PayPal are to revise their fees for the first time since they set up business in the UK eight years ago. These changes, which come into effect on the 7th September 2011, reflect the increased costs PayPal have incurred through expansion of their services. As is always the case there are some winners and losers in the fee changes.
Broadly speaking for main stream Europe there are no fee changes, it’ll cost you slightly less to trade with Northern Europe and slightly more to trade with Eastern Europe.
Cross border fee decreases
If you’re selling to Northern Europe (Denmark, Finland, Norway, Sweden, Iceland etc), you’ll benefit from a lower cross border fees as PayPal pass their own cost savings on – 0.4% of the transaction value compared with 0.5% now.
Cross border fee increases
If you’re selling to Asia, South America or Africa, you’ll see your cross border fee rising from 0.5% to 1.5%. Also the fee for some European countries is rising to 1.0% – this includes countries like Russia, Serbia and Romania. This is simply because it costs PayPal more to transact in the newly added currencies in these countries.
Currency conversion fee increases
Buyers and people sending money abroad will see a small increase in currency conversion fees. For example, the fee for sending a payment in euro from a UK (sterling) account will increase from 2.5% to 3.5% above the wholesale exchange rate applied to the amount being sent. The fee for sending a payment in US dollars will be 3% above the wholesale exchange rate.
20p charge for refunding a customer
For the first time, PayPal will be retaining the fixed (20p) portion of the transaction fee where a seller has made a full refund. There will be no changes in PayPal fees for partial refunds.
I can’t see many sellers liking this new cost, but in comparison many other payment providers retain the whole fee.
Doubling the chargeback fee
PayPal does not apply a chargeback fee if the transaction is covered by PayPal Seller Protection Programme. This is not changing, but the fee in all other cases is increasing from £7 to £14. This reflects the costs PayPal incurs in handling disputes.
I’m not to worried about this one personally as I’ve always been covered by PayPal Seller Protection for eBay transactions. However if you use PayPal off eBay then only transactions between UK, US or Canadian buyers and sellers can be covered by PayPal Seller Protection and this could have more impact.
Why the fee changes?
Since 2003 PayPal have invested heavily in expanding their services – for example, adding 40 new transactional currencies. In the main these changes are an adjustment of the cross border fee by region and country to reflect more closely the costs PayPal incur.
Unlike eBay who opted for a simpler fee structure to make it easy for sellers to calculate their costs (which for most people was a sizeable fee hike), PayPal have chosen a more complicated fee structure but one that relects the real cost of the transaction and currency conversion. I guess that means PayPal think sellers are more intelligent than eBay and prefer to do the maths and save money where they can.
Fee increases are never going to be popular, especially for those sellers who transact in the countries which will now be more expensive to trade with. In reality though PayPal is of course convenient and still competitively priced compared to merchant banking arrangements.
At the end of the day if we sell on eBay we don’t have a choice but to use PayPal, so we’ll complain about the fees and then pay them, and in truth by the time they come into effect we’ll probably not even notice the difference.
37 Responses
It is clear that Paypal are strapped for cash.
The current economy is obviously difficult for them.
After all, they have not made any profit out of these expansions that are for our benefit have they?
“These changes, which come into effect on the 7th September 2011, reflect the increased costs PayPal have incurred through expansion of their services”
I don’t understand this line being swallowed whole. My business has significant economies of scale: as I grow, things get cheaper. Paypal has been growing rapidly – how have the costs increased?
Since Paypal is a required part of trading on eBay, we consider Paypal fees and eBay fees in the same line item in our accounts — it’s all just platform fees. So that’s two increases this year in that figure.
Just to quote you
“At the end of the day if we sell on eBay we don’t have a choice but to use PayPal,”
Surely Paypal being the only payment gateway available on eBay UK must be braking competition rules. Wasn’t eBay Australia made to open up to other payment gateways? Does David Cameron play with Paypal, much the same as he did with New International?
I’m againest the EU and most of what it stands for but they should force eBay to accept other payment gateways.
There is upcoming laws on charges for electronic payments; it typically costs Banks 22p to administer transfers, regardless of the amount. Doubtless ebay/paypal are aware and are making hay while the sun shines. In 5 years, paypal will not be the profit area for ebay; assuming ebay hold any position in ecommerce in that time.
I thought Paypal were the business in eBays group that was making lots of money?
Everyone is putting their prices up at the moment and feeling squeezed in the middle, we are going to have to choice over the coming months to put our prices up!
Once the banks open their own transfer system through Visa etc .
Paypal most likely will lose about 80% of their market
I’m assuming this applies to all accounts including merchant accounts? Eek, when will they give us a break.
Why the fee changes?
Because they can, but as Chris pointed out one must consider the alternatives. On eBay there are none so if eBay is still the only platform for you, you will just have to ‘suck it up, cupcake’.
I would think Google Checkout will implement similar increases soon, again, because they can.
When will they give us a break?
When they are forced to; either by law or by diminishing customer base, neither of which look particularly imminent.
20p charge for refunding a customer
For the first time, PayPal will be retaining the fixed (20p) portion of the transaction fee where a seller has made a full refund. There will be no changes in PayPal fees for partial refunds.
So if i have to refund a £3.99 item i would be better refunding £3.98 and it saves me 20p
Paypal and eBay fees are so interconnected that an increase in either will effect the other and therefore an increase in fees will have a knock on effect to sales and profit, albeit minimal.
At the moment the eBay market and Paypal payment method works for me and I have no immediate plans of ending the eBay side of my business.
The Amazon market and payment method also works for me and I’m happy to continue selling on Amazon.
However once you start comparing selling on both markets changes like the little fee increase start to tip the balance as to which market works best.
From a personal perspective I have been developing Amazon sales more and more over the last 12 months and although the fee increase is minimal it is one more consideration as to which market place works best for me.
As has repeatedly been said in posts “Don’t put all your eggs in one basket”, and I have no intention of abandoning eBay, but the lack of stability in the eBay /Paypal partnership with constant changes, even if only a small fee increase just makes Amazon a more attractive market place.
If you think what paypal does and the fraud it prevents, its cheap at the price and a valued business partner.
I have always used Paypal and found their service to be good.
But as others have said their sales and profits seem to be going up and with economies of scale, they should not need to increase their margins.
Perhaps they have heard about VISA starting up a similar service and knowing Visa they won’t be cheap. So maybe they saw a window to put their prices up.
Or they are very confident that VISA wont take all their market.
I think if getting the 20p back for a refund makes a difference to your business something else is probably very wrong with it.
Clothing is an area that generates a high level of refunds, somewhere between 10%-20% of total sales…If your turnover is around £400K with an average order value of £15, those 20p’s add up to around £5k (I think)