PayPal raises prices for U.S. merchants
PayPal Holdings Inc. is increasing prices for thousands of small businesses as the company looks to maintain revenue growth and boost profit margins as a stand-alone business separate from eBay Inc.
The San Jose, Calif.-based payments company is introducing for U.S. merchants a flat rate of 2.9% plus 30 cents for domestic transactions and 3.9% plus a fee that varies by country for international transactions. The change takes effect Oct. 1, PayPal said Thursday in an email to sellers.
The new structure eliminates discounts—as low as 2.2%—for businesses with sufficient sales. Most of PayPal’s larger customers, including global brands, have individual contracts that won’t be affected by the change.
The change will boost PayPal’s annual revenue by about $10 million while keeping prices competitive with Square Inc. and other digital transaction businesses, said Larry Berlin, an analyst at First Analysis Securities Corp. in Chicago. “They’re always trying to boost revenue in small increments from existing customers,” Berlin said. “The main focus is to provide more services to merchants and get consumers to use PayPal more frequently.”
The sellers affected represent less than 1 percent of PayPal’s 10 million global merchants, said Amanda Miller, a company spokeswoman.
PayPal didn’t release new revenue projections as a result of the price increase. The company, which completed its split from eBay in July, is projected to have third-quarter sales of $2.28 billion, according to the average of analysts’ estimates compiled by Bloomberg.
The digital payments business had 169 million users and processed 1.1 billion transactions in the second quarter, with transaction volume up 27% from a year earlier, PayPal said last month. Investors see value in the company’s projected growth as online shopping booms and people’s spending habits change.
PayPal and competitors such as Square Inc. are trying to position themselves as more than just digital transaction businesses by offering loans and marketing services. PayPal emphasized its fraud protection and cross-border selling options in its email to merchants.
“We value our partnership with you, and we commit to investing in new capabilities to help you grow,” the company said.
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