Have you ever stopped and wondered about how PayPal makes their money?
Let’s review: With PayPal Personal you can send and receive money
electronically to and from other PayPal accounts for free. You can also
transfer money to and from your regular bank account at no charge. Sign
me up! The other account type is PayPal Premier. With this this type of
account PayPal charges a fee,
$0.30 plus 2.9% of each and every dollar received. So why would anyone
sign up for a PayPal Premier account when they can have a PayPal
Personal account which can send and receive funds for free? This is
where they have done something clever. It’s actually kind of boring,
really, which is why few people have noticed the fact that since buying
PayPal, eBay has nearly doubled it’s revenue for each auction that uses
PayPal.
Here’s an example scenario: Joe Blow puts his old laptop
up for auction on eBay. The high bid is $450, which costs Joe around
$18 in eBay fees. But Joe has taken eBay’s advice and listed his laptop
auction as PayPal preferred. So when the high bidder pays for the item,
she of course transfers money through PayPal. If she opts to use a credit card, the system allows it and sends an email notification to the seller. If the seller signed up for the free PayPal account, he is told he will have to “upgrade” to a PayPal Premium account or reject the payment. At this point sellers with free PayPal accounts are stuck. If they want to complete their sale they have to upgrade their PayPal account and pay the fee to receive
credit card transfers.
If it was just a
question of paying a fee for just credit card transactions I could live with
that. No such luck. Once you switch to a Premier account you have to pay that same fee ($0.30 +
2.9%) for ANY type of transfer into your PayPal account (not just credit card transactions). Oh, and by the
way, you can’t go back to the free PayPal Personal account. So the free PayPal personal account really isn’t very useful for receiving funds. It’s just the bait. Sooner or later someone will want to pay you with a credit card, and then you are stuck paying fees from that point on.
I
told you it was boring. Billions of dollars worth of boring. And the
only people who seem to notice are the eBay sellers who are forced into
PayPal Premier. Someone in their marketing department deserves a big
raise for putting the “pay” in PayPal.
