PayPal has established the absolute rock-bottom industry-floor of 2.9% + $0.30 for payment processing + fraud reduction.

Fraud reduction accounts for the majority of that percentage.

Patreon has established that they will completely go out of business at 5%.

Steam is taking 30% and Epic is taking 12%. Salaries, servers and regulation are expensive.

Microsoft offering 5% is a steal.

> PayPal has established the absolute rock-bottom industry-floor of 2.9% + $0.30 for payment processing + fraud reduction.

This is neither unique to PayPal or the actual floor.

2.9% + (roughly) $0.30 is pretty much the standard across all public facing credit card processors like PayPal (and their subsidiary Braintree), Stripe, Amazon Pay, Authorize.net, and more. I have heard rumors Stripe offers rates as low as 1.8% for large volume processors. Adyen charges $0.12 + 0.6% + interchange fee making them extremely lucrative for their customers (including Uber, Netflix, Etsy, Spotify).

Given Microsoft's size and expertise, I'd anticipate they are operating close to interchange rates around $0.10 + between 0.8% and 1.6%.

In Europe Stripe offers 1.4% + 25eurocent for EU cards, with the same 2.9% for non EU cards. Stripe actually charges US customers an extra 1% to process EU cards (3.9% total), plus a hefty forex fee. For a company like MS with a major EU presence the average rate will be skewed lower than what the market looks like.

The actual cost for credit/debit card processing is interchange itself, which averages to ~1% for grocers & about 2% for everyone else if your doing north of $200k a year in volume. High risk industries like cruises, concerts & similar will pay close to 5% (or more), as when the event doesn't pan out, all that cash will need to be refunded.

Fraud reduction is largely irrelevant on non tangible products though, especially when licenses can be revoked online.

Fraud reduction includes having to refund money, not just revoking licenses if the payment is reversed.

And paying exorbitant chargeback fees.

Chargeback fees to credit cards are still massive (even if you "win" the dispute)

Those are negotiable and even stripe and Braintree only charge $15.

Microsoft is probably big enough to negotiate really good terms for themselves.

I'd add hosting on top of that - like Apple, Google, etc., they don't charge you for distributing your app (which could be hefty, per paid transaction, if you have a low-converting trial or freemium app).

Even if Hosting many terabytes of data and paying for thousands of terabytes of downloads worldwide was free, people aren’t. It takes people to build and maintain hundreds of store fronts, localize them in dozens of languages, run marketing programs, provide support, developer tools, etc, etc, etc.