How does PayPal make money?

Adam Rozsa

As one of the most popular payment services in the world, you’ve most likely used — or have at least heard of — PayPal.

This may seem confusing, as PayPal offers many services at no cost. But not everything on the platform is free.

To clear things up, we’re exploring PayPal’s revenue streams and looking at how the company makes money.

If you’re looking to transfer money internationally, Wise is an excellent option. There are no markups or currency conversion fees. And when you transfer funds, you’ll always get the mid-market rate on your transfer — plus a small fee.


How does PayPal make money if it's free?

To clear this question up, understand that PayPal does more than just payments processing and provide a platform for users to send and receive money. PayPal offers a broad financial and transaction services portfolio, with both free and paid services.

The needs of most PayPal users fall under the free category, like making a payment or a transfer from a linked bank account. However, services like currency conversions, out-of-network and international ATM withdrawals, and a laundry list of merchant fees, fall under the paid category.

Is there a fee to use PayPal?

PayPal charges fees based on the service you’re using. It’s free to open an account, and you can send most payments for free, including:

  • Sending money to and receiving money from friends and family
  • Paying for services and goods
  • Making a withdrawal from your PayPal account to your personal bank account

But PayPal charges transaction fees if you:

  • Sell goods and services as a merchant — interchange fees
  • Use their instant transfer service to send money immediately
  • Transfer money to personal debit and credit cards
  • Make or accept an international payment

They also charge for other added services like currency conversions.¹

Who pays the fee on PayPal?

Again, it depends on the transaction. For example, PayPal Business users pay fees for accepting payments through PayPal. However, a PayPal user with a consumer account would incur a currency conversion fee and an international transaction fee for a cross-border purchase.

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Transferring money has never been easier or more cost-efficient. With a free Wise account, you can avoid currency conversion upcharges and other hidden fees. Wise transfers funds at the mid-market rate and only charges a small, transparent fee. This saves you up to 6x on average when sending money abroad.

The true cost of sending USD to EUR

PayPal’s revenue sources

PayPal reports its earnings as one segment and breaks down revenue as either transaction revenue or revenue from other value-added services. Most of the money the company earns comes from transactions, but let’s break down both revenue sources.

Revenue from transactions

Transaction fees for both consumers and merchants make up most PayPal charges. For example, if a merchant receives an online payment in the United States via PayPal checkout, they’d pay 3.49% plus a fixed fee with every transaction.¹ PayPal determines the fee percentage based on their total payment volume, and they can fluctuate at any time.

Other added-value services revenue

Outside of transaction fees, PayPal generates a smaller amount of revenue from services like:

  • Payment gateway
  • Subscriptions
  • Interest and fees from consumer loans and merchant loans like PayPal Working Capital
  • Other credit products
  • Referrals
  • Partnerships

The company also lists fees for a variety of other services.²

Fees from Venmo

Venmo — owned by PayPal — falls under both of the previously listed categories. But this revenue source is important to note separately, as it generates revenue from multiple streams on its own.

PayPal allows free money transfers through Venmo — is its key attraction — but charges for additional features and perks. The company offers credit cards, instant transfers, and payroll check cashing all with fees. They also charge customers when they withdraw money from their account.³

Bottom line

PayPal began in 2000 with a focus as an online payment service provider. Since then, it’s grown into a global powerhouse in the industry and expanded its product range and revenue by leaps and bounds. With that in mind, the list of revenue sources could continue to grow in the future. But for now, that’s how PayPal makes money.

If you need to move your own money, then you should look at Wise. With a free Wise account, you can transfer funds all over the world and skip out on currency markups and hidden fees.

Learn more about Wise

  1. PayPal Consumer/Merchant Fees > PDF
  2. PayPal SEC Form 10-K filing 2021
  3. Venmo fees

All sources checked on 31 May 2022

Please see terms of use and product availability for your region or visit Wise fees and pricing for the most up to date pricing and fee information.

This publication is provided for general information purposes and does not constitute legal, tax or other professional advice from Wise Payments Limited or its subsidiaries and its affiliates, and it is not intended as a substitute for obtaining advice from a financial advisor or any other professional.

We make no representations, warranties or guarantees, whether expressed or implied, that the content in the publication is accurate, complete or up to date.

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