PayPal Micropayments: Everything you need to know

If you’re an online seller, you’ll understand the importance of payment gateway for your business. Without a way for your customers to make payments right on your website, you risk losing their attention and their business. This is why you need to select your payment platform carefully.

Just as important as ease of use is having transparent transaction charges. Whether it’s commission or PayPal micropayments, many platforms charge a fee for every transaction. This is especially true for international payments. It can be very easy to lose a substantial amount of your profit in currency conversion charges.

In this article, we’ll take a look at PayPal’s micropayment structure, a special rate for small and micro-payments on the platform. We’ll also show you a Wise Business account could potentially save you money on international transactions.

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What are PayPal micropayments?

Micropayments, or micro transactions as they are also known, are small payments for digital goods. They were introduced by PayPal to offer a cheaper way to process low value transactions.

For example, if you sell products under £5, PayPal will charge up to 45p from your profit. This is because PayPal’s standard transaction fee for domestic transfers within the UK is 2.90% + 30p on every transaction¹.

PayPal micropayments are an attempt to reduce these high fees on low value transactions. They are available for PayPal business accounts only that process payments under £5.

How to apply for PayPal micropayment fees

In order to benefit from the micropayment fees, you have to apply through PayPal customer service. However, you have to meet the following criteria:

• Your average transaction value is £5 or less
• You have PayPal business account²

It’s important to note that, even if you’ve made a number of low value transactions, you won’t qualify for PayPal micropayments unless your average payment value is under £5. Once PayPal approves your application for micropayment rates, the lower rate will apply to all the transactions that come into your PayPal account.

What are the fees for micropayments?

Instead of the standard 2.90% + 30p per transaction that PayPal charges, you’ll be charged a 5% + £0.05 fee on every transaction. This would mean that on a £1 transaction, you will pay 10p as transaction fees, instead than 59p, so you save 41p. Although this may not seem much, if you sell high volumes of products at low prices, it could soon amount to a significant saving.

Comparisons for Standard vs Micropayment PayPal fees

While PayPal does not charge any money for this service, it is almost hidden from customers. The plan is available to PayPal business account holders but is not included as standard. You need to contact PayPal customer services in order to apply. The micropayment fees aren’t always easy to find, so we’ve broken them down into a table³.

Domestic Micropayments

Cost of Product	Standard Fee	Micro Fee
£1	59p	10p
£2	88p	15p
£3	£1.17	20p
£4	£1.46	25p
£5	£1.75	30p

International Micropayments

Cost of Product	Standard Fee	Micro Fee
€1	€0.67	€0.06 + flat fee based on currency
€2	€1.01	€0.12 + flat fee based on currency
€3	€1.35	€0.18 + flat fee based on currency
€4	€1.69	€0.24 + flat fee based on currency
€5	€2.03	€0.3 + flat fee based on currency

As you can see, PayPal micropayments can help you reduce the percentage of your profits that go into paying for commissions.

Micropayment flat fee

Cost of Product	Standard Fee	Micro Fee
£1	59p	10p
£2	88p	15p
£3	£1.17	20p
£4	£1.46	25p
£5	£1.75	30p

💡 Beware of additional currency conversion costs
When converting currency to your local currency, additional costs will apply ranging from 2.5% to 4% of the amount your converting.

Looking to save money on international payments? Wise could help

Use Wise Business to manage your business finances easily and with low fees.

With Wise you can hold and exchange 40+ currencies, get local account details in major currencies like GBP and EUR to receive payments from customers. Accounts also offer linked debit and expense cards, multi-user access, batch payments, cloud accounting integrations and more, with no ongoing fees and no minimum balance requirement.

To help businesses keep hold of more of their profits while trading internationally, Wise uses the mid-market exchange rate for currency conversion, with fair and transparent fees. That keeps costs down for business trading across borders - and lets you concentrate on growing your company no matter where in the world it is.

Ready to learn more about how to open a Wise business account in the UK? Here’s a quick overview:

1. Download the Wise app or head to the Wise desktop site
2. Tap Register and follow the prompts to apply for a business account
3. Add your personal and contact information
4. Upload the documents needed which are detailed online and in this Wise Business account requirements guide
5. Pay the one time fee to register your account and get a linked payment card if you need one
6. Once your account is verified you can start transacting - your account will be live in the Wise app, your physical card will be posted to you, and you can get a digital card right away for mobile spending

Get started with Wise business 🚀

Sources:

1. PayPal merchant fees

2. PayPal micropayments explained

3. PayPal micropayments

Sources last updated Apr 12, 2024