Are PayPal’s announcements bad for the platform payment market?
PayPal just announced a range of changes to its fees and terms and conditions. The announcement suggested seemingly innocuous changes but has some material implications.
You can see the full disclosure of the agreement changes from PayPal here. Some key changes of note:
- PayPal is raising fees on international transactions for US customers. Some news media are reacting strongly to the proposed hikes, ie: “PayPal sneakily hikes prices.”
- More kinds of payments have been removed from PayPal’s purchase protection scheme, including friends and family payments and donations.
- PayPal clarified it will now assess a $20 chargeback processing fee for sellers who win chargeback disputes but are not eligible for seller protection.
- Of greater interest to platform customers is a change to the terms of service that adds a clause preventing PayPal customers from giving higher prominence to other payment methods on their payment pages. This will quite possibly require payment page updates by customers. It also prevents customers from ‘mischaracterizing PayPal as a payment method.’ While this may be subject to interpretation, it seems an aggressive step for a payment platform to take.
We’re of course more than a touch biased here, because at times we compete with PayPal for the same merchant, particularly in the platform space. Yet we also respect what they’ve done, and still do, as one of the leaders in electronic payments. Here’s our take on this latest move from PayPal:
- PayPal’s filled with a bunch of smart people – so we’re assuming there’s smart thinking behind the pricing actions.
- We believe most of the best platform payment integrations are seamless and white labelled, like Shopify Payments or FreshBooks Payments. This approach enables platforms to provide the experience they want, under their own name. For those platforms that want to go in this direction while also serving their customers using a legacy provider like PayPal, it will be disappointing if PayPal truly requires they compromise on their broader aims in order to give PayPal equal weight and treat it like more than a payment type. For some companies offering payments this may be a step too far and be an impetus to move them away from PayPal. You can see what our approach to payments for platforms looks like here.