PayPal Holdings said it will not charge customers late fees when they miss payments on buy now, pay later (BNPL) purchases globally, as competition heats up in the sector.
PayPal will remove late fees from October in the United States, the United Kingdom and France, the San Jose, California-based company said. PayPal’s BNPL services in Germany and Australia are already free of late fees.
The company, which first started offering BNPL services last year, 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 Global Pay Later Products at PayPal, said.
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.
BNPL services, which allow consumers to split payments for purchases into installments, have boomed during the pandemic, as many people have turned to shopping online.
Square, the payments firm led by Twitter CEO Jack Dorsey, is buying Australian BNPL firm Afterpay.
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 fees vary based on country and U.S. state regulations. Since launching the service, the company has processed more than $3.5 billion in total payment volume through BNPL products, PayPal said. More than 7 million consumers have used the products.
