Sellers are scrambling after learning that PayPal is hiking fees by as much as 32% for many merchants. Those who process less than $3,000/month are unaffected.
"Do the math," one upset reader wrote to us. "This is a 32% rate hike! I am considering increasing my handling fees to pass this cost on to my customers - but of course I will let them know that the increase in fees comes to them courtesy of PayPal."
Here's the letter PayPal sent to merchants on August 27, 2015:
"At PayPal, we work hard to ensure your payments are simple, secure and fast. We innovate and invest carefully to deliver services beyond payment processing, including fraud protection and seller protection, to help keep our merchants secure. We drive improved customer conversions and extend credit to both merchants and their customers to help businesses grow. We also aim to make it as clear as possible how these products work, how they are priced, and how much value they deliver to you.
"In that spirit, we are simplifying the prices we charge for PayPal transactions. Effective October 1, 2015, we will remove the tiered merchant rates for US domestic and international Purchase Payments*. This means your rate will increase if you are currently receiving a merchant volume discount. Your new rate will be the standard rate of 2.9% + $0.30 USD for domestic transactions and 3.9% + fixed fee** for international transactions. Please note that card-processing rates on PayPal Payments Pro and Virtual Terminal are not changing.
"We value our partnership with you, and we commit to investing in new capabilities to help you grow. At a time when the ecommerce industry is affected by unprecedented levels of fraud due to stolen cards, PayPal has expanded our seller protection to help keep you safe from fraud so that you can sell with more confidence. PayPal Working Capital delivers more than $2 million of new loans to small businesses every single day. To drive international growth of your customer base, we continue to build overseas to make it easy to get paid from millions of customers outside of the U.S. Our investment in new product features such as One TouchTM have been proven to increase consumer conversion. These few examples are just the beginning of our long-term commitment to help you grow your business.
"This email is for your information only; there's nothing you need to do. You can review the updates that will go into effect on October 1, 2015 by visiting this page after August 27th.
"Thank you for being a PayPal customer. We appreciate your business.
Merchants who process over $10,000/month are currently eligible to receive fees of 2.2% plus 30 cents per transaction, but as of October, they'll be paying 2.9% plus 30 cents.
The same day sellers received bad news from PayPal, they got bad news from eBay - if they were considering turning to ProPay or Skrill (formerly Moneybookers) as an alternative to PayPal, that's no longer an option. As of September, eBay is banning those two PayPal rivals from its site.
On the eBay boards, a seller wrote, "Well PayPal is surely trying to boost revenue. Cash back reduced, percentage increase for anyone taking in 3k or more via PP per month, and now this to insure the 80% take," referring to the ban on PayPal rivals.
It's hard to imagine large retail chains such as The Home Depot willing to pay 2.9% plus 30 cents for payment processing fees - we're waiting to hear from PayPal if it's exempting any customers from the removal of volume discounts.
More details on both announcements are in today's Newsflash.