How Does Paypal Works and Make Money Paypal Business Model

December 6, 2019

by admin

Online payment has become an inseparable part of our daily lives. It doesn’t matter whether you a regular purchaser or an occasional purchaser, whether you are a giant online business or a startup, you will have to go through online payment process. When it comes to online payment, then there are many options and different modes of online payment have different perks and advantages. But one of the most common modes of online payment that is available at most of the online websites is Paypal. And in this blog post, we are going to discuss about how PayPal works and how does it make money.

There was a time when sending money overseas was a very complex and time taking process but all these hassles of sending overseas wiped out after the introduction of PayPal. PayPal was introduced in the year 1998 and it literally brought a revolution to how money was transferred. Now PayPal has become a synonym for money transfer as it used in more than 202 countries and there are more than 197 million users of this popular payment platform. Before digging into the money-making process of PayPal, we will first have to go through the business model of PayPal and understand how it works.

Over the years, PayPal as a part of eBay has built an ecosystem of payment that includes different platforms and mobile gateways through which PayPal is penetrating the market. There are four main brands built around PayPal.

  • Venmo
  • Braintree
  • Paydiant, and
  • Xoom

Let’s Discuss These Brands To Understand the PayPal business Model.


Venmo has literally become so much popular among young people that it has transformed into a verb. You will be surprised to know that young people now say Venmo me money in the place of send me money. The Venmo was acquired by the other brand of PayPal; Braintree in the year 2012.


Braintree was a company that dealt in acceptance and processing of a payment and it was acquired by PayPal in the year 2013. You should know that PayPal acquired Braintree in $800 million and it was all cash-in deal.


Paydiant is basically a white-label mobile wallet platform. From providing services to resellers and distributors, it also is helpful for merchants, ATM providers and banks. Paydiant is surely one of the most popular mobile wallet solution that makes payment seamless and easy.


Xoom is a part of PayPal service that offers money transfer service on a global level. By using Xoom, users can send money, pay bills and reload mobile phones from the US to other 52 countries.

Following are some of the most common things that you can do with PayPal

·PayPal is basically a digital wallet that allows you to save all the details of your credit and debit card and allows you to transfer money or buy items just by using your PayPal user id and password. This means that you will not have to enter your card details, every time you will transfer money online.

·PayPal also gives you the feature of ‘One Touch’ that allows you to save your login details in your device and by using this feature, you can check out of any website with just a single click and without even the need of entering your user id or password.

You can easily transfer money to more than 202 countries and in more than 100 currencies. The same that you will transfer from your PayPal account can be deposited to bank accounts in more than 56 currencies.

You can easily sell or buy products offline and make payments by using your PayPal account You just need a PayPal account and you can easily make transactions for all the products that you buy both online and offline. PayPal became a household name when it was introduced as a payment gateway eBay.

PayPal credit or what is more popularly known as Bill me Later allows you to get a credit of $999 or more with zero interest rate. This is another major advantage of using PayPal and another reason for it becoming famous.

You can also take advantage of the PayPal debit card that works just like any other debit card. The debit card provided by PayPal can be used to shop both online and offline. You should know that you can also earn rewards by using your PayPal debit cards and this is why it is so famous and popular.

How PayPal make money?

How PayPal make money

PayPal is surely not a bank but the features and benefits provided by this revolutionary payment platform are not less than a bank. From money transfer to money on credit, there are many services offered by PayPal and that’s why people love it so much. But do you know how PayPal makes money? Well, there are many revenue sources of PayPal and we are going to look at some of the main revenue sources of PayPal.

Transaction fee

If you have used PayPal, then you must be aware of the fact that there are basically two types of accounts on PayPal, personal and business. If you have a personal account then you can send and receive money and pay for items purchased online or offline. But you should know that PayPal charges a particular amount of fee when you make a personal payment using credit card, debit card or PayPal credit. Even the business accounts that are used by merchants have to pay 2.9% plus $0.30 of what they receive through PayPal. This is one of the biggest revenue sources of PayPal.

International payments

PayPal also charges money you get payment from another country. The charges that you incur in an international payment include the currency conversation cost and also the international payment fee. But PayPal never charges you for the money that you receive from within your country.

Business account charges

You don’t have to pay even a single penny in order to make a personal or business account on PayPal as making an account is completely free. But there are certain features for which you will have to pay fee to PayPal. Some of these advanced features for which you have to pay money are customized checkout page, same site payment. All these features are available in the Payment Pro business account of PayPal. PayPal charges a monthly fee of $30 for this Pro Business account.

P2P Payment Withdrawal Fees

In addition to all the above-mentioned ways through which PayPal makes money, there is P2P payment withdrawal fees as well and that allows PayPal to earn money as well. You should know that allows you to receive money directly from a custom link. Well, there is no charge put on by PayPal when you receive the money but when you will go for withdrawing the money then you will be charged a flat fee. If you are in the USA then you will be charged 2.9% of the total amount that you are going to receive through PayPal. This is another big source of income for PayPal since there are many users of


It is basically a payment gateway service provided by PayPal. Anyone can include Payflow in their website by using the business account they had on the PayPal platform. In the Playflow, you will be given two options or we can say two plans to setup your account. The first one is the Payflow link through which the customers will have to enter the details on a page that is hosted by PayPal. And in the Payflow pro, user gets the ability to design his own checkout page. You should know that the PayPal Pro is a premium version of this platform if you will go for this then you will have to pay a monthly fee of $25 per month.

PayPal Working Capital Fees

PayPal working capital fees are yet another bigger source of income for PayPal. Under this scheme, PayPal provides small loans for all the working capital needs. You should know that PayPal allows borrowing almost 15% of your sales on PayPal that has a maximum limit of $85,000. There is a fixed fee includes in these types of loans and you don’t have to pay even a single penny in the form of interest.

The PayPal working capital works a bit different from your traditional loan. In traditional loans, the payment is made on monthly basis but that is not the case with PayPal loans as in this case, the payment is made on daily basis and on the percentage of your daily sales. The interest that is a compulsory part of the traditional loan has been replaced with fixed fees in the PayPal working capital. This is one of the main reasons why PayPal’s working capital is so much famous among consumers.

PayPal has different business branches and therefore it has different sources of earning. From charging fees for the international transactions to working capital fees, there are many ways PayPal charges you.

Author Bio

Saurabh Gupta is currently working as a senior content writer at MyQBHost, a QuickBooks cloud hosting company and the two things which matters the most to him is technology and writing. Cloud computing, Artificial intelligence and cybersecurity is what he loves the most. 

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