PayPal says it will be making some pricing changes for businesses in the US. Most likely, these upcoming adjustments will only affect small and medium-sized businesses (SMBs), since larger merchants usually strike discount deals with PayPal.
PayPal payment products will boost their rates to 3.49% + $0.49, up from 2.90% + $0.30. (such as PayPal Checkout, Pay with Venmo, Pay for 4).
Before the new price structure, retailers paid $3.20 to process a $100 transaction. Online credit or debit payments will be 2.59% + $0.49 per transaction (or include Chargeback Protection) for an extra cost. The 12-cent fee reduction would represent a total savings of $1.
There will be no change to QR code in-person payments. For transactions of $10 or more, the fee is 1.90% + $0.10, and for those $10 and under, the fee is 2.40% + $0.05. 2.29% + $0.09—or $2.38 in fees for a $100 purchase.
As merchants faced surges in ecommerce and consumers adopted digital and contactless payments, the epidemic facilitated PayPal’s expansion. PayPal’s TPV rose 46% YoY in Q1 2021 on a constant currency basis to $285 billion, which was up from 19% YoY in Q1 2020.
Some rate increases on PayPal’s merchant fees will help fund new proprietary products and generate revenues, which surged 29% YOY to hit $6.03 billion in Q1. Meanwhile, cutting prices may help PayPal compete with firms like Square and Visa, who offer their own payment processing services.
It is possible that fees could cause some merchants to leave PayPal, but the value it offers merchants in both payment and retail solutions outweighs these concerns, especially as customers are increasingly making online purchases, and adopting contactless payment methods.
- Insider Intelligence publishes hundreds of insights, charts, and forecasts on the Payments & Commerce industry. Learn more about becoming a client.