Online payment service PayPal has made available to merchants a pricing structure that reduces fees on all purchases below $12. The micropayment pricing had previously been available on certain transactions since 2005, PayPal says.
The fee structure is 5% plus 5 cents per transaction, which comes to 15 cents on a $2 purchase. PayPal’s regular fee is 2.9% plus 30 cents, which totals 36 cents on a $2 purchase.
The micropayment pricing structure had been available on purchases from U.S. merchants by U.S. consumers with PayPal accounts, on UK-to-UK and Australia-to-Australia purchases, and on all transactions within the European Union. Now it covers all PayPal purchases, a spokesman says.
Merchants selling items above and below the $12 price point should set up separate accounts so that they are billed at the most favorable rate for each transaction, Bobby Tzekin of PayPal’s merchant services team, advised in a blog posting this week.
PayPal’s move is an attempt to match Amazon Inc.’s payment service, which has introduced a fee of 5% plus 5 cents on transactions under $10 charged to a credit card, and 2% plus 5 cents when consumers charge purchases to a bank account, says payments specialist Steve Mott of consulting firm BetterBuyDesign.
He says both Amazon and PayPal offer online retailers that sell low-ticket items, such as music downloads and computer games, a better deal than they get when taking major credit cards for small-ticket items. Including the processing fee, Mott says, a Visa or MasterCard purchase typically costs e-retailers at least 17 to 21 cents. “Digital content guys will be better off going the Amazon/PayPal route than sticking with bank card payments,” Mott says.
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