For every online shopping enthusiast, Freelancer and overseas operated business owner, PayPal is a very well-recognized money transfer system. PayPal is one of the fastest and convenient money transaction online services there exists. But, where did PayPal come from?
Well, PayPal started as a money transfer tool from 2002. It was founded by Max Levchin, Peter Thiel, and Luke Nosek as Confinity in December 1998. Later in the year 2000, the company merged with a banking company X.com. Elon Musk was the CEO at the time. But after Peter Thiel had replaced him, the real success journey of PayPal started. Currently, eBay owns the PayPal company. With an active user count of 305Million and a net worth of $61.6Billion, PayPal stands as one of the largest online money transfer services and payment processors of all time.
Product and Services Provided by Paypal
PayPal offers a vast line of services for its customers. It works as a payment processor and transaction method for online shops, online vendors, auction websites, and many other commercial users (freelancers and multinational businesses). It connects with the bank account directly. Some handy in-app features are listed down below.
- Mobile Card Reader
- Express Checkout
- Virtual Terminal
- Bill Me Later
- Barcode Scanning
- Credit Card Reader
- Inventory Tracking
- Online Invoicing
- Accept Payments Online
- Shopping Cart
- PCI Compliance
- Issue cheque
- Granting capital loan
- PayPal pro services
- Checkout page access
- International transaction methods etc.
How Paypal Makes Money?
PayPal provides its services in around 200 countries and PayPal has over 305 million users up and till 2019. Their extended activities all over the world have made it one of the highest-earning companies. According to the PayPal website, their yearly revenue of 2019 stands about $17.77 billion; 15% growth compared to the previous year. So how are they doing it? How are they making this massive amount of money every year? Because they follow a very convenient revenue model. PayPal uses the commission and subscription revenue model. The study explores on 10 ways Paypal makes money from its online platform.
Commission Revenue Model of Paypal
Commission revenue model means the company following it would charge a percentage based intensive from the payment made or transaction done rather than charging a fixed amount. PayPal has been following the commission revenue model so far and it has worked wonders for the company. PayPal charges its users as per their type and amount of money transaction. As simple as it sounds, the earning process of PayPal is rather more intense. They offer a vast line of services to the users. All different and all exclusive. Therefore, how much they are making from where is another elaborate discussion.
Transaction fee of Paypal
PayPal offers money transactions from business and personal accounts. How much they care depends on which country or region the service is being used in. The transaction can be made through Bank credit/debit card and also PayPal balance as well. Business accounts are usually charged 2.9% + $0.30 on every sell made. But the percentage varies with the amount of the sale.
Paypal Earns International Payment from Its Subscribers
Transaction made between different countries is charged accordingly (includes currency conversion cost). The fee percentage differs with various currencies and regions.
P2P Payment Withdrawal Fees Revenue Model of Paypal
This is a service PayPal.me provides. The service allows the user to receive money from a custom link directly. But when the user withdraws the whole amount received, PayPal charges it’s commission on it. Again, the rate of charge is different in different regions. But in the USA, it is 2.9%+ $0.30.
Interest Earned by Paypal
PayPal balance, as useful as it is to you, so is to the company. It works as a liquid asset, which they invest and earn interest from it. So the more PayPal balance a user has, the more money PayPal earns.
PayPal Working Capital Feel
Papal also provides loans. But the system of the loan is a bit different from banks. They give out load as capital based on the previous transactions (sales made). It can be 15% of it or up to $85000. But instead of charging with a year or monthly interest rate, PayPal takes a fixed percentage fee from the everyday sale.
Debit Card/Credit Card Withdrawal Fees
PayPal charges fees for money withdrawal through the debit card. For any amount of withdrawal, there is a percentage they charge. As for credit card withdrawal, papal only charges feel for $99+ amount withdrawals. They usually get an interest of a 19.99% annual rate from credit card withdrawal.
Subscription Revenue Model
PayPal also offers some services under subscription access. Users have to pay monthly or yearly fees to access these features. Subscription money is not the primary source of their revenue. But it does bring in a fair chunk of it. They are discussed down below.
Paypal Business Account Charges
Opening and using a business account spontaneously is free of cost but some business accounts need to use customized checkout lists or indifferent site payment access. They are only available under “PayPal Payments Pro” business accounts. Just pay $30 a month and you can access all the pro features.
Paypal Payflow
PayFlow is a gateway service where a merchant account holder can create its own checkout page and integrate it into a new website. This comes in free and charged two facilities. Pay flow pro is the paid service which costs $25 per month. Regardless of the free or paid service type, PayPal takes $0.10 for any payflow credit card payment as a gateway fee.
Bottom Line
In fine, we can say that PayPal earns its revenue through several methods, which basically falls on two different revenue models, “Commission” and “Subscription.” There are some other sources of there revenue other than the mentioned ones. They are PayPalHere, Braintree, Xoom, and Venmo etc. services. So this is how they are making billions of dollars every year and ceased their position as one of the most earning companies of all time.
Relate: How LinkedIn Makes Money?
Reference
- https://en.m.wikipedia.org/wiki/PayPal
- https://www.businessinsider.com/does-paypal-have-fees?amp
- https://www.paypal.com/ms/smarthelp/article/in-which-countries-does-paypal-exist-faq1543
- https://www.google.com/amp/s/www.ns-businesshub.com/popular/paypal-net-worth/amp/
- https://www.dailydot.com/debug/how-does-paypal-work/?amp
This is Tabassum Nusrat Soti and she is a content writer from Bangladesh. She has been a professional writer for over 5 years now. and she has been working with The Strategy Watch for over 3 years now.
Writing is Tabassum’s passion. Let it be SEO-efficient blog posts, analytical articles, reviews, news articles, or ghostwriting stories, she has worked and thrived in all sorts of writing. She has always had a way with words and intends to write for a prolonged unforeseeable future.
Currently, she is doing her honors (BBA) at the University of Dhaka. Majoring in the background of Tourism & Hospitality Management, she is a skilled and proactive third-year student. Her business studies background helps her write business analytic articles for The Strategy Watch. She will always keep learning and achieving new levels of content writing because of her passion for writing and creating words.