PayPal Inc. PYPL is strengthening its buy now, pay later (BNPL) offering to enhance branded checkout, attract new customers and help merchants generate higher basket sizes. As consumers increasingly seek flexible payment options, BNPL is becoming an important driver of PayPal's checkout growth strategy.
PayPal identified checkout as a major growth opportunity, noting that digital wallets continue to gain traction as consumers prioritize convenience, security, rewards, loyalty benefits and flexible payment options like BNPL. The company also described BNPL as an important driver of customer acquisition and said the offering remains underpenetrated across its user base, leaving significant room for growth.
Beyond driving customer acquisition, BNPL benefits merchants by encouraging larger basket sizes and improving checkout conversion, supporting higher payment volumes across PayPal's platform. The momentum is reflected in operating performance. During the first quarter, BNPL volume increased 23% year over year, highlighting strong consumer adoption.
PayPal is also investing in expanding BNPL usage. Management said transaction margin growth was partially offset by strategic investments aimed at improving customer habituation and selection rates across branded checkout and BNPL. Likewise, transaction take rate declined partly due to product mix and continued investments in branded checkout and BNPL.
However, BNPL also brings credit and funding considerations. As part of PayPal's broader credit receivables business, its growth depends on effective credit risk management and the successful sale of receivables to third parties. Balancing these risks with continued adoption will be key to sustaining BNPL's long-term contribution to checkout growth.
How Are PYPL’s Competitors Fairing?
Affirm Holdings AFRM offers transparent installment loans, checkout financing and merchant integrations across retail, travel, electronics and e-commerce. Affirm’s latest quarter showed $11.6 billion gross merchandise value (GMV), up 35% YoY, $1.04 billion in revenues, up 33%, and 26.8 million active customers, strengthening AFRM’s BNPL position.
Klarna Group KLAR offers BNPL at a global scale. In first-quarter 2026, Klarna reported $33.7 billion GMV, up 33% YoY, $1 billion in revenues, up 44%, and $68 million in adjusted operating profit. KLAR’s merchant network, app tools and U.S. growth make KLAR relevant to PayPal.
PYPL’s Price Performance, Valuation & Estimates
Shares of PayPal have declined 1.6% over the past three months, underperforming both the broader industry and the S&P 500 Index.
In terms of forward 12-month P/E, PYPL stock is trading at 8.14X, which is at a significant discount to the Zacks Financial Transaction Services industry’s 18.5X.
PayPal’s estimate revisions reflect a positive trend. The Zacks Consensus Estimate for full-year 2026 EPS has been revised upward over the past week.
PayPal currently carries a Zacks Rank #4 (Sell).
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PayPal Holdings, Inc. (PYPL): Free Stock Analysis Report
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Klarna Group plc (KLAR): Free Stock Analysis Report
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