The Australian arm of PayPal has introduced a “buy now, pay later” (BNPL) service and will not charge late fees in a bid to stay ahead of the competition.
PayPal Australia, which has nine million active accounts, is facing rising competition from local rivals such as Afterpay which have been gaining ground rapidly thanks to its BNPL offering.
“We are launching with no late fees in Australia because we believe it’s the right thing to do for our customers and will deliver a better consumer experience,” Andrew Toon, general manager of payments at PayPal Australia, said in a statement on Tuesday (13 July).
Late fee fear
PayPal internal research found that nearly 96% of online shoppers in Australia are aware of BNPL but 50% would not use the service due to high late fees.
“Our business model does not rely on late fee revenues and we believe that many people who miss a payment do so by mistake, not design. By removing late fees, we are providing our Australian customers with a secure buy now, pay later service without the risk of being penalised for late payments,” said Toon.
PayPal enjoys a leading position as the go-to payment channel for online shopping, being used in around 41% of all transactions. That is well ahead of credit cards (28%) and debit cards (19%), according to a 2020 report by data provider, BigCommerce.
Still, the BNPL sector is growing rapidly, particularly among younger consumers, growing to 14% in 2020.