Paypal's New Structure for Business: "Blended" or "Interchange Plus". WHICH IS BEST?

vikkiekaye · 24 May 2016 at 11:31AM

Hi everyone,

I have logged in to my paypal to process customer orders and have spotted that I need to confirm my fee structure for card payments by 8th June 2016.

Personally, I'm a very small business and think I'm best sticking with the Blended as Interchange Plus could be risky:

Blended Fees

Blended fees are the standard PayPal fee structure. It includes a set percentage plus a fixed fee that applies to all card payments. Money is deposited into your PayPal account as soon as your customer makes the purchase and is usually available immediately for withdrawal. Learn more

(Fees may vary by currency. Additional fees such as fees for cross-border payments may also apply. See terms for details.)

Interchange Plus:

Interchange Plus is a variable fee structure that applies only to debit and credit card transactions. In this case, the merchant fees that you pay include the bank's interchange fee (what they charge PayPal to process those cards), a percentage of the transaction value, and a fixed fee set by PayPal.

Because the interchange fee varies, your total fees may be less than, equal to or higher than the fees you would pay with a Blended structure. Your money is usually deposited into your PayPal account by the end of the next working day after the payment is made.

(Fees may vary by currency. Additional fees such as currency conversion fees may also apply. See terms for details.)

Any advice is welcome.

Thanks
Vikkie

Letsby_Avenue_(Yorkshire) · 24 May 2016 at 12:53PM

Me too, any advice on this would be greatly appreciated.

AB1982_2 · 24 May 2016 at 1:12PM

Hi Vickie

I just heard about this from PayPal and I think I'm in pretty much the same boat as you - Blended sounds like a safer option. I'm quite confused though - PayPal could have done a much better job of explaining the situation. They've pretty much said "you have the option of switching to a structure that may or may not cost more" and that's about it. Not very helpful! Surely they could have at least provided some example transactions across a range of cards, with a range of transaction amounts and from a range of countries, each accompanied by fees for each of the two structures? Then we could pick out the types of transaction which apply most to our business and develop some idea of which structure might cost us the most.

There is one thing I picked out from the email regarding the Blended structure though;

"You pay the same rate regardless of the card type, with PayPal absorbing any fluctuations in the actual costs charged by banks."

If PayPal are "absorbing any fluctuations", this means they are covering any additional cost if they underestimate the costs, but also pocketing any extra profit if they are overestimating the costs. PayPal are no mugs - they know what they are doing and they would have increased their fees by now if they were losing money on them. So perhaps we could assume that PayPal's current fees, i.e. on the Blended structure, are a little higher than they need to be on the whole, thus the Interchange structure might actually work out better for us?

Hopefully as more and more people are presented with this choice by PayPal, this thread will start to garner more replies. It's potentially a pretty big decision but it feels like I'm pinning a tail on a donkey!

AB

theonlywayisup · 24 May 2016 at 2:49PM

The info can be found https://www.paypal.com/uk/webapps/mpp/ua/upcoming-policies-full

For a point of clarity, this is for sellers using Paypal Payment Pro.

It isn't overly difficult to understand but it may not be simple to chose. We use a card processor and not Paypal for our credit/debit card payments and our card processor has an interchange type fee tariff.

I don't use Paypal Pro but with our card processor I can see what card has been used and what fee charged. If you can take your last months figures, you will be able to work out which fee structure would have been more cost effective, assuming Paypal give you that info on the transaction pages.

lovinituk · 31 May 2016 at 2:51PM

Just looking in to this in more detail as we use Paypal Payment Pro and their Virtual Terminal. I've just had a look on some recent card payments taken on our website and Paypal don't give nay indication on the type of card used unfortunately.

Has anyone else affected by this made a decision yet? I'm not sure how I can make an informed decision with the lack of data available!!

RFW · 31 May 2016 at 7:47PM

lovinituk wrote: »

Just looking in to this in more detail as we use Paypal Payment Pro and their Virtual Terminal. I've just had a look on some recent card payments taken on our website and Paypal don't give nay indication on the type of card used unfortunately.

Has anyone else affected by this made a decision yet? I'm not sure how I can make an informed decision with the lack of data available!!

It doesn't sound like you can. Is the information available on downloaded files? It used to be that there was more info on the downloaded spreadsheets.

lovinituk · 1 June 2016 at 11:05AM

RFW wrote: »

It doesn't sound like you can. Is the information available on downloaded files? It used to be that there was more info on the downloaded spreadsheets.

I've just found something in the new reports section on Paypal. Under 'Statements' there is a report named 'Merchant Processing'. This does show a certain level of the type of cards used e.g. MasterCard Consumer, MasterCard Corporate, Visa Business Debit, Visa Consumer Debit, etc.

I don't know if this is enough detail to work out the interchange fees charged on each type of card but at least its a start.

I have 7 days to see if I can garner anything useful from it!

lovinituk · 1 June 2016 at 11:22AM

According to this Paypal page - https://www.paypal.com/uk/webapps/mpp/ua/upcoming-policies-full - the interchange model will be 0.5% cheaper than the current blended structure PLUS the interchange fee.

So I looked up Visas interchange fees (https://www.visaeurope.com/media/images/intra%20visa%20europe%20eea_09122015-73-17763.pdf) and for a Visa Consumer card in Europe, the rate is 0.3% for credit cards and 0.2% for debit cards. So in this case, using Paypals new interchange structure the fees would be less.

But then if you look at the corporate card interchange fees, they are at least 1.3% for credit cards and 0.6% for debit cards. So the new interchange structure would be more expensive.

Also with the new interchange structure, Paypal state that consolidation of payments can take a few days. For me, this could make accounting slightly more complicated, particularly at month end.

Armed with this new info and the fact we do receive quite a lot of payments from corporate credit and debit cards, its likely I will stick with Paypals blended structure.

williham · 2 June 2016 at 9:44AM

lovinituk wrote: »

I've just found something in the new reports section on Paypal. Under 'Statements' there is a report named 'Merchant Processing'. This does show a certain level of the type of cards used e.g. MasterCard Consumer, MasterCard Corporate, Visa Business Debit, Visa Consumer Debit, etc.

I don't know if this is enough detail to work out the interchange fees charged on each type of card but at least its a start.

I have 7 days to see if I can garner anything useful from it!

Thanks for that, I can see that about 90% of our transactions are consumer debit so I think interchange will save money for us. It also seems like paypal are trying to direct us away from interchange plus so I get the impression it will be cheaper.. haha.

Paypal's New Structure for Business: "Blended" or "Interchange Plus". WHICH IS BEST?

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