PayPal Expands Buy Now Pay Later: Can it Fuel Growth in 2025?

PayPal is aggressively expanding its Buy Now, Pay Later (BNPL) services, launching "Pay in 4" in Canada and securing a significant two-year agreement with Blue Owl Capital for the purchase of approximately $7 billion in U.S. "Pay in 4" loans. This strategic push follows over 20% year-over-year growth in BNPL total payment volume and active accounts in Q3 2025, with the company projecting $20 billion in BNPL TPV for the year. Despite a 21.5% year-to-date stock decline, PayPal's shares are considered undervalued at 11.44x forward P/E, and analysts have revised 2025 EPS estimates upward, suggesting potential for growth driven by these BNPL initiatives.

Analysis

PayPal (PYPL) is aggressively expanding its Buy Now, Pay Later (BNPL) offering, notably launching "Pay in 4" in Canada for purchases between $30 and $1,500, and extending payment terms in Italy and Spain. This strategic push follows robust performance, with Q3 2025 BNPL total payment volume (TPV) and active accounts growing over 20% year-over-year, positioning the company to process nearly $20 billion in BNPL TPV for 2025. This indicates strong traction in a competitive market segment.

Key strategic initiatives underpin this growth, including a 5% cashback incentive for U.S. BNPL online purchases and a significant two-year agreement with Blue Owl Capital (OWL). Under this deal, Blue Owl-managed funds will purchase approximately $7 billion of PayPal's U.S. "Pay in 4" loans, effectively offloading credit risk and optimizing PayPal's balance sheet for further expansion. These moves enhance customer acquisition and capital efficiency.

Despite a 21.5% year-to-date stock decline, PayPal shares appear undervalued, trading at 11.44x forward 12-month P/E, a substantial discount to the industry's 20.65x. Analyst sentiment is improving, with full-year 2025 EPS estimates revised upward over the past month, projecting 14.6% year-over-year growth. This suggests that current valuation may not fully reflect the potential impact of BNPL growth and strategic capital management.

Key Decisions for Investors

• Investors should consider PayPal's current valuation discount relative to its industry, especially given the upward revision in 2025 EPS estimates and robust BNPL growth metrics.
• Monitor the execution and financial impact of the Blue Owl Capital deal, as it significantly de-risks PayPal's BNPL loan book and frees up capital for further strategic initiatives.
• Evaluate the sustainability of PayPal's BNPL growth and its ability to maintain market share against competitors like Block and Affirm, particularly as global expansion continues.