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PayPal (PYPL) Stops Late Fees on BNPL, Boosts Customer Reach

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PayPal Holdings (PYPL - Free Report) has put a stop to the late fees that it used to charge for missed payments on buy now, pay later (BNPL) products.

New customers availing Pay in 4 in the United States, Pay in 3 in the United Kingdom, and Pay in 4X in France will not be charged late fees for missed payments from Oct 1.

The facility will be now as similar as the facility being provided by the company’s BNPL solutions in Australia and Germany.

The latest move is likely to aid the company in gaining solid momentum across the merchants. Removal of late fees on BNPL products will allow merchants to deliver enhanced shopping experience to customers.

We note that merchants using PayPal’s BNPL solution has been gaining strong traction among customers and witnessing a boost in their conversion rates.

The company strives to be more customer focused on the back of the latest move. Also, the move bodes well for PayPal’s growing efforts to help merchants and customers by offering flexible payment solutions.

Apart from sellers, we believe that the move will help PayPal gain momentum among customers as well.

Competitive Scenario

We note that the recent move by PayPal has helped it in penetrating into the growing BNPL market.

This market is witnessing a significant improvement owing to social distancing norms amid the coronavirus pandemic. Payment platforms are offering BNPL solutions to help customers buy expensive products and choose affordable finance plans to pay in installments to retailers.

According to a report by Allied Market Research, the global BNPL market size was $90.69 billion in 2020. The market is expected to hit $3.98 trillion in 2030, witnessing a CAGR of 45.7% between 2021 and 2030.

Given this upbeat scenario of the BNPL market, other companies like Affirm Holdings, Mastercard (MA - Free Report) , VISA (V - Free Report) and Square (SQ - Free Report) are making strong efforts to bolster their presence therein.

Square recently signed a Scheme Implementation Deed to acquire the Australian BNPL giant, Afterpay, in exchange of $29 billion to expand presence in the BNPL market.

Further, Affirm collaborated with Shopify. Per the collaboration, all merchants of the United States enrolled in Shopify will be able to avail Affirm’s Shop Pay Installments to gain more customers and grow their business.

Meanwhile, Mastercard provides safe installment options to customers with higher value purchases. This in turn help merchants gain more customers and generate higher sales.

VISA’s BNPL facility Visa Installments include three installment models — namely Pre-Purchase, During Purchase and Post-Purchase — to help customers with flexible payments.

Nevertheless, PayPal’s advancing Pay Later solutions, rising customer engagement on the PayPal platform and flexible financing solutions are likely to keep strengthening its competitive position against peers.

PayPal’s Portfolio Strength

The latest step is in sync with PayPal’s growing efforts toward strengthening its payment solutions offerings.

The company recently rolled out a digital point-of-sale solution, PayPal Zettle, in a bid to deliver an enhanced payment experience to merchants and their customers in the United States.

Further, PayPal is making strong initiatives to penetrate into the booming cryptocurrency space. It recently unveiled a feature called Checkout with Crypto to help customers with cryptocurrency holdings in the United States to seamlessly checkout with crypto within PayPal.

Also, it announced plans to acquire Curv, an Israel-based digital asset security technology provider for supporting cryptocurrencies and digital assets.

Currently, PayPal carries a Zacks Rank #3 (Hold). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.


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