Upcoming Changes for Some US Businesses | Hacker News Reader

Upcoming Changes for Some US Businesses

newsroom.paypal-corp.com

60 pointsarbuge58 comments

Aannoying how hard it is to compare. So for online payments:

    OLD: 2.90% + $0.30
    NEW: 3.49% + $0.49

It seems like some in-store payments might be slightly cheaper, but I don't want to misread anything. It's funny that they benchmark their in-store numbers vs Square, but decline to benchmark anything else. Their "new" online fee is now higher than Stripe, whereas before it was identical (Stripe is 2.9% + $0.30)

https://www.paypal.com/us/webapps/mpp/merchant-fees

The "Why are we making this change?" section never answers the question, of course.

I think it's part of a general price increase we have/will shortly see everywhere. Although I'm expecting it in many areas, it's still crazy how steep the rise is.

You mean because of inflation? That wouldn't explain why the % part of the fee is increasing.

How did you arrive at that conclusion?

The "inflation" bit, or the "percentage shouldn't go" up bit?

Their costs don't necessarily have to go up linearly. So it isn't a given that they don't need to increase the percent. That would only happen in a perfect world.

Yeah, the poster doesn't know what they're talking about. Also, App Store-like fees have been declining in the last two years.

The % part is probably rising because of the increase in credit card rewards. 2% cash back on everything, 4-5% on travel and restaurants and groceries… all paid for by increasing interchange fees.

The Visa Signature, Visa Infinite, and MasterCard World Elite cards have approached Amex in fees. Fixed-rate processors like PayPal and Stripe are getting squeezed here.

Shouldn't inflation cause money to have less buying power which would mean prices increase? If so, PayPal wouldn't need to change their percentage to adjust for inflation.

Indeed, charging a percent fee on every transaction is inflation proof. I could see the flat rate going up due to inflation but to increase both looks like PayPal is just being greedy.

Everyone will try via various means to get a piece of the multi trillion dollar pie the US is creating.

That's not quite the whole story. The new 3.49% is when you choose "old school pay with Paypal".

For online:

If you use it like Stripe, to take a credit card payment (where the end user doesn't know you're using Paypal), their rates are lower than Stripe. 2.59%+$0.49 (Paypal) vs 2.9%+$0.30 (Stripe).

For in-person, as a "normal" credit card reader: 2.29% + $0.09. Ignoring in-person old school Paypal, as I don't believe anyone really uses that.

Though, for in-person, I would guess a regular old merchant account would be a better idea than Paypal, Square, or Stripe. So many transactions are debit cards, which are dirt cheap if you just use a a normal merchant account. Way cheaper than Stripe, Paypal, Square, etc.

> The new 3.49% is when you choose "old school pay with Paypal".

I don't think this is really old school. This is how most folks use PayPal.

I accept a decent amount of transactions online and I have about a 50 / 50 split between folks paying with Stripe and PayPal. The people who want to use PayPal are using it with the new 3.49% rates method because this is the one where they enter in their PayPal email address to make a payment. Literally 100% of the PayPal transactions I've accepted over the last 3 years are categorized as "PayPal checkout" which is hit by the new rate moving forward.

This is a direct price increase by PayPal for almost everyone accepting payments online through PayPal. From 2.9% + 30c to 3.49% + 49c. It makes them substantially more expensive than Stripe because everyone who pays with PayPal is using their email address not a credit card. It's no longer a no brainer decision to support both on your site back when the rates were the same as Stripe.

Sure. But, if you're comparing to Stripe I think it's fair to show the fee differences for straight credit card payments.

> But, if you're comparing to Stripe I think it's fair to show the fee differences for straight credit card payments.

The only thing that matters is the bottom line for end customers. They either pay by credit card or PayPal (I know there's Apple Pay and crypto too, but let's ignore those for now).

If the customer uses a credit card they don't care if Stripe or PayPal processes it. They just want to enter in their credit card and be done with it.

Most businesses will be using Stripe's credit card forms for that because it lets you embed the form into their page so the customer doesn't need to leave. Stripe's API is also a billion times better than PayPal's so I can't imagine anyone will realistically want to use PayPal's API directly to embed a credit / debit form (assuming this is even an option).

However when folks want to pay using PayPal, there is only 1 option of using PayPal with their associated email address. There's no escaping this price increase short of dropping all support for PayPal, which is going to be a very big net loss from loss of sales from anyone who doesn't have a credit or debit card.

So yes, this is a direct price increase to continue using PayPal and it's unrelated to Stripe also supporting credit cards.

Yes, I understand how Paypal works. But again, if you're a new online seller, you also want to know what different places charge for a straight credit card payment. Stripe is nice, but people do use different providers.

"I can't imagine anyone will realistically want to use PayPal's API directly to embed a credit / debit form (assuming this is even an option)."

Yes, it very much is an option, used by many. They call it "Paypal Business". I think that's the part you're not understanding. You can integrate Paypal as a credit card processor without the end users knowing it's paypal during the purchase. They don't need a paypal account.

> You can integrate Paypal as a credit card processor without the end users knowing it's paypal during the purchase. They don't need a paypal account.

Do you have a link to their API documentation on using this? Every search around this leads to their hosted checkout page which lets you pick between PayPal or a credit card or the legacy "Payments Pro" option which is no longer recommended to use and technically labeled as unable to sign up for unless you're a pre-existing user. I have a PayPal business account btw.

> used by many.

A ton of folks are using Stripe too, and this PayPal notification is coming out barely 6 weeks before the change in rates. If you wanted to use their new CC rates it would mean switching your entire billing system over from Stripe to PayPal for accepting credit cards.

Plus there's a ton of 3rd party services that offer SAAS apps around handling billing for you through credit card or PayPal and almost all of them use Stripe for credit cards. This makes switching to PayPal's direct CC payment not an option for many, which translates to a price increase for using PayPal.

> Do you have a link to their API documentation on using this?

Sure...

https://developer.paypal.com/docs/business/checkout/advanced...

The newsroom piece says why, it seems to me: "to better align our pricing with the value that our products and services provide.", aka because we want to make more money and we have sufficient leverage.

Q: Why are we doing this?

A: Because we feel like it.

Q: Isn't PayPal already a hugely profitable company?

A: Sure, but we think we can do better.

Q: What about micropayments?

A: As usual, we try not to mention our support for them.

It may have been because the payment networks increased their fees.

But even more probably, they might have been running a substantial percentage of payments at a loss and this change was modeled to mitigate that.

Offering these rates for $6 items will lose a lot of money.

Competition from other digital payments, specifically Apple Pay and specifically not Square, has taken low-fraud users out of PayPal, raising their costs.

It's ironic that competition in payments lead to PayPal raising its fee though. The industry is zero-sum.

Hopefully it’s the first step in a death spiral for PayPal, although they have so much momentum it would take a long time if at all. From what I’ve observed over the last 15 years, they have a culture of horrible corporate ethics and deserve to disappear.

While I'm no big fan of PayPal (I receive 95% of my income via them), it seems relevant to me to quote the entry from the Ardour FAQ about why we use PayPal:

-----------

WHY PAYPAL?

The Ardour project receives the vast majority of the revenue it generates in the form of small payments (less than US$10, and most of them around US$1). PayPal has a micropayments system that saves us nearly US$0.23 on every US$1 transaction. As far as we know, no other payment company offers this (and to be honest, we worry that PayPal may remove it at any time). This has huge consequences for us in terms of the fees we have to pay, and thus the actual revenue we receive when you do pay.

In some jurisdictions PayPal allows people to create subscriptions without having a credit card. This is also something that is not offered by any other subscription-offering service that we are aware of.

PayPal also handles the largest number of countries around the world, unlike many newer online credit card-based services that have limited their current offerings to North America and Europe (at best). Since Ardour is used in over 140 countries around the world, this seems respectful of our worldwide base of users/supporters.

How could you reasonably believe that the market for payments is zero sum? The entire market grows every day.

Is there an actual market for micropayments? I would imagine someone would have built a wallet for small-value tokens, and a cheap way to transact with them. But I don't think there's much utility beyond paying for news articles.

The overwhelming majority of the income for Ardour (how I make a living) arrives in the form of payments of < US$12 (and a substantial chunk of those are for US$1). PayPal's micropayment system saves us $23c per $1 transaction, which is huge.

This is news to me. Can you elaborate on their micropayment system or point to a source?

The fee structure is 5% + $0.05 (in the USA at least). It is beneficial up to about $12.

These are not "classic micropayments" in the sense of what was being discussed in the late 1990s and early 2000s. But very beneficial if you do lots of low value transactions.

https://www.paypal.com/us/webapps/mpp/merchant-fees

(Click on "Micropayments")

You cannot use both fee structures on a single PayPal account, so to use them effectively you either need (a) all transactions < $12 (b) all transactions > $12 (c) two PayPal accounts with your own software using the correct account based on the transaction amount.

Thank you.

My understanding is that there is a big psychological difference between something that costs nothing and something that costs 1¢, to the extent that even if (true) micropayments were possibly with current normal services, they probably wouldn’t be used because it is typically hard enough to get a customer to part with any cash at all that it isn’t worth it for very small amounts.

They should just change their QNA page to this, it does a better job of describing the new changes.

Q: Aren't you afraid that Stripe will eat your lunch?

A: Uhhh...

Interesting the comparison to Strip and Square which must be eating into their business. Anyone who's doing enough volume through these services isn't paying those published rates anyway. This will actually eat more into the smaller shops, who get the highest rates.

I wonder how this is affected by the value of the dollar. Things are generally getting more expensive across the board.

I get the rationale for using a separate domain for user-generated content, I sort-of get the rationale for an internal corp domain, but seeing material facts disclosed on paypal-corp.com reminds me how limited URL bars are for teaching people not to fall for phishing.

PayPal-corp.biz would be a bit worse but why couldn’t they just use corp.paypal.com?!

Based on this article, I'm not clear as to what exactly has changed and by how much. I wonder if they intentionally made it difficult to understand what they are doing.

Be a business in Sweden. Charge customers in USD. Paypal charges a fee for the payment. Then they charge a fee for the currency conversion from the customers’ local currency conversion. Then they use the worst conversion rate for withdrawing money from your account to local bank account (like 5% worse than actual rates). You could get around this by withdrawing the USD to a USD account via Transferwise. They changed (fixed) this by charging a 3% withdrawal fee from USD to USD. So just moving 10000 usd of OUR money to OUR bank account costs 300 USD. That’s AFTER the Paypal transaction fee AND after the conversion fee from customer’s local currency to USD. Thank god for competition, at least we can start moving new customers to Stripe. But dear lord, please stop them

I don't understand the difference between digital payments and credit card payments, but if digital payments are what stores are using, they're all probably going to ditch PayPal now.

I wondered if this was to compensate from eBay's recent push to shift payments to their own system versus Paypal after their split-- but per https://finance.yahoo.com/quote/PYPL/financials, Paypal's revenue hasn't dipped and they seem to be plenty profitable. Just a cash grab or actual increased fees/risks due to merchant profile?

You really shouldn't use Paypal. I have used a lot of payment systems etc. and none comes close to the awfulness that is Paypal.

Given your experience, which ones would you recommend as alternative?

I use a PP merchant account, here's why. I have a side business that makes a little electronic gadget for an obscure hobby. For the most part, my customers are not techies.

PP is the only [0] payment processing system that does not require me to maintain my own custom web server, either physically or in the cloud. All of the other services work like this: "Just put this code on your server, to accept payments through our service." But much as I love programming, I don't trust myself to make my own server work with 100% uptime, no surprise fees, or gaping security holes.

With PP, I can use a totally static web page for my business, with a "button" that calls PP's server. Or somebody can even just send the money to me with a note about what they're ordering. Some customers get really confused and I can kind of hand hold them through the purchasing process.

Perhaps a second benefit is the whole buyer/seller protection racket. I have had zero problems with buyers, but I think the buyer-friendly approach lets people be a little bit more confident about sending their money to some unknown person on the web. The fee is X percent, so I know that I need to sell Y more units to make up for it, but I think the reputation of PP on the buyer side probably generates those sales for me.

Of course I've read some of the horror stories on the seller side, but they seem to be mostly related to selling digital or intangible goods (for lack of a better term). Also, I figure that someone who's already selling a digital service has got the whole web server thing figured out.

[0] I occasionally go out there and look for an alternative, and if my claim is outdated, I'd love to know.

Stripe has Payment Links now which don't require any sever. https://stripe.com/payments/payment-links

There are plenty of gateways that offer a rudimentary hosted cart, where you just give people a link into the payment funnel.

In many cases, you'd be making a big mistake not offering Paypal as a payment option in your checkout flow because it increases conversion rate in many industries.

For my business, we split tested only offering credit card checkout versus a credit card AND paypal option. The latter converted ~8% better over a statistically significant sample size. For most businesses, this lift in conversion rate is a huge deal and largely covers the incremental transaction fees.

Tell me where I can pay just 10c on a US$1 transaction (say, $7k of them each month), and I'll be right there. Promise!

Luckily most of the world isn't in the US. I can't even remember a single business that use it around here so easy to avoid.

There are like… I don’t know… 5-10% of people who refuse to use anything but PayPal to pay for things online.

Venmo currently has no fees for consumers, is this changing too or only businesses are impacted by the change?

Venmo will cancel your account at the drop of a hat, faster than parent company PayPal. I wouldn’t recommend anyone trust that system for anything.

Both my SO and I were canceled because we separately accepted payments from people out of state.

The terms for Venmo are amazingly limited. Find a better option.

Another interesting question is what this will mean for Braintree rates. They are a wholly-owned subsidiary of PayPal but function like an almost-wholly independent payment system. I wonder if their rates will shift in step.

Another monopoly continues to grow unabated.

Payment processing is hardly a monopoly. As others have mentioned square and stripe are both viable alternatives.

Stripe isn't a viable alternative if someone wants to pay using PayPal instead of a credit card. This is especially common for folks who want to make 1 time payments and don't have access to a credit / debit card or simply feel more comfortable using PayPal.

PayPal is a monopoly on accepting payments by email addresses associated to a PayPal account. There is no alternative.

Sounds like the straightforward thing to do in that case is offer both options and get the consumer to pay the difference. Also AFAIK google pay and amazon pay offer similar service, but they're much less popular.

Making the customer pay the difference is tricky because it would mean showing a different checkout price based on the payment method.

What will probably happen is businesses will increase their prices across the board for everyone which is a win for the payment provider but a loss for both businesses and customers.

Monopoly doesn’t mean “big company I dislike”. It has an actual definition and Paypal doesn’t meet it.

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