It appears the new regime is specifically designed to make smaller crypto transactions more expensive. A $10 buy will soon cost twice as much as it did before.
PayPal and Venmo have announced that they plan to increase the fees it charges on small crypto transactions.
At present, a minimum fee of $0.50 is charged for crypto purchases or sales between $1 and $24.99. From there, a flat fee of 2.3% is charged for transactions between $25 and $100 — decreasing to 2% for those worth $100.01 to $200.
All of this is going to change from March 21, when Venmo moves to a flat dollar fee instead.
New tiers are being introduced, and fees of $0.49 will only be available for crypto purchase or sale amounts between $1 and $4.99. Charges will then jump to $0.99 for transactions between $5 and $24.99 — and to $1.99 for those between $25 and $74.99. Finally, a $2.49 fee will be in place when crypto worth between $75 and $200 is bought or sold.
It appears the new regime is specifically designed to make smaller crypto transactions more expensive. A $10 buy will soon cost twice as much as it did before.
Right now, someone buying $75 of crypto would end up spending $1.72 on fees — but this will rise to $2.49 when the changes come into effect, an increase of 44%.
The new fee structure will be especially beneficial for those buying or selling between $125 and $200 of crypto — as they'll actually end up saving money.
Fees associated with bigger transactions remain unaffected — meaning a 1.8% cut will continue to be taken when crypto worth $200.01 to $1,000 is bought or sold. This falls to 1.5% for transactions worth more than $1,000.
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Who Will This Affect?
Venmo — and its parent company PayPal — have become popular outlets for those looking to dip their toe into the world of cryptocurrencies.
But both platforms only have a limited repertoire of digital assets available: Bitcoin, Ether, Litecoin and Bitcoin Cash.
Crypto-focused exchanges tend to have a greater selection of coins on offer, a broader range of features, and more competitive fees. But they tend to fall down when it comes to usability, making Venmo and PayPal more of a convenient option for those who are unfamiliar with how digital assets work.
In a statement, a PayPal spokesperson said:
"This change is part of our ongoing commitment to provide transparency, ease of understanding and clarity to our customers."
Transaction fees tend to vary wildly between rival platforms — and sometimes within a company itself. The retail-facing Coinbase app tends to be more expensive to use than the more technically minded Coinbase Pro, for example.
Some analysts have warned that Coinbase's business model could be undermined in the months and years ahead as trading platforms embark on a "race to the bottom" when it comes to fees — with newer entrants such as Robinhood declaring that they don't take a commission. All of this has prompted Coinbase to start seeking alternative forms of revenue.
PayPal's stock has been performing terribly of late. PYPL's share price has tumbled by 62.1% over the past 12 months — and is down 46.8% since the year began.
Investors have soured on the stock after the company warned that growth would be affected by high levels of inflation, and ambitious targets to reach 750 million users worldwide are now being abandoned.
