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Sun Nov 3 2019 09:24:40

Expect More PayPal Price Changes Ahead

By: Ina Steiner

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PayPal executives revealed there are more price changes coming in 2020 after rolling out a controversial refund policy last month that promised to be costly for merchants: PayPal no longer credits any fees when they issue refunds for returns or other reasons - previously it had credited all but the fixed-price transaction fee.

During its third-quarter conference call on October 23rd, PayPal Chief Financial Officer John Rainey addressed the new policy, saying it had been rolled out in three countries this year and will be expanded further next year.

What might come as a major surprise to many sellers, however, is the revelation that certain merchants are excluded from the new, costly policy - "... certain merchants are excluded if you have negotiated pricing and so forth,..." Rainey told analysts.

Volume discounts are standard in ecommerce and elsewhere, but offering a policy exemption for merchants of a certain size is another matter. It means small sellers are stuck with the costly new policy, while an unknown number of larger merchants are exempt. (It's possible PayPal received pushback from large merchants back in April when it first announced the new policy in its new user agreement.)

A former merchant sales officer at a big bank sent us an email last week to point out that when a merchant issues a refund to a customer, Visa and Mastercard refund a portion of the interchange fees - meaning PayPal now keeps all of it.

We found an interesting discussion of this topic on a site called Cardfellow.com. "Visa and MasterCard use interchange fees to determine how much you pay an issuing bank each time you accept a credit or debit card transaction. Interchange is also used to determine how much money you get back on your processing fees when a customer returns the product she purchased."

"I am not opposed to PayPal keeping something, overall I think they have provided a good service to me over the years I never had a big issue," the former banker-turned-online seller said. "But PayPal's new policy is a big dynamic shift towards profit, which I am all for, but not so much that you tick off you customer base."

"When PayPal is taking back the IC refund and keeping it in their pocket under the ruse that all the other kids are doing it, does not sit well with me," he said.

During the same Q3 conference call where Rainey discussed the policy, PayPal CEO Dan Schulman said, "We're going to have pricing initiatives this year, next year, the year after and then the year after that. I mean we continually assess market dynamics. We look at the evolving practices of our competitors. We take a hard look at the value we provide. And then we try to price appropriately based on all those factors."

You can find the full transcript of the PayPal conference call on SeekingAlpha.com.

To understand the impact of PayPal's new refund policy: one reader explained to us that for a $100 transaction, they pay PayPal fees of 2.9% plus a 30-cent fixed transaction fee - $3.20. Prior to the new policy rolling out in October, if the seller refunded the entire $100, PayPal would keep only the fixed-price portion, or 30 cents, and the seller would receive back $2.90. But under the new policy, PayPal keeps the entire processing fee of $3.20.

There are many reasons why a seller would issue a refund - sometimes it's because of a shortcoming of a marketplace. For example, a seller may be forced to overcharge on shipping for multi-quantity purchases and then feel obligated to refund the customer a portion of the shipping charge.

Sellers must also issue refunds for most returns, meaning they become even more costly for merchants.

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Readers Comments

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This user has validated their user name. by: The End

Sun Nov 3 12:28:52 2019

PayPal is DEAD.
Never use it.

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by: Lisa This user has validated their user name.

Sun Nov 3 19:56:50 2019

i use it all the time

realistically, how often do you have to refund a buyer?

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by: Shanna This user has validated their user name.

Sun Nov 3 20:43:06 2019

Ebay is Paypal's biggest customer, so of course, eBay is getting that policy exception. When eBay's Managed Payments claims the same refund policy, just know that Paypal is not keeping their fees, just like they do for Walmart and Home Depot.

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by: Lisa This user has validated their user name.

Mon Nov 4 00:04:12 2019

wont they do the same thing for etsy pay paypal integrated and kick the refund fee back to the seller? i bet they will.

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by: TDAKS This user has validated their user name.
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Mon Nov 4 00:18:48 2019

2.9% + $0.30 ????
I am on 2.6% + $0.30 and I am tiny.

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This user has validated their user name. by: DeathFromAbove

Mon Nov 4 00:29:13 2019

As they are set to lose 3/4 of their revenue when ebay splits - it's basically their dying-breath cash-grab, being used to sew together the A suite's golden parachutes, and give one last chance for Dan and pals to do some insider trading and well-timed stock dumps for their millionaire retirement funds, before Paypal implodes.

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by: Tiffee Jasso This user has validated their user name.

Mon Nov 4 01:31:56 2019

I had a cancellation and it cost me $2.01 in Paypal fees. Buyer had zero feedback. How many other sellers have had cancellations from zero feedback buyers since this new no fees returned policy began a couple of weeks ago? Just wondering as I know one other Ebayer that had them same thing happen to them.

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by: BargainzBabylon This user has validated their user name.

Mon Nov 4 01:47:22 2019

eBay provides Paypal with about 11% of their revenue (per fiscal end 2018), and being included in eBay Payments means Paypal will continue to get some revenue from eBay. Meanwhile Paypal is growing mobile payments, signing up independent small merchants (I can pay with Paypal just about anywhere, now), and being cut loose from a declining marketplace like eBay means Paypal will likely improve its future prospects.  I don't think it's going anywhere.

However, this money grab is still a poor idea.  

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by: Eagle This user has validated their user name.

Mon Nov 4 02:48:17 2019

I was getting a lot of (hate to call them customers) ppl purchasing items at night and the next morning wanted to cancel the orders. I stopped accepting PayPal as a payment option then when they would keep the .30 cents. Wasn't so much as the 30 cents being the issue as was these kids buying something they didn't have any insinuation of wanting or keeping and being charged for the buyers head games which I had no control. I even posted that purchases as described above would be charged a restock fee and I would refund the payment less the restock fee and PayPal would take it on their own to refund the full payment and take the fee out of my account. Anyway, I'm damn sure not going to rethink my decision about accepting PayPal now.

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by: HardWorkingSeller This user has validated their user name.

Mon Nov 4 06:58:19 2019

I have stopped accepting PayPal in my Webstore and moved to eBay Managed Payments (as I assume that eBay has negotiated themselves an exemption to the cash grab).

If enough people vote with their feet the people who thought they could get away with this will be fired.

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by: epuise This user has validated their user name.

Mon Nov 4 09:59:37 2019

It's very simple...
IF a customer pays me CASH, pickup...
They can return FREE, dropoff.
IF a customer pays me PAYPAL, postage paid service...
They can return LESS PayPal fees & postage.
That's my policy.

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by: cellular-seller This user has validated their user name.

Mon Nov 4 10:36:42 2019

Returns are a normal part of both brick and mortar and e-commerce sales.  Returns & refunds are a costly part of business for all merchants.  From new items that can no longer be sold as new (much of which goes thru reverse logistics) to lost shipping, insurance fees, packaging costs etc.  Everyone loses on returns! For Paypal to be insulated from returns and refunds is utter NONSENSE. It is simply a cost of doing business. No business is entitled to their fee when a transaction is not completed successfully.

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by: pace306 This user has validated their user name.

Mon Nov 4 10:42:24 2019

Cash grabs are the ONLY way these companies can grow anymore - just STEAL from your customer aka the seller.

After all he/she is an UNLIMITED reserve of free money thats there for the taking.

Now (as said above) that Paypal and eBay are on the way outs - Paypal needs to make up that lossed revenue - and guess who will make up that short fall? ... the seller. Not eBay (who created the separation) not the big guys with their billions of sales - just the small guy whos railroaded into using Paypal to start with.

eBay bought Paypal back int he day - to control sellers - cause "damnit" - Postal money orders, checks etc were all no good (so said the pea brained eBay CEO).

They TOLD everyone that smaller sellers NEEDED Paypal so they could accept CCs and such - BS - anyone with a company can open a merchant account - I know - i did it in the past a few times.

Paypal was also the convenient pasty in eBays good cop/bad cop game - to entrap sellers. Paypal would tell you "we would GLADLY refund you when you got screwed by the buyer, BUT EBAY WONT LET US".

While Paypal grew, eBay didnt and now that they were forced to part company and Paypals acceptance in the world of finance has slowed - out come the daggers - for the one guy who cant protect himself - the small sellers.

Paypal deserves the same hell that eBay does - for hurting people for no reason. You need to keep the transaction fee to cover your cost on moving money (since Paypal isnt a cc company or a bank) -OK. But theres no excuse to steal from small sellers.

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by: purpleiris This user has validated their user name.

Mon Nov 4 12:11:17 2019

Everyone is always blaming PayPal for the shenanigans of eBay. If you're selling on eBay and having a lot of problems with cancelling buyers, then maybe you need to find another place to sell. Trying to lead a dead horse to water is just, well, a serious waste of time.

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by: Fahrenheit451 This user has validated their user name.
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Mon Nov 4 14:49:57 2019

I stopped using PayPal buttons just recently, thanks to a poor decision on their part about a dispute I filed to get my money back. Now I rely on Stripe. I will be using PP less and less since a lot of shopping sites don't even use PP. Eventually I will wean myself off.

And they keep sending me emails about taking out a loan, when I don't need one. Since when have they become a bank?

After 20+ years of waiting for PP to straighten itself out, I've had enough. My advice is: weigh what you are willing to put up with against a more dedicated payment processor like Stripe or Quickbooks, which are only going to process your card income instead of telling you what to do.

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by: Eagle This user has validated their user name.
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Mon Nov 4 18:57:59 2019

@Fahrenheit451, I constantly get the loan offers too! Guess they think since we aren't doing any transactions with them that we have a money problem and can't stock our websites with enough of a selection to attract sales? God forbid it would have anything to do with the fact we dumped PayPal over greedy decisions on their part and are using Stripe to process our orders now.

Don't know if anyone watched the PayPal interview on HBO/Axios Sunday night with PayPal CEO Dan Schulman? He was coming across as PayPal being the savior of small businesses and coming across with a tear and jerk attitude about how the small guys get screwed. This while keeping a straight face knowing in the back of his head what they are doing to the small guys with this money grab of keeping all the fees on customer returns. What a POS! Coming across to main stream viewers that PayPal really cares about small businesses via HBO/Axios interview while only the actually small business people know the truth.

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by: purpleiris This user has validated their user name.

Mon Nov 4 20:31:44 2019

I will never use Stripe again. The very first transaction that I had through them, they triple charged my customer. When I went to my account to fix the problem, their user interface was so archaic that it took me 30 minutes to figure out how to do what I needed to do.

In the nearly 20 years I have been using PayPal, I have not had a single problem. Yet, I have a problem with Stripe on the very first transaction? Which payment processor do you think I prefer? LOL

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by: Lisa This user has validated their user name.

Mon Nov 4 21:31:16 2019

i have never had an issue with paypal either. i was hacked once and paypal resolved that in my favor ASAP.

i do, however, use square in person. they have less glitches with their reader and deposit funds much faster.

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by: Lisa This user has validated their user name.

Mon Nov 4 21:40:56 2019

isnt it normal though for a CC and BC processor to keep these fees? I mean when we do kiosks during holidays and i go through my bank to process cards, they don't refund fees when an item is returned. i mean, they did their job and processed the initial transaction. Plus any fees you incur are a write off.

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by: purpleiris This user has validated their user name.

Mon Nov 4 22:09:28 2019

@Lisa, that's the way I look at it, so I don't have a problem with PayPal keeping their fees. I actually never understood why they refunded them in the first place. I also don't have a problem with returns, so it's not like I have anything to worry about.

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