December 9, 2003, 12:00 AM

PayPal lowers payment processing rate for digital music merchants

In a move that eases the tight profit margins in retailing digital music, PayPal is offering micro-payment processing fees at a savings of 30% or more over conventional fees.

Kurt Peters

Executive Editor

 

In a move that eases the tight profit margins in retailing digital music, PayPal is offering micro-payment processing fees at a savings of 30% or more over conventional fees.

PayPay, a unit of eBay Inc., is charging digital music retailers a payment processing rate of 2.5% of the value of each transaction plus a fixed per-transaction fee of 9 cents, the company said. Until now, digital music retailers paid the conventional processing rate of 2% of the value of each transaction plus 20 to 30 cents per transaction, a spokeswoman said.

PayPal notes that many digital music retailers sell individual song tracks for 99 cents each or less, which leaves little room for profit after paying payment processing fees on top of publishers’ license fees of about 65 to 80 cents per song.

Under the new micro-payment fee structure, a retailer would pay 11.5 cents to process the payment for a single 99-cent song compared to 22-32 cents under the conventional fee structure.

PayPal is a third-party payment service that collects funds from the customers of its retail clients through money orders, checks, credit cards or wire transfers, then forwards payment to merchants for a processing fee. PayPal reports a user base of 35 million account members in 38 countries.

 

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