Online Consumer Lending

Summary

  • Consumers are finding that new technologies are making online loans more accessible, simple, and affordable.
  • PayPal Credit is a unique credit option that provides consumers access to an instant line of credit at the time of checkout online.

According to the Online Lender’s Alliance (OLA), online loans represent 1/3 of the consumer credit industry, servicing over 17 million individuals.

New Technology is Changing the Game for Online Loans

  • Consumers are finding that new technologies are making online loans more accessible, simple and affordable. Nearly 70 million people in the U.S. and over 2 billion people around the world are considered unbanked or underbanked and forced to turn to alternative lending options. Particularly among millennials, some choose not to have credit cards, which inclines them to seek out these alternative methods of lending.
  • PayPal’s goal is to provide viable credit options for those underbanked or unbanked populations. We are continuously enhancing our ability to underwrite loans based on internal transactional data. More reliable data about the consumer means smarter credit decisions resulting in more options for more people.
  • There are typical policy concerns that could affect online consumer lending, including burdensome rules that may limit the ability for a consumer to access instantaneous credit, legal regimes related to credit that vary by country, and limited access to data from the public and private sector in some regions or countries that could enable better credit risk assessment.

What Are The Experts Saying?

  • Global consulting firm PricewaterhouseCoopers has found the majority of consumers now prefer to apply for loans online, especially young borrowers. [access to full report here]
  • According to the Online Lender’s Alliance (OLA), online loans represent 1/3 of the consumer credit industry, servicing over 17 million individuals.[access to full report here]

How Does PayPal Credit Work?

  • With PayPal Credit, consumers have the flexibility to pay over time or divide larger purchases into predictable monthly payments, giving them greater visibility into their finances and helping them to better manage their budgets.
  • In 2015, PayPal Credit TPV grew 27% faster than PayPal overall. This growth has continued as the demand for capital grows with consumers and businesses.
  • Some small and mid-sized merchants saw up to a 68% larger transaction sizes for customers when offering PayPal Credit compared to offering only credit/debit payment options.

Our Vision

PayPal encourages regulators to consider rules that don’t stifle innovation, but rather encourage it. Regulation should not limit the ability to offer an instant line of credit through a waiting period or other roadblocks; there should be a harmonization among divergent regulatory regimes around the world; and, there should be greater access to good data from governments and credit agencies.