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. 

If you live in Brazil, India, Israel, Japan, Micronesia, or Turkey, PayPal Connect is unfortunately not available for you. Your customers will still be able to pay via credit card and you will still get paid out using PayPal as normal, but accepting PayPal directly from your customers will not be available until PayPal chooses to ship PayPal Connect for your region.

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.
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¢.

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. See below

Once you connect your PayPal account on your payments settings page, 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.

Balance Page

On the balance page, we show your total sales, and then subtract any sales paid out instantly to PayPal 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 can also refund them directly through PayPal. Issuing a full refund to a customer returns 100% of their money to them. If they paid VAT on their purchase, we will refund that 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 Transaction CSV (the immutable record of transactions you can download from the Balance page) has an additional column to see if a purchase was made through PayPal directly
  • 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 through PayPal Connect, VAT is added and then deducted as part of the "Partner Commission" in the transaction as it shows 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.

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. 

Frequently Asked Questions

Q: If my audience purchases through PayPal, will they be able to see my personal info connected with the account?
A: Yes, your customers will be able to see the personal info attached to your PayPal account like name, email in their transaction details. As a workaround, you could create a Business PayPal account with the name and email you wish to be visible to your audience. If that is not possible for some reason, the only option would be to disconnect (or not connect in the first place) PayPal with your Gumroad account. 
For further clarity: Here's a screenshot of what your customers will see in their PayPal dashboard for the purchase. 

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 (or cannot) connect my PayPal account, will my existing membership subscribers who are paying with PayPal have 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 by PayPal, they have not yet decided to shut down the existing integration. As long as PayPal allows, you will be able to make sales via PayPal as usual. The integration might end on Jan 1, 2021 or might get extended indefinitely—this is completely under PayPal's control. In case they do shut down the incumbent integration without adding PayPal Connect support for your country, your audience will lose the ability to purchase your products via PayPal. 
Irrespective of the above, we will keep paying all your earnings made through sales via credit/debit card to your PayPal account as usual. Nothing changes in that. 

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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