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Pay in 4: Should You Offer It?

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The GoCardless content team comprises a group of subject-matter experts in multiple fields from across GoCardless. The authors and reviewers work in the sales, marketing, legal, and finance departments. All have in-depth knowledge and experience in various aspects of payment scheme technology and the operating rules applicable to each. The team holds expertise in the well-established payment schemes such as UK Direct Debit, the European SEPA scheme, and the US ACH scheme, as well as in schemes operating in Scandinavia, Australia, and New Zealand. See full bio

Last editedMar 20223 min read

Part of the growing trend of Buy Now Pay Later (BNPL) payment plans, Pay in 4 programs allow shoppers to split the cost of their purchases into four installments over time. Here’s a closer look at how Pay in 4 works, which apps provide this service, and whether BNPL could be beneficial for your business.

What does Pay in 4 mean?

This term refers to paying off a purchase in four equal installments as part of a BNPL plan. Sometimes called a point-of-sale installment loan, a Pay in 4 service splits the total cost into four equal, interest-free payments. There are a few restrictions to be aware of depending on the app used, but this type of program is appealing to customers who might have difficulty paying a full bill upfront. Compared to using a high-APR credit card to pay bills in 4 payments, a Pay in 4 plan is more affordable.

How do Pay in 4 programs work?

It couldn’t be easier to figure out how to pay a bill in 4 payments with this type of plan. At checkout, the customer chooses the BNPL provider such as Klarna or PayPal as their payment method. The provider or app will split the total purchase cost into quarters. The customer usually pays the first installment at the time of purchase, and the following three at regular intervals over the next few weeks. These interval timings will vary by provider. For example, PayPal’s Pay in 4 program spreads the cost over six weeks. This allows the customer to pay bills in 4 payments without any additional interest charges or fees.

However, late fees might be charged if customers are late with any of their 4 installment payments. It’s important to follow the terms of the payment plan and be sure you have adequate funds in your account.

Popular BNPL Pay in 4 payment apps

With the explosion of BNPL services over the past few years, there are plenty of pay in 4 payments apps for your customers to choose from. Here are a few of the most popular:

Klarna – This BNPL app lets you spread the cost of in-store and online purchases, free of interest, over six weeks. Beyond its Pay in 4 programs, Klarna also offers financing options for larger purchases on credit.
PayPal – Anyone with a PayPal account in good standing can use the popular platform’s Pay in 4 service, provided it’s to purchase eligible products and services. The installment plan applies to any purchases with values between $30 and $600.
Afterpay – Afterpay’s payment terms are also interest-free and spread out over six weeks. In addition to online retailers, Aferpay can be used at select brick-and-mortar locations including Dick’s Sporting Goods, Aveda, and Forever 21.
Affirm – With the Affirm app, customers can opt to split bills into four equal installments paid every two weeks. However, they can also choose monthly installments instead for a flexible range of payment options over time.
Zip – Formerly known as Quadpay, Zip splits bills into 4 installment payments spread out over six weeks. No hard credit check is required, for zero impact on a customer’s credit score. Zip can be used anywhere Visa is accepted, both in-person and online.

Is Pay in 4 right for your business?

BNPL is an increasingly popular payment option, particularly for younger shoppers. A GoCardless survey showed that 42% of all shoppers planned to use BNPL over the festive holiday season in 2021. And when looking at Millennials alone, that figure rose to 60%. Respondents planned to use BNPL as payment primarily for clothing and electronics, although you can use Pay in 4 terms for many industries.

Clearly, offering customers payment methods that best suit their preferences is a good idea. If your business is in the retail industry and caters to a Millennial client base, offering a Pay in 4 option is beneficial. This might entice customers who are otherwise on the fence about making a purchase, with flexible payment terms and no interest.

However, using Pay in 4 payments apps isn’t right for all business models. For example, if you offer recurring subscription services, you might need an ongoing payment plan that goes beyond these basic installments. GoCardless can help with both Pay in 4 and ongoing recurring payments, recently partnering with Klarna to provide bank debit payment options and a more convenient shopping experience for customers.

We can help

GoCardless helps you automate payment collection, cutting down on the amount of admin your team needs to deal with when chasing invoices. Find out how GoCardless can help you with ad hoc payments or recurring payments.