PayPal shares jump after announcing price increases

New York

PAYPAL Holdings Inc jumped after warning merchants it will raise prices for some of its new products.

The company plans to charge 3.49 per cent of a transaction's value plus 49 US cents for merchants that use its proprietary services, PayPal said last Friday in a statement.

For instance, retailers will have to pay more to accept Venmo payments or use a product that lets consumers split their purchases into four installments.

"We are making changes to our published rates in the United States to better align our pricing with the value that our products and services provide," the company said in the statement. The changes will go into effect from Aug 2.

PayPal climbed 1.9 per cent to US$283.38 at 4.15pm in New York, the highest since February and the third-best performer in the 74-company S&P 500 Information Technology Index.

PayPal has long charged one flat rate for its services - 2.9 per cent of a transaction's price plus a 30 US cent fee. With the changes, the firm is betting that merchants will pay more to use some of the proprietary products it spent years developing beyond just processing credit- and debit-card payments.

"PayPal has become more than just a button or payment processor to be a full commerce platform capable of driving growth for businesses," the company said in the statement.

"Consumers are nearly three times more likely to complete their purchase when PayPal is available at checkout."

Part of the changes will allow PayPal to take aim at the likes of Square Inc and Stripe by lowering prices for both in-store and online credit- and debit-card purchases.

For in-store transactions, PayPal will lower its fee to 2.29 per cent of the transaction's price plus nine US cents. For online payments, rates will fall to 2.59 per cent of the transaction's price plus a 49 US cent fee.

PayPal's moves come after Visa Inc and Mastercard Inc postponed plans of their own to boost the fees US merchants pay when consumers use credit cards online. The networks said in March they wouldn't implement those changes until April 2022. BLOOMBERG