Why PayPal conversion rate is low

PayPal's conversion rate is low because PayPal adds a markup, usually 3% to 4%, on top of the wholesale or base exchange rate.

• Currency conversion spread: PayPal does not convert at the mid-market rate, which is the interbank rate shown on Google. It applies a percentage markup instead, which works as a fee built into the rate.
• Revenue model: Currency conversion earns significant income for digital payment platforms and covers the cost and risk of handling many currencies.

A PayPal overview of the rate often misses this markup, because it is not shown as a separate charge. Some ways to reduce its impact:

• Invoice in your local currency: Asking overseas clients to pay in your home currency, rather than USD or EUR, moves the conversion to your bank instead of PayPal.
• Withdraw in the original currency: Where possible, withdraw funds in the currency they arrived in, for example into a multi-currency account, so PayPal does not convert them automatically.
• Pay in the seller's currency: When shopping, choose to be billed in the seller's currency so your card or bank handles the conversion, after checking whether it charges foreign transaction fees.

Before converting, compare the rate PayPal offers with the mid-market rate for the same currency pair to see how much the markup costs on that transfer.