We get why so many people love PayPal. It revolutionised ecommerce and gave the world unfettered access to Internet shopping and selling. But if you’re using PayPal for international business transactions, there may be some better money-saving options to consider.
Whether it’s a bit of retail therapy, a side freelancing gig, or sourcing merchandise for your online business – we know PayPal is a convenient way to pay and get paid.
However, if you’re using PayPal for international business, you may be getting shortchanged when you pay foreign invoices. And we want to stop that from happening.
Let’s say I turn my passion for collecting art into a business. I’m now the proud owner of an ecommerce website, and find a fantastic supplier who makes unique pottery I want to sell. Good news – the supplier sells me the product at a great price. Bad news. They’re based in France.
I’m not worried about receiving the product – couriers will have everything shipped in no time. But when it comes to paying the European invoice, sure I can conveniently pay with PayPal. But are the extra international transaction costs to pay euros worth it?
It may be easy to pay the invoice with PayPal, but it’s also very expensive. And the PayPal fee structure can be hard to understand. Here’s what you should know.
It’s hard to know the exact exchange rate PayPal will give. But what we do know is it’s not “real.” The real or mid-market exchange rate is the one you’ll find on Google. To figure out PayPal’s, you’d need an account, log in, and start the exact transaction you’re thinking of.
That’s because PayPal adds a percentage on top of the real exchange rate, also known as a currency conversion spread, so they make a profit whenever they process an international payment.
Because I’m sending money from the UK to my supplier in France, PayPal could inflate the exchange rate by nearly 4%. I have to cover that 4% to make sure my supplier gets what they’re owed. The case study below shows exchange rate markups coming in at £82.49 in independent research from Consumer Intelligence Ltd, when a payment of £2,000 goes to a business in France.
There’s a fair chance that the recipient – in this case, my supplier – will also be charged. In the research done by Consumer Intelligence Ltd, the end recipient paid a whopping additional €73.38 to receive their payment, because of what PayPal calls ‘domestic fees for receiving commercial payments’. Meaning that the €73.38 of their £2,000 invoice that should have gone to them, went to PayPal. You can calculate PayPal fees for merchants with this easy to use PayPal calculator.
Compared to PayPal, it could be nearly 4% cheaper to send money to European suppliers with TransferWise. You can get the products you want for a price that's more reasonable.
There’s just a single, upfront fee – and you can guarantee that the exchange rate used will be the mid-market rate. No markup. And it’s over 3% cheaper for your suppliers to get paid with TransferWise.
Here’s the research from Consumer Intelligence that shows your cost of sending £2,000 from the UK to France for a business transaction.
|Original amount sending (GBP)||£2000||£2000|
|Exchange rate (Reuters’ rate = 1.7303)||£1 = €1.1259||£1 = €1.0813|
|Exchange rate markup (GBP)||£0 (0%)||£82.49 (3.96%)|
|Upfront Sender fee (GBP)||£7.77||£0|
|Total sender fees (GBP)||£7.77||£82.49 (3.96%)|
|Total cost of transfer (GBP)||£2007.77||£2082.49|
And here’s the research that shows how much your French supplier would pocket after your sent £2000 with TransferWise versus PayPal.
|Amount sent to recipient (EUR)||€2,243.05 (£2000€1.1259)€2,162,63 (£2000€1.0813)|
|Recipient fee applied (EUR)||€0 (0%)||€73.38(3.39%)|
|Final recipient amount (EUR)||€2,243.05||€2,088.85|
All data was obtained independently by market research company Consumer Intelligence Ltd on January 16 2018, 11:16 UTC. Read more about the case study.
If you love the convenience of paying your invoices with PayPal, but don’t like the look of their hefty fees, then it’s time to start shopping around. When it comes to paying your international invoices, try TransferWise – it could be nearly 4% cheaper to send money to overseas suppliers compared to PayPal.
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| This publication is provided for general information purposes only and is not intended to cover every aspect of the topics with which it deals. It is not intended to amount to advice on which you should rely. You must obtain professional or specialist advice before taking, or refraining from, any action on the basis of the content in this publication. The information in this publication does not constitute legal, tax or other professional advice from TransferWise Limited or its affiliates. Prior results do not guarantee a similar outcome. We make no representations, warranties or guarantees, whether express or implied, that the content in the publication is accurate, complete or up to date. |
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