There’s talk of the US Federal reserve including PayPal in legislation to cut the cost of debit card transactions. There are two issues at stake here, firstly what will the Fed reduce debit card fees too, and secondly are online payment systems to be included in the new rules?
Currently Visa and MasterCard charge interchange fees of between 1.5% and 2% for every debit card transaction – that averages to 35 cents to 50 cents per purchase. The proposals will cut fees with a maximum suggested cap of just 12 cents per purchase.
Interchange fee is the term used in the payment card industry to describe a fee that a merchant’s bank pays a customer’s bank for each purchase. PayPal accepts both credit and debit cards, and in the US charge 30 cents plus a percentage of the transaction.
If they were included in the legislation it would result in an enormous cut in PayPal’s profits of $971 million on sales of $26.9 billion in the fourth quarter of 2010. PayPal generate almost half of eBay’s total revenues.
PayPal are making the case that they shouldn’t be included in the legislation as they are not a payment card network and don’t themselves charge interchange fees.
Any ruling would initially apply to the US, but if PayPal fees drop there they’d doubtless fall around the world given time. PayPal appear confident that they would not be affected by the new rules due to come into effect in July, but the possibility that they could must be a troubling thought.
5 Responses
they would just add any fee loss on somewhere else
no chance of our paypal bill going down
anytime soon,
to many politicians and rule makers piddle in the banks pee pots
for any real saving to trickle down to the plebs
I wonder if Paypal will now suspend the US Federal Reserves account like they did to Wikileaks? I wonder why Paypal suspended Wikileaks account in the first place and I wonder who told them to do it? I wonder if Paypal will get their fees charges lowered, they do like to do what there told.
$0.12 for debit transactions:
https://paymentsu.com/understanding-fed%E2%80%99s-proposed-rules-on-debit-interchange-fees-routing/
I don’t think that means PayPal fees will go down. Did you see PayPal fees on balance to balance payments go down because it is free to PayPal? They make pure profit off it. Now they get to make additional profit. I doubt they will lower fees – only offer additional protection to buyers and sellers to generate greater market share.