PAYPAL has caused some controversy over a pricing update that went into effect earlier in January.
The move comes after promises from CEO Alex Chriss that changes would be made at the payment services provider.
Chriss took the helm at PayPal in 2023, and noted an intention to improve business operations for merchants and customers.
“There are clearly challenges to tackle,” the CEO said on an earnings call from November of that year.
“Simply put, our cost base remains too high, and it’s actually slowing us down.”
“As such I’m in the process of evaluating our most profitable growth priorities and aligning our resources to those priorities,” Chriss told investors.
“We will become leaner, more efficient, and more effective driving greater velocity, innovation and impact for customers.”
Part of the actions Chriss and PayPal have taken since includes an increase in pricing for some merchants that use its PayPal Pay Later service or the Braintree processing platform, per Payments Dive.
As of January 13, 2025, a rate of 4.99% of a purchase plus 49 cents was implemented, increased from 3.49% plus 49 cents.
Costs for advanced card transactions and alternative payment methods also went up to 2.89% from 2.59% and virtual terminal pricing went from 3.09% to 3.39%.
PRICE JUSTIFICATION
PayPal defended the increases due to the variety of extra features it has continued to add to its services for merchants recently.
“To better align with changes in the economic landscape, while incorporating the enhanced features delivered for customers, we have updated our U.S. pricing, applicable to U.S. PayPal business accounts and U.S. Braintree accounts,” PayPal spokesperson Nicole Cutler told the publication.
“We regularly review our pricing structure to align with broader economic factors, industry shifts, and the impact our products provide for our customers.”
“Over the past few years, PayPal has launched new innovations and features to better support merchants and help enable growth,” she added.
COST COMPETITION
It is true that buy now, pay later (BPNL) services like PayPal Pay Later have become increasingly popular.
Using it, consumers can pay for a variety of goods and services through short-term payments, often avoiding fees so long as they pay on time.
We will become leaner, more efficient, and more effective driving greater velocity, innovation and impact for customers.
Alex ChrissCEO of PayPalPayPal also faces several major competitors that offer BNPL, including Afterpay, Affirm, and Klarna.
Even with the pricing increase, the costs for merchants to have PayPal’s BPNL is still lower than those competitors, according to Cutler.
“The new pricing for PayPal Pay Later options is still lower than other notable providers in the industry,” she said.
Block, the payments company that owns Afterpay, cited a price of 6% per purchase plus 30 cents for merchants in a post.
Klarna’s pricing sheet from May 2023 also noted a 5.99% rate plus 30 cents.
It’s unclear if that’s still accurate for 2025.
PayPal also made customers wary in November after a global outage, leaving thousands locked out of their accounts.
A new tax law also went into effect last year that affected PayPal and Venmo users.
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