PayPal is one of the most successful online payment systems out there — if not the most successful. The system makes payment online both convenient and safe for internet users and its success has skyrocketed because of these features. The ability to innovate has been another of the secret ingredients, as the company faces stiff competition from Apple and other companies and strives to remain at the forefront of online payment technology.
Things did get off to a rocky start for the company, initially. Before being PayPal, the company was called Confinity and specialised in delivering security software for handheld devices. The business model wasn’t working. It was then that they began to focus on electronic wallets. They decided to serve the eBay community, who were using part of the service as an online eBay currency.
Breaking into different industries
PayPal has become a presence in a variety of ecommerce business. Several stores in retail, technology, entertainment and other areas accept payment through the platform on their website. Of course, Amazon is one company which doesn’t provide PayPal as an option.
One industry in which customers may feel particularly reassured to see PayPal is the online gambling industry. Customers can play online and not have to provide any financial information. All they have to do is provide the PayPal email address to which they’ve connected their bank account. PayPal casinos are growing in popularity, largely due to how straightforward they are.
Paying the fees
PayPal does provide value for money and allows users to conduct certain transactions for free, not to mention open a free account. One bone of contention that customers may have with using PayPal is the actual amount of the fees they do have to pay. Sending money abroad, for instance, is expensive because it’s necessary to pay the currency conversion fee and the ‘cross border personal transaction fee’, which depends on the country where the sender is based and you’ll have to pay if you send the money in the recipient’s currency. It can be cheaper to pay in your own currency. If you’re based outside of the US, Europe or Canada, the currency conversion fee can get especially expensive — as high as 4%.
If you’re receiving a commercial payment, you must also pay a fee, whether you’re in the UK or outside of it, and this can be anywhere between 1.9 and 3.4% domestically. There’s also a cross border personal transaction fee, which ranges between 0.4 and 2%. The question is are any of PayPal’s fees fair?
The answer, especially if you’re a business, is likely to be ‘No’, plain and simple. It was reported online a couple of years ago that PayPal updated their User Agreement to include terms and conditions that prevent businesses from discouraging customers from paying by PayPal. The obligation to pay fees when selling to customers across the border — would not be fair, some might say. The company had also hiked up its rates, but justified this by stating that its increases would only apply to users in the US. Does that make them fair? Probably not if you’re in the US.
PayPal, meanwhile, could well believe that the fees they charge are perfectly acceptable. The company provides several different options for people who run businesses and could well believe that fees are necessary to cover the operation of its different services. Businesses who use PayPal offer their customers a secure way to make payments and company may feel they’re entitled to charge the fees, too, in return for this business benefit.
Is it possible to avoid them?
If you’re a business that uses PayPal, you can apply for a lower merchant rate. The lower rate may only be a little lower, at around 1.9%, but when you add this up over time it soon becomes a pretty penny, which makes it well worth considering. Take care of the pennies and the pounds will look after themselves, as they say.
The other way to avoid them is by going with a competitor. There are plenty of them. Amazon Pay, Apple Pay, Stripe, Venmo, Google Wallet… they’re all out for a piece of the PayPal pie and will be happy for you to set up with them.
The battle between tech companies is fierce in many spheres — and online payments is one of them. PayPal may have been one of the pioneers in creating a safe platform for shoppers online to make payments, but it’s having to fight hard and innovate to remain ahead of the pack. Users of the platform — and anyone who is considering making PayPal a payment option for their customers — may not agree with the fees the company charges them, which is where their power lies because they can choose other options. PayPal may well reconsider their policy on fees.
