Correction (10 Oct 2026): an earlier section on this page showed unsourced figures; it has been removed.
How we source: figures on this page come from the company’s own filings (SEC 10-K, 10-Q and earnings releases, or its annual report), with the period stated next to each number. Last refreshed October 2026. Our methodology.
In short
PayPal makes most of its money from a fee on each payment it completes. In fiscal 2025, transaction revenues were $29.8 billion of $33.2 billion in net revenue, earned on $1.79 trillion of total payment volume. The rest came from credit, partnerships, interest on customer balances and other services.
PayPal reported solid revenuegrowth of 6% year-over-year to $7.85 billion in Q3 2024, driven by steady growth in both transaction revenue and value-added services. However, net income declined 8% to $1.01 billion as the company invested in growth initiatives and faced increased competition in the digital payments space.
PayPal charges merchants and consumers a fee when it completes a payment, and the fee is mostly based on volume. Total payment volume (TPV) was $1.79 trillion in fiscal 2025, up 7%. Transaction revenues were $29.8 billion, or 89.8% of net revenue. That is about 1.66% of TPV, down from 1.72% in 2024 (our calculation).
PayPal revenue by fiscal year, FY2021 to FY2025, from the company's filings. Chart: The Business Engineer.
PayPal also charges for currency conversion, cross-border payments, instant transfers to a bank account and crypto trades. The company says it generally does not charge customers to fund or withdraw from their accounts.
Revenues from other value added services were $3.4 billion. They come from partnerships, referral and subscription fees, gateway fees, interest and fees on PayPal’s loans, and interest earned on assets that back customer balances.
The largest cost is paying card networks, banks and processors to draw customers’ funds. Transaction expense was $16.0 billion, or 0.89% of TPV. Transaction and credit losses added $1.7 billion. Together they took 53% of revenue (our calculation), leaving $15.5 billion of what PayPal calls transaction margin dollars.
How PayPal compares
Measured against its own history, net revenue rose from $25.4 billion in fiscal 2021 to $33.2 billion in fiscal 2025, about 7% a year compounded (our calculation). Growth slowed to 4% in 2025, from 7% in 2024.
Across its two revenue categories, other value added services grew 14% in 2025 and transaction revenues grew 3% (our calculation). By region, the U.S. produced $18.9 billion and other countries $14.3 billion. PayPal reports a single segment, so it does not disclose profit by business.
Volume grew faster than revenue. TPV rose 7%, but transaction revenues rose 3%. PayPal blames product and merchant mix and about $210 million of hedging losses. Payment transactions fell 4% to 25.4 billion as PayPal cut back unbranded Braintree processing, which it says was part of a focus on profitable growth. Excluding unbranded card processing (PSP), transactions rose 6% to 16.1 billion.
PayPal revenue by line, prior year against FY2025, as reported. Chart: The Business Engineer.
Margins improved. The transaction expense rate fell from 0.93% to 0.89%, operating income rose 14% to $6.1 billion, and net income rose 26% to $5.2 billion.
In February 2026, the board appointed Enrique Lores as chief executive, replacing Alex Chriss. It said the pace of change and execution had not met its expectations.
What to watch
The first thing to watch is branded checkout. The company says its execution has not been where it needs to be, particularly in branded checkout, and in February 2026 it guided to a mid-single-digit decline in fiscal 2026 GAAP EPS.
The second is interest rates. Lower rates reduce the interest PayPal earns on customer balances. Revenue from its partner bank can fall to zero in any quarter in which the credit programme misses a minimum return.
The third is cost. Two payment processors accounted for 56% of transaction expense in 2025, and a shift in funding mix towards cards would raise the transaction expense rate.
Frequently asked questions
How does PayPal make money?
Mostly from fees on payments. Transaction revenues were $29.8 billion of $33.2 billion in net revenue in fiscal 2025. The other $3.4 billion came from value added services such as credit, partnerships and interest on customer balances.
What is PayPal's take rate?
Transaction revenues divided by total payment volume came to about 1.66% in fiscal 2025 ($29.8 billion on $1.79 trillion), down from about 1.72% in 2024. This is our calculation from reported figures.
How many active accounts does PayPal have?
439 million as of 31 December 2025, up 1% from 434 million a year earlier.
Is PayPal profitable?
Yes. In fiscal 2025, operating income was $6.1 billion, an 18% operating margin, and net income was $5.2 billion.
PayPal makes money primarily by processing customer transactions on the Payments Platform and other value-added services. Thus, the revenue streams are divided into transaction revenues based on the volume of activity or total payments volumeβand value-added services, such as interest and fees earned on loans and interest receivable. In 2023, PayPal generated nearly $30 billion in revenues and $4.24 billion in net profits.
Who owns PayPal?
How does PayPal make its profits?
PayPal makes money primarily by processing customer transactions. Therefore most of its money comes from transactions revenues. As of 2020 PayPal generated over $21.5 billion in net revenues with a 25% operating margin.
How does PayPal make money if it's free?
PayPal is a free service, but it makes money via transaction revenues. Indeed, as the company offers an end-to-end transaction platform when transactions go through the company collects a fee on top of each transaction.
What is PayPal's biggest competitor?
PayPal competitors are those offering end-to-end payment services for either consumers or merchants. Among these competitors, we have Google with Google Pay, Square with Cash App, and Apple with Apple Pay.
PayPal was first founded in 1998; it was called Confinity (among its founders was Peter Thiel); later, it merged with X.com, its major competitor, founded by Elon Musk (which would become known for other companies like Tesla and SpaceX). From this merger, PayPal was born. In 2002, PayPal was bought by eBay for $1.5 billion. eBay spun off PayPal in 2015, which would be listed as an independent entity. Today, PayPal owns brands like Braintree, Venmo, Xoom, and iZettle. Today, PayPal is mostly owned by institutional investors like The Vanguard Group (8.4%) and Blackrock (6.7%)
PayPal makes money primarily by processing customer transactions on the Payments Platform and other value-added services. Thus, the revenue streams are divided into transaction revenues based on the volume of activity or total payments volumeβand value-added services, such as interest and fees earned on loans and interest receivable. In 2023, PayPal generated nearly $30 billion in revenues and $4.24 billion in net profits.
PayPal is a two-sided marketplace which collects a transaction fee for each payment that happens via the platform. PayPal’s flywheel is based on creating a stronger and stronger network, where the company provides a suite of services to merchants, and consumers are given affordable digital payment solutions. In 2022, PayPal processed over $1.35 trillion in global payments.
PayPal processed $1.53 trillion in payment volume in 2023, $1.36 trillion in payment volume in 2022, and $1.25 trillion in 2021βa growth of 12.5% year over year. In 2020, PayPal passed a trillion-dollar in payment volume, with $936 billion processed via the platform.
In 2023, PayPal generated nearly $30 billion in revenue compared to over $4.24 billion in profits. Compared to over $27.52 billion in revenue and over $2.42 billion in revenue in 2022.
In 2023, of nearly $30 billion in revenue, nearly $27 billion came from transaction revenues. Thus, transaction revenue represented over 90% of total revenue, while revenues from other value-added services (primarily comprising revenue earned through partnerships, interest and fees from merchants and consumer credit products, interest earned on certain assets underlying customer balances, referral fees, subscription fees, and gateway services) were over $2.91 billion, representing about 9% of PayPal’s total revenue.
PayPal had 426 million active accounts in 2023, a 2% slowdown compared to 435 million active accounts (users) in 2022, back to the 2021 level, when PayPal had 426 million active accounts.
The PayPal transaction per active account/user is a critical metric to measure the level of usage of PayPal. In 2023, the transaction per active account grew to 58.7, compared to 51.4 in 2022 and 45.4 in 2021. Thus, each active account has performed (on average) nearly 59 transactions via PayPal in 2023.
The PayPal Mafia describes a group of former PayPal employees and founders who have since become involved with other tech companies. While most know SpaceX founder Elon Muskβs association with PayPal, the company also has links with YouTube, LinkedIn, and Yelp, among many others. In addition to founding these generation-defining companies, the members of the PayPal Mafia are some of the richest men in Silicon Valley.
Gennaro Cuofano is a CRO and tech executive who has worked in AI since late 2015, starting with bringing NLP, natural-language generation, voice and chatbot products to the marketing industry. His background is in law and finance: he holds a Master's degree in Law and an International MBA with an emphasis on corporate finance (LUISS Business School and the University of San Diego, 2012), and worked as a financial analyst at a real-estate investment firm in San Diego and as an assistant controller. His work focuses on business model strategy, business engineering and, more broadly, structural analysis: how companies make money, read from their own filings. He created FourWeekMBA and leads research there and at The Business Engineer, his newsletter on AI and business strategy, with over 95,000 subscribers and more than 1,000 published analyses. His writing has also appeared on Entrepreneur (for example, How to Digitize a Family Business in Europe) and HackerNoon. Find him on LinkedIn and Substack. See how we source.
2 thoughts on “How Does PayPal Make Money? PayPal Business Model (2026)”
Great information. Thanks
Thank you Devin!