PayPal is tinkering with transaction fees to strengthen its competitive position

Starting in August, PayPal says it plans to hike transaction fees to 3.49% plus 49 cents for merchants that use its proprietary services, which include PayPal Checkout, Pay with Venmo, PayPal Credit, Pay in 4, PayPal Pay with Rewards, and Checkout with Crypto. The payments giant is also lowering some of its other transaction-based fees, a nod to the growth of competitors in its field.

Why should we care?
PayPal, which has for some time charged merchants a flat rate for processing payments – 2.9% of a transaction plus a 30-cent fee – said it’s taking these actions to “better align our pricing with the value that our products and services provide.” Not all of PayPal’s changes that will take effect in August will amount to fee increases. Online credit and debit card transactions will be 2.59% plus 49 cents per transaction without chargeback protection, or 2.99% plus 49 cents with chargeback protection. Meanwhile, in-store transaction fees will go down to 2.29% of the transaction’s price plus 9 cents. PayPal is expecting merchants to pay more for its proprietary services, and by lowering the costs of other types of transactions, the company can compete more effectively against rivals Authorize.net and Stripe, a report suggested. “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,” the company said. “Consumers are nearly three times more likely to complete their purchase when PayPal is available at checkout.”