PayPal Will Introduce Five-Day ‘Floating’ Payment Option

December 11, 2012
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PayPal will soon introduce a new five-day payment “float” option within its digital wallet, Bank Innovation has learned.

Specifically, after a PayPal user makes a purchase with PayPal’s digital wallet, the consumer will soon have five days to choose the method for payment. To explain, let’s say you have a MasterCard, a Visa card and an American Express in your PayPal digital wallet. PayPal will give you up to five days to earmark one of those payment providers for the transaction.

The seller, on the other hand, is paid immediately for the good, which means this five-day “float” will require PayPal (and, by extension, eBay, its parent) to take on the credit risk of the floated payment.

Dan Schatt, PayPal’s GM of financial innovations, said that PayPal will take the risk on payments, although he did not estimate the size of the float for the new five-day payment option. However, PayPal has 117 million customers and expects to exceed $10 billion in mobile payments alone in 2012, so the dollar value of the money floating could be great.

PayPal will not charge a fee for the service, nor will it levy interest. The transaction can be funded by multiple sources, so that, for example, half can go on a credit card while the rest is taken from a checking account. At the end of the five-day period, if no alternative funding instructions have been given, the default funding source linked to the PayPal account will be charged.

PayPal was acquired by eBay in 2002 for $1.5 billion.

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2 Responses to PayPal Will Introduce Five-Day ‘Floating’ Payment Option

  1. V.me Gains Traction | Bank Innovation on February 7, 2013 at 10:47 am

    [...] This is all since Visa officially took V.me, which competes online with PayPal, out of beta last November. V.me launched with 50 banks participating. To compare, PayPal has around 117 million active users. [...]

  2. [...] PayPal’s credit program for purchases using a PayPal account. PayPal also offers a five-day float on international remittances. Collectively, these products amount to a significant risk management [...]

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