|Fri June 3 2011 16:00:37|
PayPal Wanted 7 Percent for Consumer Transactions on AliExpress
By: Ina Steiner
PayPal ended its relationship with Alibaba's AliExpress wholesale marketplace after just one year, and a document reveals PayPal wanted to charge 7% fees for processing certain AliExpress transaction payments - much higher than the 2.9% - 3.9% fees it charges for China cross-border transactions.
PayPal entered into an agreement with AliExpress in April 2010, and today announced PayPal would no longer be a payment option on AliExpress after August 3rd. See today's AuctionBytes news story.
A document obtained by AuctionBytes reveals that PayPal was unhappy over a "dramatic increase" in North American consumers using AliExpress and told the B2B marketplace it would begin charging 7% fees on transactions involving personal consumer PayPal accounts. PayPal doesn't typically differentiate whether the sender is a consumer or business.
A possibility as to what might have spurred PayPal to withdraw from AliExpress is that consumer transactions could be more costly in cross-border trading: a larger volume of lower-value transactions with a potentially higher risk of claims than from resellers.
PayPal is training North American consumers that it will protect them from "Item Not Received" claims and items received but significantly different from what was described by the merchant across all marketplaces. PayPal is able to do this by shifting a lot of risk to merchants - eBay sellers in particular are aware of PayPal holds and reserves on their accounts. I'm not clear on whether PayPal was able or willing to impose some of these risk management techniques on AliExpress suppliers, or whether higher fees satisfied its risk management criteria.
Whatever the case, it's interesting that more consumers are going directly to Chinese suppliers for their purchases.