CiviCRM does not update status of PayPal Standard transactions after update to 5.27.2

WordPress 5.4.2, CiviCRM 5.27.2

After updating CiviCRM to the latest version (5.27.2) CiviCRM stopped updating the status of contributions when payment is made using PayPal Standard payment procesor. The payment is processed correctly (money left contributor account and was received by the organisation), however the contribution in CiviCRM is still in Pending status and moreover the confirmation email was not sent to the contributor.

I’ve read the CiviCRM 5.26 and WordPress Important Notice and I understand that there are some changes in paths, but the page does not provide a clear guide on how to update the PayPal IPN settings. In the past I used just the domain name (https://example.com) for the Notification URL in and it worked without major issues. Now it appears to stooped working. I also tried to update the notification URL in line with the guidelines from Recurring Contributions and Webhooks using the updated path i.e. https://www.example.com/?civiwp=CiviCRM&q=civicrm/payment/ipn/1 but this also does not work.

Is this an issue with Civi/PayPal or am I missing something important?