How does PayPal make money? Easily explained
The PayPal account is free and the fees are limited. This raises the question of how the service provider makes money. After all, the online payment system reports sales in the billions. We have investigated the question.
This is how PayPal earns money
In short: PayPal makes a lot of money because a lot of people use the service.
- A PayPal account is free of charge, as is payment via PayPal. However, the recipient of the money pays a fee. The amount depends on the amount of money that has been transferred. An overview of the PayPal fees can be found in a separate article.
- PayPal earns money with these fees. The individual amounts claimed are not particularly high - but in total they result in a considerable profit for the company.
- The number of users of this payment system plays a role here. At the end of 2014, more than 179 million active users were already registered with PayPal - and the number is constantly increasing.
- For example, the company reported sales of $ 9.2 billion for the 2015 financial year. While revenue is not a profit, Paypal's $ 380 million profit was earned in the third quarter of 2017 alone - with fees for receiving payments.
PayPal fees are often passed on to buyers
Seller fees are the main source of income for PayPal. But often it is not the seller who pays the transaction costs, but you, the user. Sellers can request the fees for PayPal payments from buyers.
- On eBay, for example, products with PayPal are preferred by buyers as a payment option. After all, this is a quick and secure way to pay for goods.
- However, sellers are increasingly demanding payment fees from customers. While this is not customer-friendly, it is legal. According to the law, online retailers may charge costs for using payment via PayPal.
- However, legislators and courts have defined conditions for the premium. In addition to paying PayPal, the seller must offer the customer at least one common and free payment option. This can be a payment on account, transfer or prepayment.
- In addition, the seller cannot arbitrarily set the costs for using the PayPal payment. He may charge a maximum of what Paypal himself charges for receiving the payment.
If you are also wondering how WhatsApp makes money, you will receive a detailed answer in the next practical tip.