PayPal’s “Take Rate” Declined in Q3

Clients bringing the company larger volumes of payments are also forcing it to lower its fee per transaction.
Katie Kuehner-HebertOctober 29, 2015
PayPal’s “Take Rate” Declined in Q3

The amount of money that PayPal has been able to keep from each payment made on its platform has fallen, raising investor’s concerns.

In its third-quarter earnings release — PayPal’s first quarter since its split from EBay — the San Jose, Calif.-based company said that its “take rate” fell to 3.24%, from 3.39% a year earlier. However, the company’s total payments volume rose 20%, to $69.7 billion

In reaction to the news, PayPal’s shares fell more than 1%, to $36.02, on Thursday.

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As PayPal processes more payments in stores like Macy’s and on popular smartphone applications like Uber and Airbnb, the company keeps less money from each transaction — because the clients that bring bigger volume to the payments company also have the leverage to negotiate lower rates, according to Bloomberg.

“Take rates are expected to go down over time as the mix of large retailers and person-to-person payments increases,” Wedbush Securities analyst Gil Luria told Bloomberg. “However, the decline in the quarter was larger than anticipated.”

PayPal’s chief executive Dan Schulman told Bloomberg as the company increases its payment processing business, including from its peer-to-peer digital payments platform Venmo, it’s take rate will continue to fall, but overall profits from more revenues will increase.

PayPal’s net income for the third quarter, excluding items, was 31 cents a share on revenue of $2.26 billion, compared with analysts’ average projections of 29 cents and $2.28 billion, according to data compiled by Bloomberg. The company’s operating margin was 14.6% in the quarter compared with 13.8% a year earlier.

For the full year, PayPal maintained its 2015 earnings forecast of $1.23 a share to $1.27 a share, excluding certain items.