PayPal offers interest-free installment loans

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PayPal Credits (PYPL) – Get the report from PayPal Holdings, Inc. said on Monday that from the start of the next quarter it would offer interest-free 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 United States, can help merchants drive conversions, revenue, and customer loyalty without taking on additional risk or paying extra fees, while enabling consumers to make a purchase and pay more than 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 wallets, so they can manage their payments in the PayPal app.

Last month, PayPal reported strong second-quarter results. The company posted a 22% increase in revenue to $5.26 billion, with earnings up 49% to $1.07 per share. Analysts had expected revenue of $4.99 billion on earnings of 88 cents per share.

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The numbers represented the company’s best quarter to date.

“Our second quarter performance highlights the benefits of PayPal’s diversification and scale, and our resulting earning power,” Chief Financial Officer John Rainey said in a statement. The San Jose, Calif., company generated $2.2 billion in free cash flow, the executive said.

For the third quarter, PayPal expects revenue to rise 23% from the year-ago period, with earnings rising 25% to $3.88 per share. Analysts expect earnings of $3.39 for the quarter.

PayPal at last check exchanged little changed at $204.60. Shares had climbed 89% year-to-date through Friday.

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