PayPal is increasing prices for thousands of small businesses as the company looks to maintain revenue growth and boost profit margins as a stand-alone business separate from EBay
The San Jose, California-based payments company is introducing for U.S. merchants a flat rate of 2.9 percent plus 30 cents for domestic transactions and 3.9 percent plus a fee that varies by country for international transactions. The change takes effect Oct. 1, PayPal said Thursday in an e-mail to sellers obtained by Bloomberg.
The new structure eliminates discounts as low as 2.2 percent for businesses with sufficient sales. Most of PayPal's larger customers, including global brands, have individual contracts that won't be affected by the change.
The change will boost PayPal's annual revenue by about $10 million while keeping prices competitive with Square Inc. and other digital transaction businesses, said Larry Berlin, an analyst at First Analysis Securities Corp. in Chicago.
"They're always trying to boost revenue in small increments from existing customers," Berlin said. "The main focus is to provide more services to merchants and get consumers to use PayPal more frequently."
The sellers affected represent less than 1 percent of PayPal's 10 million global merchants, said Amanda Miller, a company spokeswoman.
PayPal, which completed its split from EBay in July, is projected to have third-quarter sales of $2.28 billion, according to the average of analysts' estimates compiled by Bloomberg.
The digital payments business said it had 169 million users and processed 1.1 billion transactions in the second quarter, with transaction volume up 27 percent from a year earlier. Investors see value in the company's projected growth as online shopping booms and people's spending habits change.
PayPal and competitors such as Square are trying to position themselves as more than just digital transaction businesses by offering loans and marketing services. PayPal emphasized its fraud protection and cross-border selling options in its e-mail to merchants.
"We value our partnership with you, and we commit to investing in new capabilities to help you grow," the company said.