How do PayPal make money
PayPal makes money mainly by charging transaction fees when people and businesses send, receive or move money through its platform.
PayPal splits its revenue into two groups: transaction revenues and revenues from other value-added services.
Transaction fees account for more than 90% of PayPal's revenue and are charged as money moves through the platform. The main types are:
- Merchant processing fees: Businesses that accept payments through PayPal checkout pay a fee. In the U.S., standard commercial rates are typically about 2.99% to 3.49% plus a fixed $0.30 per transaction.
- Cross-border fees: Sending or receiving money internationally adds an extra percentage charge.
- Currency conversion: When converting between currencies, PayPal applies a markup, often 3% to 5%, on top of the mid-market exchange rate.
- Instant transfers: Users pay a small percentage to move money from a PayPal or Venmo balance to a bank account or debit card immediately, instead of using the free standard transfer.
Anyone who wants the exact rates for their country and payment type should check the PayPal pricing page, as fees differ by transaction type and location.
Value-added services bring in the rest of PayPal's income:
- Interest on balances: PayPal earns interest on the cash that sits idle in its many active user accounts, often called float.
- Credit and pay later: PayPal offers Buy Now, Pay Later loans and working capital. Merchants can pay higher fees for BNPL installments, sometimes up to 4.99% plus a fixed fee, and consumers pay interest on some credit lines.
- Other services: Further income comes from gateway fees, subscriptions for advanced business account features, crypto transactions and referral fees.
Opening and setting up a PayPal merchant account is free, and PayPal charges for access to advanced features.