Paypal or Xoom: Which one is cheaper for Publishers?

About 2 weeks ago, I was able to reactivate a 4-year old dormant Paypal Premier/Business Account. I’ve been using that account now to receive funds from advertisers as well as pay some online bills. Now that I have both Xoom and Paypal, I’ve been contemplating which of the two I should be using more often.

Here my quick analysis of the two:

For the purpose of illustration, let’s do a transaction with Xoom and Paypal then compare the rates and the actual amount you would be receiving. This is to make the case that when receiving ad fees from advertisers, you’d be more informed if Paypal is much more practical than Xoom.

Transaction Amount: $100
Peso to $USD Rate: 45.43 = 1 (Yahoo! Finance, Sept. 25, 2007)
Peso to $USD Rate: 44.0866 = 1 (Xoom Internal Rate Card, Sept. 25, 2007)

Paypal Fees: $0.30 + 2.9% for $1 – $3,000
Xoom Rates: 8.00 for $100

The standard usual practice is that when an advertiser remits payment via Xoom, they incur the additional charges. However, on Paypal, the exact listed amount is sent then the Publisher receives a deducted amount based on the listed fees.

via Paypal:
Amount Transmitted: $100
Amount Received: $96.8
Fee Incurred: $3.2 (3.2% on the Publisher)

via Xoom:
Amount Transmitted: $108
Amount Received: $100
Fee Incurred: $8 (7.4% on Advertiser) + $2.86 (2.86% on Publisher)

The Fees incurred via Xoom are higher since both the advertiser and the Publisher are changed. Even if advertiser shoulders the transaction fees, the Publisher takes on the difference in public exchange rates and the Xoom internal exchange rates. However, if you’re just looking at your own fees on the receiving end, Xoom is still lower than Paypal.

Let’s see if these percentages will vary if we put the transaction amount to $1,000.

Paypal Fees: $0.30 + 2.9% 1 – $3,000
Xoom Rates: $40 for $1000

via Paypal:
Amount Transmitted: $1,000
Amount Received: $970.7
Fee Incurred: $29.3 (2.93% on the Publisher)

via Xoom:
Amount Transmitted: $1,040
Amount Received: $1,000
Fee Incurred: $40 (4% on Advertiser) + $28.60 (2.86% on Publisher)

With this amount, the fees incurred by the Publisher between Xoom and Paypal are almost the same (2.86% vs. 2.93%), not including the fees shouldered by the advertiser from Xoom.

Take note that these computations are based on assumptions that the Paypal account is a Premier/Business account, foreign exchange rates were used for the current date and that the Publisher will be receiving the remittance in Philippine Peso.

For reference, you can look up the fee structure of Xoom here as well as their own exchange rates; a comparison between a Personal account and Premier/Business Account on Paypal is here, the main difference being Perosnal accounts cannot accept credit/debit card payments; and here is the table of Paypal transaction fees for various amounts.

On a personal note — if you only have Xoom and can convince advertiser to fully shoulder the transaction fees, try to set the payments so that you’ll receive it in dollars instead of pesos. However, transaction charges for these will also increase ($10 for a $100 remittance and $59 for $1,000).

P.S. I wonder how these computations would look like if you compare them to other competing services like Ikobo, MoneyBookers and Western Union.