While not entirely unique, PayPal introduction of a 5% cashback offer on Buy Now, Pay Later (BNPL) purchases for the 2025 holiday season is a notable development in the fintech industry.
This week, PayPal launched a new cashback program for U.S. customers, offering 5% cashback on all Buy Now, Pay Later (BNPL) purchases till the end of the year, right in time for the holiday season.
The offer will be automatically applied when saved in the PayPal app. It covers all eligible BNPL purchases made both online and in-store through the end of 2025. Besides that, PayPal is also rolling out its Pay Monthly BNPL option to in-store purchases, providing more flexibility for shoppers.
While the concept of offering cash back on BNPL transactions is not new per se, PayPal’s initiative stands out due to its scale, integration, and timing.
First, a combination of cash back rewards with BNPL services is relatively rare. This integration encourages consumers to use BNPL services more frequently and can potentially increase customer loyalty.
Among other popular BNPL providers, which offer the same benefits we could name only:
- Tabby (UAE) lets local shoppers earn cash back on purchases from brands like Shein, Adidas, and IKEA. The fintech company currently operates exclusively in the Middle East.
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OnePay, a fintech company backed by Walmart, offers a BNPL service, but a 3% cash back reward is limited to Walmart purchases.
However, these companies offer similar incentives in different regions and contexts. Meanwhile, for the wider U.S. market, this initiative is unique and, thus, even more valuable.
As we know, last holiday season, around 16% of American shoppers planned to resort to buy now pay later (BNPL) services to spread out the purchase cost, compared to 20% preferring traditional credit card purchases. However, this year, the share of consumers opting for BNPL is growing. Almost one-third of U.S. shoppers plan to use BNPL this holiday season.
The growth of BNPL adoption coincides with a growing trend among BNPL providers to enhance customer loyalty and attract more users by offering additional financial benefits.
PayPal’s 5% cash back offer on BNPL purchases is a wise strategic move to attract holiday shoppers and differentiate itself in the competitive BNPL market. By combining financial incentives with flexible payment options, PayPal can hit two birds with one stone, not only enhancing the shopping experience but also supporting consumers during the holiday season.
To begin with, the offering of cash back incentivizes more purchases through PayPal, increasing transaction volume and engagement. The launch timing aligns perfectly with the holiday shopping season, when consumers are looking to maximize value and manage cash flow.
Cashback on BNPL purchases gives customers just what they want: BNPL allows users to spread costs over time, and the cash back effectively reduces the net cost of purchases. This is especially appealing during the holidays when budgets are tight and big-ticket purchases are common.
Furthermore, while many BNPL providers offer installment options, few combine them with direct rewards like cash back. This unique combination positions PayPal as a more attractive and rewarding choice for shoppers.
