Wednesday, July 30, 2008

PayPal Responds to Amazon Threat!

Okay, its just a little promo that was planned way in advance and has nothing to do with the news yesterday about Amazon Checkout, but it is pretty funny about the timing.

I found out about it from the BrewsNews blog. Here are the details on the PayPal Promo:

Exclusive Pricing Offer

For a limited time, we're offering a new pricing structure that could save you up to 34% on PayPal fees for the next 12 months.

Compare rates:

Receiving fees
Current rate - 2.9% + $0.30
New rate - 1.9% + $0.30

Transfers to bank account
Current rate - 0%
New rate - 1%

PayPal Debit Card*
*Only applies to customers with a PayPal Debit Card
Current Rate - 1% cash back
New rate - No cash back

If you receive $10,000 a month, you could save $1,200 in one year by keeping the money in your PayPal account or using it to shop or send money.

So lets take a look at this deal, if you pull your money out you have to pay 1% to tansfer it to your account, so basically there is no benefit to the new rate. Also, you lose the cash back benefit of the debit card. The only people who benefit from this deal are low volume sellers who keep their money in PayPal.

High volume PayPal users already get the 1.9% rate.

Does this deal make any sense to you guys?

Just my 12%


TheBrewsNews said...

I think it is a unique way in which PayPal can offer a significantly lower processing rate to those eBay sellers who are not high volume sellers.

As you pointed out, high volume sellers get a better rate already. So, this incentive program now offers a better rate to lower volume sellers.

The real question, though, is whether a 1% reduction will "motivate" anyone to change their spending patterns or to change their funding method (from credit card to instant transfer, for example). Having been an eBay Education Specialist for quite some time, I can tell you that most small volume sellers don't have a good grasp on the fees they are paying including PayPal fees. So I'm not sure that an offer to save 1% would make a difference in their decision-making process.

Plus, this offer is limited to select folks only not to everyone.

What it indicates to me, though, is that PayPal is really trying to think of unique ways to keep users motivated to use PayPal instead of giving the competition a try. Whether or not this promotional rate works as intended, it is clear that PayPal is not going to let the competition take swings at them without at least trying something innovative.

Randy Smythe said...

They are giving up some profit on the Credit Card purchases to increase the balance held in the account.

Paying 30 cents plus 1.9% for balance transfers is very profitable, plus they enjoy the benefits of the retained balance.

But if you transfer money there is no point to the discount.

wiiseller said...

Not to point out the obvious, but this makes no sense for anyone that does any type of volume.

Plus you can get 1% back by using your PP card as a credit card so its kind of silly if you ask me.

I am starting to think most companies think the average person can't do any basic math.

Moonlight said...

I'm a small seller, and this makes perfect sense to me. PayPal is offering a typical eBay promo. The 1.9% headline sounds good until we read the details and find out that they are giving us absolutely nothing. What else is new?

Matt with BumbleZine said...

The idea of keeping money in a PayPal account is scary. It shouldn't be, but given the oodles of ways in which one's funds can get frozen even for invalid reasons - this kind of incentive is no incentive whatsoever.

permacrisis said...

"You spoke...and we listened!"

Steve said...

Ok, I'm trying to discern this through the haze of my second gin and tonic...

...and it makes no sense at all to me.

(Cut to everyone in the eBay boardroom)

"Since PayPal is doing so well, we need to do something to drive business down."

"How 'bout giving everyone the ol' eBay treatment?"

"Great idea! Let's wait till the competition rolls out a new product, then to counter it, we'll drop benefits and increase our take!"


(Lots of pats on the backs and martinis at the Elephant Bar.)

David said...

It actually is a good deal if you aren't a high volume seller.

I believe you have to sell $10,000 a month to get any kind of discount (I'm too lazy to do the research)

If you sell the occasional item you get the same deal when you withdraw funds but if you choose to use money in your paypal account you get a 1% discount.

Anonymous said...

I might be missing something in the math, but right now I am robbed the 2.9%, but I get my 1% debit reward, and I can transfer my money free to my bank hmmm. It seems there is a potential for paypal to actually manage to swindle an extra 1% in fees from the poor deceived people who fall into this trap.

Again I could be miscalculating I'm tired.

Lisa said...

I'm a small power seller. I transfer money out of Paypal at least once every two days. I don't want my money sitting in Paypal. I want it in my bank to pay bills. It seems like this is a back ended reduce the listing cost but up the fvf ploy. What am I missing here?

Anonymous said...

If I understand the program corretly, the ONLY benefit would be for purchases made using PayPal.

Since I don't leave my money sitting in my PayPal account and I use credit card for eBay purchases it has little value.

I already get a percentage cash back from my credit card.

Paypal accounts aren't FDCI insured.

May be benifited through fees paid to ebay and purchases made via Paypal. Although it seems like a good way to get people to use Paypal as a savings account were only Paypal gets the interest on YOUR money.

ms.pat said...

More hocus-pocus. Ebay seems to be running solely on smoke and mirrors these days. This is just another empty ploy to try to make it look like Paypal is being sooo generous in giving us a break. Not so...nothing they've done so far has given the small seller a break - which is why they're leaving!

Rich said...

Don't you love the eBay/Paypal growth model: Abuse your customers, drive them off, and then run promotions to try and get things moving again.

I'm a big fan of positive reinforcement with the carrot out there when people like you...

They can drop dead.

Anonymous said...

How i wish amazon would accept paypal? would then be the ultimate marketplace!

Henrietta said...

@ the last anonymous poster

Why would you want Amazon to accept PayPal? How do you fund your PP account now? You can use a debit or credit card on Amazon payments or direct debit from a checking or savings account. No different from PP but a heck of a lot safer for sellers and with the Amazon A-Z guarantee a better protection plan for buyers.

Anonymous said...

Randy do one on the new Visa Money Transfer. Oh and let us know what you think of Cuil!

Randy Smythe said...

Anonymous, Visa Money Transfer appears to only be available Internationally.

Seems to be ideal for emerging markets.

As for Cuil, I took a quick look at it when it launched and I'm going to wait a few months before I look into it further.

My first impression was that it needs work.

leon said...
This comment has been removed by a blog administrator.
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