PayPal Connect

Due to changes in PayPal's policies, as of January 1, 2021 we have changed how Gumroad's creators collect payments via PayPal. 

To creators from Brazil, India, Israel, Japan, Micronesia, or Turkey: This change is NOT applicable to you. Your customers are only able to pay for your products using credit or debit cards. 

Context

From 2015 - 2021, if one of your customers bought your product using PayPal, the money went into your Gumroad balance. The money from the sale then sat there for at least 7 days, and then was sent on Fridays to your bank account or your PayPal account (depending on your geographic location).

As of January 1, 2021, PayPal changed the structure of their merchant accounts, and now require all eligible Gumroad creators to connect their PayPal and Gumroad accounts, in order to allow customers to buy through PayPal. 

What this means for you

As a creator, you have two options. You can either do nothing, or you can choose to re-enable PayPal, connected to your own account.

Option 1: Do Nothing

If you choose not to connect your PayPal account,  nothing will change from your perspective. Your Gumroad user experience will remain entirely unchanged. The only difference will be customer-facing: your audience will not have the option to use PayPal to purchase your products and memberships. 

Depending on your audience, this may have a  material negative effect on your conversion rates. Approximately 38% of purchases on Gumroad are made with PayPal, though we do not know what percent of those customers would have still made a purchase if PayPal was not an option. You know your particular audience better than we do, but for most creators we recommend taking action to keep PayPal as an option for your customers.

Option 2: Connect your Own PayPal Account

If you want to give your audience the option to use PayPal at checkout, we've made it as simple as possible to connect your PayPal account to Gumroad.

You will have to connect your PayPal account on the payments settings page (please note that this is different than the payouts settings page).

Purchases made through PayPal will be charged 1% by Gumroad, instead of our usual 3.5% + 30¢ (or 6% instead of 8.5% + 30¢ for non-Pro accounts), in addition to any fees PayPal charges, which is most often 2.9% + 30¢.

Once you connect your PayPal account, you'll notice some new things:

  1. PayPal payments to you will be instant. Any time a customer buys a product from you using PayPal, the money shows up in your PayPal account. 
  2. The fee structure on these payments:
    For premium accounts - on each sale there is a 1% Gumroad fee (6% for those without a premium membership) plus what PayPal charges. Read more about our fees. If you're in the US, PayPal lists its fees for domestic transactions and international transactions. If you're outside the US, find PayPal's fees for your country on this list.

Pros of new PayPal approach:

  • Money is paid out instantly into your PayPal account, so you get the revenues from some of the sales sooner
  • You are paid out in the default currency of your PayPal account, rather than in USD. 
  • Continue offering your customers multiple payment options.
  • Qualify for PayPal's micro-payments rate of 5% + 5¢ on appropriate transactions.
  • High-earning creators may be able to negotiate their own bulk payment processing discount directly with PayPal.

Cons of the new PayPal approach:

  • Slightly higher total transaction fees (Ordinarily, Gumroad charges 3.5% + 30¢. For these transactions, Gumroad will charge 1% and PayPal will charge its own fees, most often 2.9% + 30¢ within the US, find yours here)
  • Requires you to take a one-time action to connect Gumroad and PayPal, and once the accounts are connected you'll want to make sure you are incorporating PayPal funds into your cashflow system.
  • If your products violate PayPal's ToS, they may ask that you not use PayPal Connect. 

Balance Page

On the balance page, we show your total sales, and then subtract any sales paid out instantly to PayPal (under the header "PayPal Payouts") to show the net amount that you receive in your weekly payout. PayPal payments are shown in USD as all transactions on Gumroad are processed in USD.

So, to clarify, what looks suspiciously like a fee is simply a debit. You have already received this money - it was sent to your PayPal account during the week, thus it is not being paid out to you this Friday. 

Payout Email

Similarly, the payout email focuses on the net amount but includes your gross sales and subtracts money already paid out to you though PayPal Connect.

Refunds

With PayPal connect, you are still able to refund customers following the normal steps in your customers tab. You just have to ensure that there is enough balance in your PayPal account to process the refund. Issuing a full refund to a customer returns 100% of their money to them. We will refund our fees and VAT (if any) to them out of our accounts. 

You will be responsible for paying PayPal's fees on refunds - Gumroad will not be able to manage those on refunds that are issued to PayPal customers. 

Chargebacks

With PayPal Connect, you are in charge of handling your own chargebacks. You can go here for more information or reach out to the PayPal support team for further assistance. 

Tax and Compliance

PayPal Connect does not materially affect tax or compliance for creators. More specifically:

  • Gumroad's approach to sales tax is unchanged
  • The Sales CSV download has two additional columns, one to determine whether the sale was via PayPal, and another to show the fees collected by PayPal. 
  • The Payouts CSV, which can be downloaded from the Balance page, will have an additional row to show the net amount already credited to your PayPal account. 
  • Gumroad still serves as the Merchant of Record in jurisdictions where that matters
  • Gumroad is still considered the seller for VAT purposes and will continue to collect and remit VAT in the appropriate jurisdictions

VAT and PayPal Connect

When you make a sale that is subject to VAT and customer pays with PayPal, VAT is added to your transactions under the field "Sales Tax" or "VAT", and then deducted as part of the "Partner Commission" in the transaction shown on your PayPal account. For example, a creator with a Premium account would see a 24% "Partner Commission" line item. Gumroad keeps our 1% and then remits the remaining 23% to the appropriate authorities as VAT.

Affiliates and PayPal Connect

When one of your affiliates helps you make a sale and the customer pays with PayPal through PayPal Connect, the affiliate fee is deducted as part of the "Partner Commission" in the transaction as it shows on your PayPal account. For example, if a creator with a Premium account is paying a 50% affiliate commission, they would see a 51% "Partner Commission" line item. Gumroad keeps our 1% and then passes the remaining 50% to the affiliate as part of their weekly payout.

Privacy

For PayPal Connect sales, your customers will be able to see the personal information attached to your PayPal account like name and email in their transaction details. If you don't wish to share your personal info, a workaround would be to create a "Business" PayPal account so that your customers can only see your company name and email. If you can't create a business account for some reason, the only option would be to disconnect your PayPal account.

For further clarity: Here's a screenshot of what your customers will see in their PayPal dashboard for the purchase, and here's a screenshot of what you (creator) will see on your PayPal dashboard for the sale.

NSFW Accounts

If you sell NSFW products online, you are probably aware that PayPal's approach to adult products is different than ours (TL,DR; we're a lot more lenient than they are). By choosing to use PayPal Connect, your products may come under the purview of PayPal’s own risk reviews, which we don’t have transparency into and cannot oversee. In short, we don't know if PayPal will allow you to sell NSFW products through Gumroad and PayPal Connect. 

If your Gumroad products violate PayPal's terms of service, and you are concerned that PayPal may penalize you, you may want to not connect your PayPal account, and continue processing your sales through credit and debit cards. 

PayPal Account Under Review

In some rare cases, PayPal might put your earnings under hold in the initial days of getting directly credited to your PayPal account for your sales. PayPal says they do this to investigate the sudden stream of incoming funds, and is part of their various risk mitigation processes. If this happens to you, please get in touch with PayPal support and give them all the details they might require to complete their investigation. If they ask for proof of delivery, you can tell them that it's a digital product. Your funds will be released back once your account is through the scrutiny. 

Disconnecting Your PayPal Account

You can disconnect your PayPal account from the same page that you used to connect it in the first place: https://gumroad.com/settings/payments

However, please note that you cannot disconnect your PayPal account if there are any active memberships or pre-orders authorized through the existing PayPal Connect account. We cannot manually override this setting, or transfer your customers to a different PayPal Connect account, simply because PayPal won't allow us to.

If you still wish to disconnect your PayPal account, you will have to first cancel all the existing memberships and pre-orders that are connected to this account and only then will you be able to disconnect your account.

Another alternative would be to go to your PayPal account and revoke Gumroad's access from within PayPal. However, please note that doing this will lead to failure of all the active membership renewals and any pre-orders from this PayPal account. 

Frequently Asked Questions

Q: Will the payment come directly from customer's PayPal to my PayPal? If yes, how does Gumroad take its fee and VAT (wherever applicable)?
A: The payment comes directly from the customer's PayPal account. Gumroad won't be mentioned in your PayPal dashboard. Gumroad is still able to collect its fee, VAT, and serve as the Merchant of Record because we are still processing the transaction for you and your audience. EU creators can use the CSV, Payday email or Balance statement for accounting purposes.

Q: If I do not wish to connect my PayPal account, will my old/existing membership subscribers who are already paying with PayPal need to update their payment to a card?
A:
No. The direct PayPal integration, which comes in effect on Jan 1, 2021, is a new "agreement". Pre-existing customers will not get affected as they started making recurring payments to us under a separate set of terms.

Q: I am from one of the unsupported countries (Brazil, India, Israel, Japan, Micronesia, Turkey), does that mean my audience will not be able to purchase my product(s) from Jan 1, 2021? Will you also stop paying my earnings every Friday through PayPal? 
A:
Because your country is not supported for the PayPal Connect feature, your customers cannot pay for your products using PayPal. They can only pay you using credit/debit cards. 
You have to fill out your payout settings to get paid. 
We will keep paying all your earnings made to your PayPal account as usual. 

Q: In what currency will I be paid?
A:
Payouts in the new PayPal system will be in default currency of creator's PayPal account, irrespective of what display currency they set for their product on Gumroad (until now, all transactions happen in USD irrespective of what display currency is set on Gumroad). However, the payout email will display all the amounts in USD to begin with at least.

Q: Will Affiliate commissions be paid out instantly?
A: No. When your affiliates help you make a sale and a customer pays via PayPal with PayPal Connect enabled, the affiliate's commission will be bundled into their weekly payout as normal.

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