PayPal to rise merchant costs for its branded payment products

By Ashika Rajan, Trainee Reporter
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The American online payment giant PayPal will raise merchant costs for its branded payment products while lowering those for behind-the-scenes processing of some Visa and Mastercard transactions.

It is a daring move in an increasingly competitive digital payments sector. The strategic shift reflects PayPal’s growing dominance in online transactions, which surged during the COVID-19 pandemic. During the lockdown, consumers and businesses flocked to the market, bringing the total number of active accounts to 377 million, more than double what it was in 2015.

According to the company, the move reflects the value of its proprietary services, with customers nearly three times more likely to complete a purchase when PayPal goods are available at the checkout, and users of the new buy-now-pay-later option spending 15 percent more on average.

Mr. Dan Leberman, PayPal’s Senior Vice President for small and medium business and partners stated that “we are changing prices to help our customers understand even more clearly where we provide value. The wallet is of tremendous value; the card processing is commoditized.”

According to the material the company shared with media, PayPal will charge sellers 3.49 percent plus 49 cents to process transactions made through its proprietary products, such as its button on merchant websites and its digital wallet.

The higher rate applies to products like PayPal Checkout, Pay with Venmo, PayPal Credit, and new buy-now-pay-later offering Pay in 4.

Mr. Ben Dwyer, Founder of who analyzes processing deals offered to merchants remarked that it will be difficult for merchants to know how much extra value they are getting from PayPal features in exchange for the higher rates.

Sellers will pay 2.59 percent plus 49 cents for PayPal to process, unseen by consumers, online payments made with Visa and Mastercard debit and credit cards from other companies.

In the past, PayPal used to charge sellers 2.9 percent plus 30 cents for most online transactions, regardless of the role it played.

Although most of its transactions are online, PayPal will also lower prices for in-person transactions through its network, which should help it compete with Square Inc.

PayPal owns Venmo, Braintree, and iZettle, and has 392 million active accounts worldwide, including 31 million merchants.

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