As income inequality increases and wage growth remains under pressure, household spending is tight for many families.

Some turn to debt — especially credit cards — to make ends meet. Last year alone, there was a $71 billion net increase in credit card debt, according to research from CardHub. And why analysts expect consumers to use tax refunds this season to whittle down that debt, what often occurs is a cycle that is anchored by too much reliance on debt to manage expenses. In 2004, Congress anointed April as Financial Literacy Month with the intention of educating consumers on the topic of reducing household debt.

The topic is close to the heart for Kathleen Pierce-Gilmore, vice president and general manager of credit for the Americas at PayPal. Pierce-Gilmore, a veteran in the financial services industry, is deploying strategies aimed at helping consumers address their finances and create better fiscal health as a result.

Here, Pierce-Gilmore discusses these strategies and how it also benefits retailers.

WWD: What led you to take a role at PayPal?

Kathleen Pierce-Gilmore: The seeds for my place at PayPal were sown early in life. Growing up, my family leaned a bit too much on credit cards, and it became detrimental to sustained financial stability. I saw how utterly draining the situation was for my parents and I made a vow that I would never allow the same to happen to me.

Even if I was not entirely conscious of it at the time, my upbringing seated in me a deep passion for financial discipline and independence. After several years in the financial services industry, first at American Express then at Capital One, I realized this personal passion could be best expressed in helping people who are in vulnerable financial situations use their money more wisely.

Fast forward a few years, and I started hearing the things [PayPal chief executive officer] Dan Shulman was saying about reimagining money, financial inclusion, and making it less expensive for people access, manage and move their money. The message simply hit home.

As luck would have it, an opportunity opened to lead the company’s credit business in the Americas, and I instantly saw it as a way to bring my personal mission around financial fitness to a platform that is real. And here I am.

WWD: What does it mean for a consumer household to be “financially healthy”?

K.P.G.: There’s a wide spectrum of metrics for what constitutes household financial health. Most financial advisers or coaches would say that to be financially healthy, you need to have your monthly debt obligations equal no more than 40 percent of your total income. They might also say that a household should have three months’ worth of total debt obligations available as liquid assets, at all times. If a household meets those two criteria, it is most definitely financially healthy.

In practice, it’s more about common sense. Did you miss or need to delay payment on any of your debt obligations in the past year? If so, you probably aren’t as financially healthy as you might hope.

PayPal Credit products are designed to help people see not only what credit can do for them in their particular situation, but more importantly to understand, through transparency, how to manage credit use more wisely.

WWD: How is PayPal Credit approaching consumers differently than traditional banks and lenders? And why is this approach important?

K.P.G.: First and foremost, PayPal Credit does not solely rely on the traditional credit economics that are driven by interest and fees. Instead, we have set out to improve the experience, open financial doors and help people be more aware of managing their money.

PayPal’s technical prowess and merchant relationships allows us to “short-circuit” the traditional process of applying for and using credit. We are able to offer credit to people who may not qualify under purely traditional underwriting rules, more quickly, and more simply. Most customers can be approved for instant-use credit within minutes, without leaving the checkout process. That’s certainly a unique twist we bring to the experience.

But the real difference comes after the purchase. We provide shoppers with greater visibility into their finances, and tools that help them manage their budgets. PayPal Credit goes above and beyond to be transparent and timely in our communications with customers to inform them about how to pay on time and avoid interest or fees. And with our installment-like promotional financing option, Easy Payments, consumers can see how larger purchases break down into predictable monthly payments, before they even make the purchase. This helps people view credit with more confidence, since they know exactly how much they are going to pay over a certain period of time.

When our ceo talks about financial inclusion, this is one of the things he’s getting at: making credit a democratized process, especially for those at the lower end of the financial spectrum who traditionally have been subject to the most burdensome fees and expenses. Even those who have ready-access to credit don’t necessarily see it as way to improve their financial position. Rather, credit so often gets viewed with skepticism and confusion. PayPal is working to change that dynamic.

WWD: What do you think are some of the benefits of merchants who partner with PayPal?

K.P.G.: Merchants who offer PayPal Credit may see it drive higher spend, fewer shopping cart abandonments, and better customer engagement. In fact, our data shows that some merchants see as much as double-digit lift in average order value.

But more than that, PayPal Credit provides a very unique checkout experience and helps merchants build trust with customers. Many merchants are specifically working right now to grow their Millennial customer base, and doing so requires some new approaches. PayPal Credit is a perfect match for this prized demographic, with Millennials moving away from plastic credit cards and showing preference for “digitally native” payment methods.

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