If you uses paypal and are in India (or in any non US country) you would had noticed that paypal always gives about 3% less conversion rate from US Dollars to any non US currency. For example, today (1st June 2009)’s current Dollar to Indian rupee conversion as per Google (which shows most recent data for currency rates) is 1 USD = 47.02 INR and its only getting less as dollar is again gaining strength (last week it was about 47.5+)

Now here is what paypal is giving as conversion rate - 

so today’s paypal conversion rate is about 45.7, almost 3% less then the actual rate and I have seen the same difference of exchange rate between actual rates and what paypal offers for the past 3 years. Now the question is, when paypal is already charging 3.5% fees on all transactions making hundreds of millions of dollars, why not offer a more accurate conversion instead of taking cut from people of India, Romania, Philippines etc

One argument paypal can give is that they are safeguarding themselves against any rapid change in currency market, say fall of rupee by 3% suddenly but this don’t hold water as paypal can always update their exchange rate in real time, or at least semi real time.

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