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Wednesday, June 23, 2021

PayPal revamps pricing, hikes ecommerce fees

Many businesses that accept PayPal will start paying higher processing fees this summer; in some cases the fees will climb by more than 40 percent. Online sellers currently pay 2.9 percent plus 30 cents to accept PayPal digital products (for example, PayPal Checkout, Pay with Venmo and Checkout with crypto). Beginning Aug. 2, the cost rises to 3.49 percent plus 49 cents. That’s a 78-cent (or 24.3 percent) fee increase on a $100 ticket; the fee for processing a $10 online purchase will jump from 59 cents to 84 cents, or a whopping 42 percent.

The fintech will also impose a new, mostly lower fee structure for online payments using traditional credit and debit cards (Visa, Mastercard, Discover): 2.59 percent plus 49 cents. Online sellers processing these cards through PayPal can opt for chargeback protection, for a higher per transaction fee of 2.99 percent plus 49 cents. Today, PayPal charges online sellers the same rate (2.9 percent plus 30 cents) regardless of payment instrument.

In-person card payments will cost merchants 2.29 percent plus 9 cents to process through PayPal. In-person touchless payments, using QR codes generated through PayPal and Venmo mobile apps, will cost 1.90 percent plus 10 cents for transactions above $10; QR code payments of $10 or less will cost 2.40 percent plus 5 cents.

PayPal introduced QR code payments last year at the height of the COVID-19 pandemic, as more consumers and businesses sought to minimize contact at the point of sale. Since then, more than 1 million merchants have implemented the feature, the company said in its first quarter 2021 earnings statement. Payments initiated using QR codes totaled nearly $6.4 billion in the first quarter, the company reported.

Capitalizing on ecommerce boom

PayPal’s business boomed during the pandemic, as homebound consumers flocked to ecommerce providers. The company reported that it processed $285 billion in payments during the first quarter of 2021, a 49 percent increase over the same quarter last year. The company also reported 392 million active accounts.

In a blog post detailing the planned rate hikes, PayPal Senior Vice President Dan Leberman said the changes reflect the benefits of the company’s new products, capabilities and features. “PayPal has become more than just a button or payment processor to be a full commerce platform capable of driving growth for businesses of all sizes online or in person,” he wrote.

Here are some of the benefits Leberman said PayPal delivers to merchants:

  • Consumers who choose PayPal are 60 percent more likely to convert than those not using PayPal.
  • Consumers are nearly three times more likely to complete purchases when PayPal is available at checkout.
  • Merchants offering PayPal’s buy now, pay later option have seen a 15 percent lift in payments volume.

“We are continuing to innovate at a record pace and empower businesses to never miss a transaction no matter where they do business,” Leberman wrote. “By investing in our data and analytics capabilities, the improvement of our fraud tools, and the new consumer experiences we are delivering with products like buy now and pay later, pay with rewards points and Checkout with crypto, we remain at the cutting edge of payments.”

PayPal’s decision to hike merchant fees follows decisions by Mastercard and Visa to back off interchange rate hikes that were set to take effect in April. The two card brands had originally planned to implement new, higher interchange rates in April 2020, but the move was postponed to April 2021.

As the new date drew closer, however, the card brands attracted the ire of influential lawmakers, including Senator Dick Durbin, D-Ill., who in a letter to the two companies said interchange increases would “undermine” a fragile economic recovery. Both Visa and Mastercard soon relented, agreeing to hold off on any interchange rate increases until April 2022.

end of article

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