PayPal, margin pressure and the small business perspective

A few days ago, I received an email from PayPal informing me that some of their terms and conditions of service had changed – ostensibly to ‘ensure high standards of service continue to be maintained’. I read that immediately as a greedy grab: turns out I was right. Buried in the fine print of the changes were a bunch of rate amendments, effective 10 Sep 2013, that now make the cost of receiving payments in my part of the world anywhere up to 6% plus a fixed fee (for commercial payments that fall into the “International micro payments for digital goods” category, which includes my videos). On top of this, there’s a ‘micropayment fixed fee’ of MYR2.00 (US$0.65). And then there’s a 4% currency conversion fee to Malaysian Ringgit on conversion. And a further 2.5% added to the exchange rate when you withdraw the funds to your bank account. Very cunningly, they don’t provide a like-for-like fee comparison, either. That’s a grand total of anywhere up to 12.5% PLUS RM2.00. Previously, I calculated the net cost of using PayPal at about 5% inclusive of FX; a merchant credit card terminal would be around 3%. Given the long payment times for credit card providers and relative discomfort of people using cards overseas, I elected to stay with PayPal for the time being – lousy service and lack of regulation notwithstanding. See why this has now become a problem?

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