Why is PayPal conversion rate lower

The conversion rate is lower because a markup, typically 3% to 4%, is added on top of the wholesale or base exchange rate rather than using the real mid-market rate.

• Markup over the base rate: The mid-market rate is the interbank rate shown on Google, and the conversion rate you receive is set below it, with the difference working as a fee for moving money between currencies.
• Revenue from conversion: Currency conversion is a major source of income for digital payment platforms and covers the cost and risk of handling many currencies.
• Fee built into the rate: The charge is included in the exchange rate rather than listed separately, which is why it is often described as a hidden fee.

There are a few ways to reduce what you lose to conversion when using PayPal for international payments:

• Invoice in your local currency: If clients abroad pay you, ask them to pay in your own currency instead of USD or EUR, so the conversion is handled by your bank.
• Keep the original currency: Where possible, withdraw funds in the currency they arrived in, for example to a linked multi-currency account, rather than letting the platform convert them automatically.
• Let your card issuer convert: When paying for a purchase, choose to be billed in the seller's currency so your credit card or bank does the conversion, after checking whether your bank charges a foreign transaction fee.

Comparing the rate offered at checkout or withdrawal against the mid-market rate for the same currency pair shows how large the markup is on a given transaction.