PayPal Fees Are Insane | Hacker News Reader

PayPal Fees Are Insane

74 pointsrandytandy31 comments

So I have been doing personal transfers with cryptocurrency recently for large sums over 20K USD and more each time the fees are around 10 USD. The worse fee that I have had to pay was 100USD but that was during the NFT craze and it still was less then what paypal charges

I've just recently for the first time in ages used Paypal for invoicing and was charged about 5%.

This is insane. I was charged over 90 USD to invoice 3000 USD? Isn't their process automated or are they still doing accounting by hand. I could pay an accountant to do the invoice for less.

Why are their fees so high (aside from demand/supply) surely this gives room for a startup to come in and take the a fixed transactional basis rate?

Does anyone have any alternatives to Paypal that doesn't charge on a percentage basis?

TLDR: Been spoilt using crypto for transactions and the fees are significantly less then Paypal.

How is paypal still charging this rate?

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The risk a payment processor (credit card, PayPal, etc) takes on when handling your transaction is proportional to the size of the transaction. Basically, if you draw out the complete state transition diagram, there are some terminating states where PayPal is left holding the bag. So to cover that risk you have to charge a percentage - of course, the percentage gets bumped up (perhaps dramatically so) to make a profit, but you’ll never escape percentage charges with payment processors.

How do banks, crypto, etc. operate without charging percentages? I don’t know if it’s a completely sensible distinction to make but I think of them as processing transfers rather than processing payments. A payment is money in exchange for something, there’s customer rights involved, if the something isn’t provided the money can be clawed back (e.g. chargebacks). A transfer is just a raw “moving money” operation, there’s fewer customer rights involved, if you transfer to the wrong account you just lose the money. Basically, draw out the state transition diagram for a raw transfer and there’s fewer end states where the institution ends up on the hook - few enough that it’s safe to offer flat or no fees.

If you use PayPal, there is a risk to you that you will be left out to dry (as numerous anecdotes attest) with a locked account and funds frozen. Can you charge a fee to these fucking assholes as an insurance against that?

You're getting hit with basically the same %% fees credit card companies charge

PayPal's very clear on this (as is Stripe, etc)

The only "feeless" transfer service I know is Zelle ... but there's also no recourse if you transfer money to the wrong target, the product doesn't arrive, etc

In Australia the Reserve Bank publishes the average cost of acceptance by card type.

As of 2019 the published rates are 0.5-1% for Visa and Mastercard (lower end for debit, higher for credit) and 1.4% for American Express. They are basically all dropping over time, not going up. This includes terminal rental, monthly fees, etc.

PayPal charges 2.6% plus a fixed $0.30 fee for domestic + another 1% for international. Stripe by comparison charges 1.75% domestic and 2.9% international. PayPal still charges this fee even if someone funds it from a much cheaper bank account or their PayPal balance. BrainTree, a subsiduary of PayPal for many years.. charges 1.75% + $0.30. Go figure :)

PayPal also has a fairly good anti-fraud measure that many others lose out on in that it does not let you submit a payment with a credit card associated with a PayPal account, without actually logging into said PayPal account.

PayPal has historically always had quite a high percentage, operating off brand I think and owing to easy integration options.

I'm sure there is some more complexity here I'm missing but in general, PayPal fees have always been significantly higher than the competition in Australia.

Also worth noting unlike the US, in Australia we have totally free transfers between all australian bank accounts - same system, every bank, 0 fee. So Paypal here is really only used primarily as a merchant facility for your website. The inter-person payment part has a much lower use rate than the USA.

Despite the hate paypal gets, and the high fees i have multiple times been saved by having them in between me and the seller, its something i dont mind paying abit extra for the clawback system is pretty decent.

Paypal in USA charges 3.49% for domestic!

But credit cards in the US also charge about 3%. Paypal’s somewhat pegging to what’s ‘reasonable’ in the locale.

I know! We really get cheated in the USA.

In the USA my expectation is that the higher fees cover two things. The first is much higher all around credit limits - with higher fees you can handle more delinquency. In the UK it's typical to get a credit limit of around 10% of your salary, whereas from what I know it's easier to get a higher limit in the US. That may be a good or a bad thing. The second thing is that some credit cards are basically an asset transfer from the poor to the rich. Get a Chase Sapphire Reserve? $500 fee per year, then you get $300 back immediately on travel, $0.015 on travel per dollar spent ($0.075 if spent on flights), $25/year value on global entry applications, and various free other things (airline lounge, auto rental insurance, etc etc). You don't get that if you're poor.

It's not just fees. Its the currency conversion spreads they offer which are just as bad and fluctuate wildly depending on the country.

Lots of alternatives. I don't use paypal anymore for this reason AND they can freeze all your funds at any time esp involving crypto as they don't cover it in their policies. Beware.

Yes only use it as a buyer!

Your crypto transaction fees did not incorporate conversion risk.

So, for example, if you transferred crypto, but the value of crypto fell by 10%, that expense to the recipient could be far greater than the 5% fee you paid. Alternatively, if the value rose by 10%, then the cost to you as a sender is far greater than the 5% fee you paid.

And crypto is extremely volatile, so your exchange risk is also extremely high.

Unless you're using stable coins.

Which doesn't help when your exchange steals your stable coins.

There are many who avoid exchanges altogether which was the original purpose of crypto: DeFi

And DeFi has no way to interact with the real world and fiat. The fundamental flaw with crypto is that the real world requires trust and governance to handle the corner cases when there are disputes between parties. None of the blockchain technologies in use today have solved that. If someone knows otherwise, please show me. I have a friend that lost 7 digits worth of crypto assets because of this issue 5 years ago, and it seems to keep on happening to other people. This is flat out wrong, unethical and immoral.

Okay thank you, @fwir, @asdajksah2123, @lathiat These points make much more sense however

If there is 1.75% of counterparty risk then why do bank transfers charge fixed rates of 0, 3 Euro and alike. If the underlying transfer is swift, sepa, wire then shouldn't this be the baseline?

That or give the option to accept the counter party risk for failure of transfers.

And there surely is signing methods that one could do as an escrow like service to mitigate most of the fee

In addition to the points already mentioned (counterparty risk, currency conversion, popularity, ease of seller side integration), don't underestimate how much PayPal can increase conversion rates by making it easy for the buyer to make a purchase.

Fumbling around with credit cards or IBAN numbers + having your banking app fail randomly when trying to authorize payments is annoying. PayPal just works. Also, if you're some random shop on the internet many customers prefer to pay via PayPal rather providing you banking details or credit card numbers.

> That or give the option to accept the counter party risk for failure of transfers.

In Germany, merchants frequently offer to be paid by IBAN in advance or by invoice after the delivery. No fees, but the risk is fully on one side.

> And there surely is signing methods that one could do as an escrow like service to mitigate most of the fee.

PayPal basically acts like an escrow with their buyer protection policy. If you find another provider, good luck convincing the customers.

> Fumbling around with credit cards or IBAN numbers + having your banking app fail randomly when trying to authorize payments is annoying.

What country? I use 3 EU banks and different credit/debit cards and haven’t had issues in the past 5+ years; there is no fumbling; the data is stored in Apple Pay or google pay or the browser password vault, so maybe (there isn’t anymore as the banking apps immediately allow to add your card without you even having a physical card) there is 1 time fumbling and that’s it. And the banking apps have never failed for auth.

PayPal on the other hand stole money from my company and closed/banned my personal account because they simply couldn’t fix a bug they have and closing an account is easier and cheaper for them. It’s a horrible company and has high fees. Happy to never having to use them again.

There aren't many alternatives. Particularly for international transfers.

I mean even stripe is just paypal isn't it

Wise.

Wise varies rapidly depending on your input and receipt country. They charge around 6% in many places.

Better to send USDC and convert to the local currency once the USDC is at the destination.

Agreed, I know Wise keeps getting mentioned but they are very expensive. Seems like every 1-2 months they also restructure/tweak their pricing as well.

Well you answered your own quesiton: crypto.

And you'll say: for reason X and Y crypto doesn't apply in your case...

Yes, these reason X and Y are where Paypal fees come from.

I have been spoilt using a traditional bank for transactions and the fees are 0.

It is insane, I was charged 0 USD to invoice 30,000 USD.

What you did there was make use of a good client relationship. This won’t work selling a tshirt to a stranger. So it is about use cases.

> for large sums over 20K USD and more each time ... invoice 3000 USD

> This won’t work selling a tshirt to a stranger.

If a stranger is paying you 20K USD + for a tshirt then the I wouldnt worry too much about the fees.

Selling 20k worth of $40 tshirts attract the same fees though.

Here’s one area where Europe is nice.

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