments over a six-, 12- or 24-month period.

At present, the standard interest rate quoted is 22 percent, although PayPal said this can vary from between 10 and 36 percent depending on the customer’s creditworthiness.

Additionally, there are no late fees or down payments when using PayPal Pay Monthly.

Kurt Campisano, SVP of strategic accounts at PayPal, said the partnership is a show of confidence in the long-standing relationship between Microsoft and PayPal.

"For over 16 years, PayPal checkout has been a trusted method for Microsoft Store customers to purchase products like Surface devices, Xbox consoles and the Microsoft 365 product suite," he said.

"We are thrilled to expand our partnership with Microsoft to offer them access to our full suite of capabilities that will create a beautiful customer experience across the entire shopping journey."

Shift in PayPal’s BNPL strategy

The partnership is the first major BNPL announcement from PayPal since the company sold its European BNPL loanbook to American investment firm KKR in June this year.

Under the agreement, as covered by VIXIO, KKR will purchase up to €40bn of current and future PayPal Pay Later loans originated in France, Germany, Italy, Spain and the UK.

KKR's private credit funds and accounts will acquire the loan portfolio, but PayPal will continue to handle all customer-facing BNPL activities in Europe, including underwriting and servicing.

Gabrielle Rabinovitch, senior vice president and acting chief financial officer at PayPal, said the main reason for outsourcing its BNPL receivables is to free up capital for other corporate uses.

When the deal closes later this year, PayPal expects to raise about $1.8bn from KKR, which will be used to increase capital return to shareholders and to fund share buybacks.

Since launching its first BNPL offering in 2020, PayPal has issued more than 200m loans to more than 30m customers in eight markets through PayPal Pay Later.

In 2022, PayPal processed more than $20bn in BNPL payments globally — an increase of about 160 percent above the previous year.

Venmo expands Microsoft footprint

In addition to the BNPL expansion, Microsoft has expanded its integration with PayPal-owned Venmo in the US.

Previously, Venmo was available as a payment option on the Microsoft Store only via the Xbox console. However, over the coming months, Venmo will be integrated throughout the Microsoft Store on all devices.

Payments integrations have been a prominent theme for Microsoft and PayPal so far in 2023.

In May, Microsoft also launched an integration of PayPal within Microsoft Teams, allowing users to request and accept payments within the instant messaging platform.

Although the feature is still in testing, it will ultimately be rolled out to more than 300m users of Microsoft Teams. Similar integrations have been added for Stripe and GoDaddy Payments.

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