Volume Climbs for PayPal, While Some Sellers Will See Fees Rise

Volume for Internet payment processor PayPal Inc. climbed 21% in the second quarter, to 172.9 million transactions, and the San Jose, Calif.-based company continues to make steady inroads with e-commerce merchants away from eBay Inc.'s online auctions, according to statistics filed last week by eBay, PayPal's parent company. Off-eBay volume almost reached $5 billion in the quarter, accounting for 42% of the processor's total dollars processed, up from 39% in the first quarter and from 35% at the mid-point of 2006. Dollars and transactions do not include traffic through PayPal's online gateway business. In related news, PayPal is increasing certain fees associated with its Website Payments Pro service, effective Sept. 1. In an e-mail it sent to merchants Thursday, PayPal said the monthly charge for the service will rise to $30 from $20. Transaction pricing for the Virtual Terminal component of the product will also go up. The new pricing will be 2.4% plus 30 cents to 3.1% plus 30 cents, depending on volume, up from 2.2% plus 30 cents to 2.9% plus 30 cents. Also, PayPal will start levying a 30-cent fee for Website Payments Pro authorizations in cases where transactions aren't settled within 29 days. Up to now, there has been no fee in these cases. A PayPal spokesperson says the fee increases are intended to recover costs the processor is laying out to handle card transactions on behalf of merchant clients. It will affect a relatively small segment of the company's merchant base, though the spokesperson refuses to be specific. So far, she says, merchant comment has been light. “We've gotten very little contact from our customers about the fee increases,” she says. “It's still one of the lowest [pricing structures] in the industry.” PayPal's notification went specifically to merchants using Website Payments Pro, a non-hosted application PayPal introduced two years ago that allows e-commerce sellers without conventional merchant accounts to accept credit and debit cards. The Virtual Terminal component allows merchants to process card payments online after customers give them their account details over the phone or via fax. PayPal also notified shopping-cart vendors and Web-hosting services, the spokesperson says. In the quarterly data, which eBay filed last week as part of a report to the Securities and Exchange Commission, PayPal reported it now has 153.1 million accounts, of which 35.9 million are considered active. That's up from 113.7 million and 29.5 million a year ago. An active account is one that performs at least one transaction in the quarter. PayPal notes that it's possible for users to maintain more than one account, though it doesn't break out a figure for users.