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How to set up PayPal for commission payments

Set up PayPal to pay your affiliate commissions straight to their PayPal accounts.

Written by Aleksandra Velkova

Before you start

A few requirements are needed before u setup PayPal payouts.

  • PayPal Business account. It must be verified: identity and email confirmed, and a bank account or card linked.

  • Access to PayPal Payouts. PayPal does not switch Payouts on by default. Request access at paypal.com/payoutsweb/landing. PayPal emails you its decision.

  • Funds in your PayPal balance. Commissions are paid from your PayPal balance, in your Lootly store currency. Keep enough to cover the commissions plus PayPal's fees.

  • Where affiliates are paid. Each affiliate is paid to the PayPal Email they entered when they signed up. If they left it empty, they are paid to the email on their Lootly affiliate account. You can check and change the PayPal Email on the affiliate's profile in Lootly. If that address has no PayPal account, PayPal emails them to open one and claim the payment.

Step 1: Open PayPal Payouts in Lootly

In Lootly, go to Integrations > Browse Apps, find PayPal Payouts and select Connect.

Keep this page open.

You will copy three values from PayPal into it: the Client ID, the Client Secret and the Webhook ID.

Step 2: Log in to the PayPal Developer Dashboard

Go to developer.paypal.com, log in with your PayPal Business account and select Dashboard.

Step 3: Switch to Live

At the top left of the dashboard, use the Sandbox / Live switch and select Live. Sandbox is PayPal's test mode. Keys from Sandbox will not send real payments.

Step 4: Create an app

Go to Apps & Credentials.

Select Create App.

App name: Lootly Affiliate Payouts.

If PayPal asks for a type, choose Merchant.

Select Create App.

Step 5: Copy your Client ID and Secret

Open the Lootly Affiliate Payouts app. Copy the Client ID. For the Secret, select the eye icon to show it, then copy it. Keep both for Step 8. Check that the switch at the top left is set to Live.

Step 6: Check that Payouts is turned on

On the same app page, scroll to Payment capabilities and check that Payouts is ticked. If you change anything, select Save Changes.

If Payouts is missing or cannot be ticked, your PayPal account does not have Payouts access yet. See "Before you start".

Step 7: Add the webhook

The webhook lets PayPal send Lootly updates about each payout. Lootly uses these updates to send your affiliate the PayPal Payment email, if it is turned on in Display > Email Notifications. Payouts are sent even without the webhook.

  1. On the same app page, find the Webhooks section and select Add Webhook.

  2. Webhook URL: https://app.lootly.io/api/webhooks/paypal

  3. Event types: select All Events.

  4. Select Save.

  5. Copy the Webhook ID shown in the list.

Step 8: Connect PayPal in Lootly

Go back to the PayPal Payouts page in Lootly (Integrations > Manage > PayPal Payouts).

  1. Paste the Client ID, Client Secret and Webhook ID.

  2. Optional: change the Email Subject Line and Email Message. PayPal sends this email to your affiliates when a payout completes. {company} is replaced with your store name.

  3. Turn the integration on with Enable, then select Save.

You are ready to pay commissions through PayPal.

Paying your affiliates

  1. Go to Affiliates > Payments and select Send Payment on the payment you want to pay.

  2. On the confirmation page, check the PayPal will pay list. It shows the exact email PayPal will pay for each affiliate. If one looks wrong, fix it on the affiliate's profile first.

  3. Select Send PayPal Payment. If you see Connect instead, PayPal is not connected yet. Finish Step 8 first.

  4. In the window that opens, select Send Payment.

PayPal takes the amount from your PayPal balance and sends it to the affiliate's PayPal Email, or to their account email if they did not enter one.

Connected PayPal before October 2026?

Lootly moved to app.lootly.io. If you set up the PayPal webhook earlier, update its URL:

  1. Log in to developer.paypal.com, switch to Live and open your Lootly app under Apps & Credentials.

  2. In the Webhooks section, edit the webhook.

  3. Change the URL from https://lootly.io/api/webhooks/paypal to https://app.lootly.io/api/webhooks/paypal.

  4. Save. The Webhook ID stays the same, so nothing changes in Lootly.

Troubleshooting

  • "PayPal API error, please make sure payouts is enabled and credentials are correct then try again." Check that you copied the Live Client ID and Secret, not Sandbox keys. Check that Payouts is ticked under Payment capabilities (Step 6), and that your PayPal balance covers the payment plus fees.

  • Payouts option missing in PayPal: your account does not have Payouts access yet. Request it at paypal.com/payoutsweb/landing.

  • Affiliate did not get the money: open the affiliate's profile in Lootly and check their PayPal Email. It must match the email of their PayPal account. If it does not, select Edit next to it, correct it, and save. PayPal emails the address it paid, asking them to claim the payment.

  • "The PayPal Email of ... is not a valid email address." Lootly stops the payment because the affiliate's PayPal Email is not a real email address. Correct it on the affiliate's profile, or pay that affiliate another way.

Still stuck? Contact us at support@lootly.io.

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