LONDON - PayPal Holdings Inc will no longer charge late fees to customers when they miss payments on Buy Now, pay later purchases globally, as competition heats up in the fast-growing sector.
The changes are effective from October in the United States, the United Kingdom and France, said a San Jose, California-based company on Wednesday. PayPal's BNPL services in Germany and Australia are already free of late fees.
The company, which launched last year BNPL services for the first time, hopes the changes will help make its products more affordable and attractive for consumers.
We felt late fees were hindering the customer experience, Greg Lisiewski, vice president of PayPal Pay Later Products, said in an interview.
The changes come as more regulators across the world take a closer look at the fast-growing BNPL sector in a bid to ensure consumers do not take on more debt that they can handle.
Given the exponential rise and acceleration to the pandemic of this space, regulators across all geographies take notice, Lisiewski said.
We think that is appropriate and we do think late fees will be, and have been, part of this discussion, and we think being as customer friendly as possible puts you in a better place with regulators.
Asked if there was a risk that dropping late fees would encourage more consumers to default on their loans, he said he didn't expect to see that. BNPL services, which allow consumers to split payments for purchases into installments, have boomed globally during the Pandemic as many people turned to online shopping.
The sector's explosive growth has led to increased competition.
Earlier this month Square Inc., the payment firm led by Twitter CEO Jack Dorsey, announced it was purchasing the Australian BNPL firm Afterpay Ltd.
BNPL models vary, with some providers earning most profits by collecting fees from merchants at the point of sale, and others charging interest and late fees to consumers.
PayPal's late charges vary based on country and U.S. state regulations. PayPal said the company has processed more than $3.5 billion in total payment volume after launching the service since launching the service. In a statement, it said more than 7 million consumers have used the products.