In the world of exchanging services and goods, online money transaction is something expected to be at rage. Further, it is expected that it is high time for any payment gateway to compete and dominate. What actually unexpected was the rise of a payment giant like PayPal into the game within few years. Apparently, it does! PayPal which was used to subsidiary owned by EBay was announced as an independent company in mid 2017.
Now, PayPal proudly outperform its parent company EBay Inc according to late 2017 reports. It has been a mystery to lot of people that how PayPal is making so much money and growing so fast that it brought the parent company stand behind. Here we crack up the revenue model of PayPal which resulting in its rapid growth.
How PayPal is making Money: Revenue Model
It will be a mistake to consider PayPal as just a fintech company because it is more than that. PayPal brought a revolution in digital finance and transaction system. It is also one and only payment giant which was succeeded to bring its own concept to this digital transaction domain. Interestingly, it is not a bank but still act almost like a bank with whole lot of financial features like online money transfer, payment gateways, debit cards, credit cards, loan, credit system, digital wallet and more. There different revenue sources of PayPal revenue system.
PayPal Revenue Source
Transactional Fees: PayPal offers two kinds of accounts to sign up for the people. One is person and other is business. With personal accounts which are heavily used by freelancers, buyers, traders and people, PayPal take away a particular percentage of the transactional money. People send money to their friends, family or relative or they purchase something from online with personal account. It also largely used by freelancers across the world for exchanging money by their services. PayPal charges around 2.9% in addition with 0.30 USD money when person use debit or credit card. For better calculation of your amount you can use paypal fee calculator according to your country.
Then, there are the Business accounts used by merchants who use the PayPal to sell their products and goods online. They also suppose to pay 2.9% of transactional fees along with 0.30 USD on whatever amount they earn from their sale. These fees charged by PayPal are constantly fluctuating as sometime it get reduced and sometime increased. However, there are no transactional charges or fee on withdrawals. In case of withdrawing a check from PayPal, you need to pay a fee of 1.50 USD extra.
When the payment is transacted locally, only transaction fee is applied on your payment module but with international, there is another revenue source for PayPal Company. If you are receiving money from any other country than yours, you will be charged an international payment fee while conversion of the currency. So if you are getting payments from abroad, there will be two deductions from your payments which are often the case. This proves to be primary earning revenue for PayPal as it is primarily used by freelancers, business owners, merchants and buyers.
P2P Money Withdrawal charges
There is another feature introduced by PayPal for the quick transaction and online payments between buyer and purchaser. PayPal.me is a feature which lets people to receive money from another party through a custom and one time generated link for one person at a time. Whenever the money is withdrawn through the link, you will be charged 2.9% along with 0.30 USD of the money received.
Debit Card Withdrawal Charges
As a user of PayPal, one might get this easy transaction payment mode but nothing is free with PayPal. According to Paypal Calculator, Every time you withdraw money from your PayPal account using a debit card, they charge a certain amount on it. For US withdrawal through debit card, PayPal charges 1.50 USD per transaction. For Non-US withdrawal through debit card, you will be charged 1.50 USD per transaction with the conversion rate of currency. Then, there is a signature withdrawal where one will be charged 3.00 USD per transaction. If there is a foreign transaction withdrawal, the person will be charged 1% of the amount withdrawn.
Business Account Registration Charges
When you come to the Business accounts used by merchants and business owners, it is not free even at the registration. Registration an individual or person PayPal account is free but Business account is certainly not. There are lot of features which even could use by Personal Account users but they have to buy the PayPal pro account for that. The registration cost of PayPal Business or Pro account is USD 30 which is valid to one month only. So more than a registration cost, it is a subscription of USD 30 per month.
Interests from Money Deposition
One of the hidden revenue sources of the PayPal which is not much discussed or announced are the interests coming from money deposition. Every user deposit some amount in the PayPal account as PayPal Balance. That amount is used by the company for liquid investments and earns interest from them. Such hidden revenue source is never officially shared by company to the users or anywhere else.
PayPal Credit Card Interests
PayPal Credit Card features are really tempting for the users which enable them to buy things on credit even without any interest if paid in six months. The amount should be equal to or more than 99 USD. PayPal charges Annual Percentage Rate (APR) of 19.9 percent from the purchase date.