Revenue Model of Paypal: The Way It Makes Money

Overseas payment used to be a troublesome affair until the advent of PayPal in 1998. The PayPal market grew considerably since then. Currently, PayPal has more than 305 Million active accounts and processes a payment volume of about $712 Billion.

PayPal had been reliable for people interested in overseas transactions. Since you can have smooth currency conversion, the demand kept growing.

Under these circumstances, it is very common to feel curious about how PayPal makes money. But before we get into that, let’s understand the operation of the PayPal revenue model.

PayPal Operational Procedure:

  • Digital Wallet: This is a place where you can save your credit and debit card details with full security by using the ID and password of PayPal. Whenever you need to transfer money, all you need to do is just remember the account details of PayPal. You need not remember all the card details.
  • One-touch technology: This is a new PayPal technology that allows the users to check-out from any online payment option in just one-touch.
  • Bank account transfers: With PayPal, you get to transfer your funds from bank to PayPal account and vice-versa. This facility is applicable for 202 counties in 100 different currencies.
  • Payment recipient: You can use PayPal as a gateway for receiving payments and then it will get automatically deposited to the linked bank account.
  • A debit card from PayPal: This debit card will be the same as any other bank debit card. The only difference is that it will be linked only to your PayPal account.
  • No interest PayPal Credit: PayPal comes with a special “Bill Me Later” option. Here you will get a credit of $99 without any interest charges if you clear this credit off within a span of 6 months.
  • PayPal capital loans: If you need at a low fee for business purposes then PayPal offers capital loans too.
  • Business-in-a-Box solution: PayPal offers a special tool for setting up an online business easily. this tool is called the Business-in-a-Box Tool.

Truly, this is a revolution that the overseas market appreciates. 

Let’s now see, “how does PayPal make money” by helping people with money transfer.

Processes of PayPal Making Money:

How does PayPal get paid? the revenue earning process is very diverse. You understand how the website works. Understanding the revenue earning processes will now be easier for you.

1. Fees that are applied to each transaction:

Transaction in PayPal happens from two different types of accounts-

  • Personal
  • Business

Transactional fees again vary from one type of account to another. 

In case per personal transactions, you generally send money to friends, family, or shop online, sometimes even involving currency conversion. Where does this payment come from? It is  coming either from your credit or debit card or from your bank account. PayPal helps to make these transactions smooth. But at what cost?

A transaction fee is applied every time you use PayPal. The charges applicable for personal transactions are-

  • Within the USA the charge is 9% of the transaction value plus $.30.
  • For transactions related to sales, per transaction, the fees applied are 2.9% of the value plus $0.30.
  • If you transfer an amount from PayPal account to your bank, the fee is either waived off or 1%. This varies from country to country.

In business transaction cases, the merchant involved in selling is charged as below-

  • 2.9% of the value plus $0.30 for online payments
  • 2.7% of the value plus $0.30 for in-store payments
  • Bank transfer charges are the same as any personal transaction

Remarkably, for business, the transaction charges are reduced with an increase in the value of every transaction. It can go down to 1.9%.

In case you wish to withdraw money from PayPal, there are no withdrawal charges. But if you want a cheque, be prepared to pay a $1.50 fee for that.

2. Charges on business account:

While registering as a business account in PayPal, you pay no charges. But if you want to have some customized feature for the payment gateway, you will be required to upgrade your account to PayPal Pro. The cost of doing this $30 per account per month.

3. Fees on P2P withdrawal:

PayPal allows users to receive payments from custom-made transaction links. But if you wish to withdraw this money, you will be charged a fee of 2.9% of the transaction value plus $0.30 in the USA.

4. Fees on the International transaction:

PayPal allows you to transfer money overseas in different currencies. But this service is not free. There is a fee varying between 0.3% – 3.9% along with a small figure of fixed charge. This is applicable only for the one sending money. The recipient doesn’t pay anything here.

5. Interest from deposited money:

If you are leaving money as in your PayPal account, the company deposits the amount as a liquid asset and earns interest out of it. That’s how PayPal makes a profit. Unfortunately, this interest amount or a percentage of it is never shared with you.

6. Payflow:

Payflow is nothing but a gateway for payments by PayPal that can be united with websites while making a merchant payment. This is a customized online payment method. PayPal has 2 such Payflow plans for you to choose from-

  • Payflow Link: A free plan for payments.
  • Payflow Pro: A plan that charges $25 per account per month for delivering premium payment check-out options.

Regardless of what plan you choose here, PayPal will charge you $0.10 on every transaction with a credit card. 

These plans again come with add-ons for advanced services:

  • $10 per month for choosing recurring billing
  • $10 per month for advanced protection from fraud
  • $10 per month for authentication of the buyer

7. Fees on Working Capital:

We already know that PayPal loans a capital for starting businesses. If you want to keep the loan amount free of interest, you are permitted a maximum amount of $85,000 or 15% of what you had sold over the last 1 year. Though there is no interest, a particular sum is allotted as a fee with this loan.

This fee is variable. If the value of daily sales is high, the fixed charge is reduced considerably.

8. Business-in-a-box Tool:

As mentioned earlier, PayPal provides a business solution tool called a business-in-a-box. This is done in collaboration with Woo Commerce and Xero. PayPal provides this tool to users and earns a commission as an affiliate.

9. Withdrawal with a debit card:

You can withdraw money from PayPal anytime, anywhere with your debit card. A minimum charge of $1.50 and $ 3 is applicable to ATM and signature-based withdrawals, respectively.

10. Interest in PayPal credit:

If you opt for PayPal credit at a charge of $99, PayPal offers you a credit facility for 6 months. If you don’t opt for this, there is an Annual Percentage Rate of 19.99% applicable on purchase amounts right from the moment of posting.


No doubt PayPal is a great money transfer opportunity. But the revenue model it maintains and updates have ensured a constant flow of money to the company. But so far there is no competition for these services in the market, making PayPal the pioneer in its field.

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