If you’ve made a purchase online in the last 20 years, you’ve probably used or heard of PayPal.
Offering a range of secure money transfers services, PayPal has become a staple of online shopping.
How Do They Make Money?
“PayPal makes money primarily by processing customer transactions on the Payments Platform and from other value-added services,” business developer Gennar Cuofano explains. “Thus, the revenues streams are divided into transaction revenues based on the volume of activity or total payments volume.”
Transaction fees are the backbone of PayPal’s business model. There are two types of PayPal accounts, business and personal, each with different fee platforms.
Personal Accounts
Members with a PayPal Personal Account can transfer money to and from their family and friends or pay for goods and services. PayPal charges a 2.9% transaction fee plus $0.30 for all transfers from debit or credit cards.
Business Accounts
Business accounts have a tiered transaction fee structure that’s based on the total value of the transaction. Fees can vary from as high as 3.4% for small transactions or as low as 1.9% for large ones.
PayPal also offers additional services to business owners.
PayPal Payments Pro
Payments Pro is a monthly service that includes special features like custom checkout pages or same-site payment. Business account holders can add this service to their membership for an additional $30/month.
Payflow Payment Gateway
Payflow is a similar service that allows online merchants to offer PayPal checkout directly from their website. This means their customers can make a payment via PayPal without opening a separate webpage. Merchants can either use the free Payflow link service, or pay a monthly fee to unlock customization options.
Other Service Fees
PayPal also charges a variety of small fees for other services such as withdrawals via mailed checks or currency conversions from international transactions.
What Is PayPal?
PayPal is an American company that supports online money transfers around the globe. Founded in December, 1998 as Confinity and X.com, PayPal was originally designed to offer a digital alternative to traditional money transfer methods via checks, money orders, and wire transfers.
The young company appeared just in time to take advantage of growing online vendors and auction websites like eBay. By 2002 PayPal made their first public offering and quickly became a subsidary of eBay. In 2015 eBay branched PayPal into its own independent company, where it remains to this day.
Learn More About How PayPal Works With The Video Below