PayPal Adds Cash Back to BNPL for the Holidays And Expands BNPL to In-Store Purchases

PayPal Holdings Inc. announced it is offering 5% cash back to U.S. consumers using its buy now, pay later payment option for purchases through the end of the year. In addition, PayPal is rolling out its Pay Monthly BNPL option to in-store shoppers.

The moves are expected to make PayPal’s BNPL offerings more “rewarding” and “flexible” as payment options, the company says. PayPal’s Pay Monthly payment option allows users to pay off purchases using 3-, 6-, 12-, or 24-month payment plans with zero dollars down. Users can finance up to $10,000 in purchases. PayPal also offers a Pay In 4 option that splits purchases up to $1,500 into 4 interest-free, bi-weekly payments.

PayPal added the cash-back option as a way to differentiate its BNPL offerings. “The combination of flexible payments and rich rewards is not often available for pay later purchases, which is why we are so excited to offer it during the holiday season when customers are looking for more ways to manage budgets and take their money further,” Michelle Gill, general manager, small business and financial services for PayPal, tells Digital Transactions News by email.  

PayPal sees the cash-back offer as an opportunity to drive more sales for its merchants. More than 80% of consumers who have used or considered BNPL to finance a purchase say they are open to using it for 2025 holiday shopping, according to a Talker Research survey of 1,000 U.S. consumers in September.  PayPal commissioned the study.

“Merchants [that] offer BNPL benefit from repeat purchases, stronger brand loyalty, and customer goodwill – at no additional cost,” Gill says.

Offering BNPL leads to 91% higher average order values for enterprises and 62% higher average order values for small businesses, according to PayPal. In addition, 74% of PayPal’s BNPL transactions are from repeat shoppers, the payments company says. 

“BNPL is a proven way to attract more shoppers and drive higher sales. We see BNPL order values up to 80% higher,” says Gill. “PayPal’s BNPL reduces cart abandonment, boosts conversion, and enables merchants to maximize sales during the holiday season.”

The decision to expand PayMonthly to in-store purchases builds on PayPal’s strategy to extend the reach of its payment options to physical merchants. “Last year, we introduced a new, rewarding debit card offering allowing customers to use PayPal online and in-store, and this is the next phase of our in-store expansion that enables our customers to use PayPal wherever they choose to shop and pay,” Gill adds.

To use Pay Monthly in-store, customers open the PayPal app and apply for their desired loan amount. Upon approval, consumers are issued a single-use virtual card, good for 24 hours, that they can add to their mobile wallet and use with any merchant that accepts Mastercard, Apple Pay, Google Pay or tap-to-pay.