PayPal Holdings Inc will lift merchant costs for its branded payment products while cutting those for behind-the-scenes processing of some Visa and Mastercard transactions, a bold move in an increasingly competitive digital payments sector.
The strategic shift reflects PayPal’s growing power in online transactions, which surged during the COVID-19 pandemic. As consumers and businesses flocked to the company, a market leader, during lockdown, its active accounts mounted to 377 million, more than twice as many as in 2015.
The company said the move reflected the value of its proprietary services, with consumers nearly three times as likely to complete a purchase when PayPal products are available at checkout, while users of the new buy-now-pay-later option spend an average of 15% more.
“We are changing prices to help our customers understand even more clearly where we provide value,” Dan Leberman, PayPal’s senior vice president for small and medium business and partners, said in an interview.
“The wallet is of tremendous value; the card processing is commoditized.”
PayPal shares were up 2.5% late Friday afternoon.
PayPal will charge sellers 3.49% plus 49 cents to process transactions made through its proprietary products, including its button on merchant websites and its digital wallet, according to material the company shared with Reuters.
The higher rate applies to products like PayPal Checkout, Pay with Venmo, PayPal Credit and new buy-now-pay-later offering Pay in 4.