PayPal Holdings Inc confirmed that it would charge its sellers more for their branded payment products. At the same time, the company will cut the payments for behind-the-scenes processing of several Mastercard and Visa transactions.
It is a bold gesture, considering that the digital payment sector continues to become increasingly competitive.
PayPal's Explanation
According to a report by Reuters, PayPal stated that the move is a reflection of its proprietary services' value, and that customers are three times more likely to finish a transaction whenever PayPal is available at checkout.
On the other hand, the buy-now-pay-later option by PayPal encourages consumers to spend 15% more than those who do not use the service.
Dan Leberman, Senior Vice President at PayPal, stated that the reason behind the price hike is to make customers realize the importance of the value they provide. The PayPal wallet has such a tremendous value, and card processing is entirely commoditized.
As of June, PayPal has 392 million active accounts, and it includes 31 million sellers throughout the world.
The company also owns other famous e-wallets such as Braintree, Venmo, and iZettle.
PayPal Charge: What Changed?
PayPal used to charge sellers only 3.9%, and 30 cents for payments on most available online transactions, regardless of their type and role.
However, Reuters mentioned that PayPal would start charging merchants 3.49%, and an additional 49 cents for transactions completed through proprietary products. Such products include its digital wallet and button on merchant websites.
The higher charge covers various products like Pay with Venmo, PayPal checkout, PayPal Credit, and buy-now-pay-later, which offers Pay in 4.
PayPal added that they want to become a comprehensive payment solution. However, it is hard to achieve that goal if it will continue to sell on value over price.
As a result, sellers would have to pay 2.59% plus 49 cents for each PayPal transaction made with Mastercard and Visa debit and credit cards.
The payment change is a massive indication that PayPal has developed its services after splitting with eBay back in 2015.
Most PayPal transactions are done online, but some merchants still use it for in-person transactions as well. Reuters reported that the company would be reducing fees for the in-person transaction to compete with Square Inc.
For transactions over $10, PayPal will charge 1.90% plus 10 cents, while cheaper transactions will require 2.40% plus 5 cents.
PayPal's Stock Value
According to Bloomberg, the PayPal price hike triggered the company's stock value to climb 1.9%, which totals $283.38. So far, it is the highest PayPal stock value since February.
The company's power move comes after Mastercard and Visa put a temporary halt to their plan in boosting the fees U.S. sellers pay for consumers who use credit cards online.
Bloomberg said that the two networks would only start implementing the changes in April 2022.
Related Article : PayPal to Start Accepting Cryptocurrencies as Payments Moving Forward
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Written by Fran Sanders
