Connecting PayPal directly to your Gumroad account

Due to changes in PayPal's policies, we are going to have to change how Gumroad helps creators collect payments via PayPal. Please read this post to understand the changes that are coming. We're not thrilled about this change (it was forced on us and we've had relatively little time to adapt and respond), but we've done everything we can to make the change minimally impactful for you.

Once you connect your PayPal account on your payments settings page, you'll notice a couple of changes:

1. PayPal payments to you will be instant.

2. Fee structure on these payments: 1% Gumroad fee (6% for those without a Pro membership) plus what PayPal charges. Read more about our fees.

If you do not wish to connect one, you do not have to. Nothing changes about your Gumroad experience, but your customers will no longer be able to pay via PayPal, which may lead to a decline in your conversion rates. You can also choose to connect a PayPal account at any time.

That's the short of it. Now, the extended story...

The Problem

Hi, Philip here. I joined Gumroad a few weeks ago, but I've been a Gumroad creator since May. A couple of days ago, I was minding my own business, working on creating educational resources for Gumroad creators, when Sahil told me that going forward, if a creator wanted to offer PayPal as a payment option, they would have to connect their own account and those payments would exist outside of Gumroad's purview. Here is the important part of the conversation:

38% of the Total Marketplace Volume on Gumroad goes through PayPal, so needless to say I was a little freaked out. However, Gumroad worked quickly to downgrade this particular emergency from "existential threat" to "mild inconvenience." Daniel Vassallo, our Head of Product and an extremely successful Gumroad creator, said this is no big deal for his business, and you can feel calm about yours as well.

The Solutions

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. Either way, you'll be able to continue selling your products on Gumroad through our optimized checkout pages and retain the use of all of the features like posts, analytics, refunds, and customer management that you have come to rely on.

You can change your mind between these two options at any time.

Option 1: Do Nothing

If you choose not to connect one, 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. Again, 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
  • 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¢)
  • 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.

Future Plans

We will continue to improve the checkout experience to help you make more money. Apple Pay is officially "Coming Soon" on our public roadmap, and with my inside knowledge I can let you know that our engineers are targeting a rollout before the end of the year for that feature. Apple Pay offers a compelling alternative to PayPal for millions of users and should boost conversion rates site-wide.

Furthermore, this change has helped us re-imagine how we handle the entire payout cycle, and we are exploring options like allowing creators to hook up their own Stripe account with a similar fee structure. No matter what, we're going to proceed in a manner that puts creators first, as best we can. I am directly affected by these changes, just like you, and we're on the same side.

Additionally, we will still be working behind the scenes to offer you and your customers great support, battle fraud and compliance issues, handle VAT and sales taxes, and otherwise make Gumroad the easiest way to earn a living as a creator online.