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BNPL wars: PayPal slashes pay-later late payment fees to zero

It’s a race to grab market share before regulation slows the industry’s hyper-growth.

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PayPal is changing its Pay In 3 buy-now-pay-later (BNPL) product as it looks to compete in the growing battle around BNPL.

Yesterday the payments giant revealed to Reuters that it would no longer charge late payment fees when customers miss payments on BNPL purchases, starting from October.

The change will affect the US, UK and France, which will join Germany and Australia, where PayPal has already slashed its late payment fees.

In the UK, shoppers are currently charged a £6 fee for late payments with PayPal’s Pay In 3 product, which also impacts their credit score.

Rival BNPL providers like Klarna don’t have late payment fees.

Greg Lisiewski, vice president of Global Pay Later Products at PayPal, told Reuters that: “late fees were hindering the customer experience”.

"Given the massive rise and acceleration through the pandemic of this space, regulators across all geographies are taking notice.”

"We think that is appropriate, and we do think late fees will be, and have been, part of that discussion, and we think being as customer friendly as possible puts you in a better place with regulators,” he added.

BNPL regulation, in the UK at least, is moving slowly for now, yet there is widespread agreement that consumer protection rules around the credit product do need to be tightened.

In the last few months we’ve seen venture capital continue to rush into the sector, with Klarna raising a $1bn mega-round and relative BNPL minnow Zilch raise $80m here in London to expand to the US

Just earlier this month US fintech Square announced a $29bn deal to snap up Australian BNPL leader AfterPay.

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