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Ecommerce Forum

    
Paypal vs Merchant account
What's the difference
Adam5000




msg:4198089
 12:08 am on Sep 8, 2010 (gmt 0)

Greetings all

I'm trying to find a way to process credit cards on my website and I'm even more confused now than when I started.

I know Paypal processes credit cards and is is mostly free, are there any big drawbacks to using them instead of opening a merchant account?

Help!

 

Brett_Tabke




msg:4198099
 12:16 am on Sep 8, 2010 (gmt 0)

The definition of what-is-PayPal has changed coniderably over the years. There are several levels of PayPal integration you can use. The cheapest and easiest is processing through paypal where a user leaves your site and then uses paypal to process the cards.

You can step up to Website Payments Pro. You will process cards on your own site and people won't even know that it is PayPal doing the processing. There are several bolt on modules for standard shopping cart systems. This step takes quite a bit more time and effort install, but offers all the benefits of a full payment processor.

BeeDeeDubbleU




msg:4198259
 7:11 am on Sep 8, 2010 (gmt 0)

The drawbacks for using Paypal are few. Historically its use was once seen as amateurish as it was mostly used for personal rather than business purposes. They now operate all over the world and most people have heard of them. In fact they are probably the best known online payment system for the general public. At one time buyers also had to open a Paypal account before making a purchase. These drawbacks no longer apply.

Paypal does get a lot of bad press for various reasons most of which have some foundation but for low volume transactions it is the by far the easiest way to go. If you anticipate a high volume of transactions it becomes cheaper but in this case you may also want to look at a merchant account.

topr8




msg:4198404
 9:22 am on Sep 8, 2010 (gmt 0)

if your turnover isn't that much, then paypal is the most convenient and cheapest option.

the main drawback in my view is that when i have a problem then i can phone up my card processor and talk to them about it, from chargebacks to anything else, which is less so with paypal (although you can speak on the phone)

jbinbpt




msg:4198468
 12:03 pm on Sep 8, 2010 (gmt 0)

PayPal offers level pricing. The processing fee you see in your account when the transaction is completed is it. We found that with standard merchant accounts, the fees that show up later can be greater than the processing fee. Corporate card fees, Reward card fees, AVS problems all get charges back to the seller.

We have found that PayPal reduced our man hours in administering it, a big savings for us.

RhinoFish




msg:4198470
 12:19 pm on Sep 8, 2010 (gmt 0)

people are used to the checkout process at major merchants, tossing them into something different may hurt sales. i've tried carts and checkouts where they leave your site, and it hurt my sales. new choices are emerging that feel more seamless, including the evolving advanced integration PP offers and "off site" carts that are more tightly branded and seamless feeling.

LifeinAsia




msg:4198531
 3:33 pm on Sep 8, 2010 (gmt 0)

PayPal adds another layer of "communication" in the chargeback process. If a customer issues a chargeback, their bank issues the chargeback to PayPal. Then you submit your paperwork to PayPal, who forwards it on to the bank (or they may decide on their own not to dispute it and just accept the chargeback without your approval). If the bank rejects it, you lose- no appeal.

PayPal takes out a level of fraud prevention as well. Since PP handles all the transaction details, you are not privy to missing CVV numbers, address mismatches, suspicious IP of the transaction, etc. We had cases where PP happily processed transactions that we NEVER would have processed without additional verification. And guess what? They turned out to be stolen cards, the transactions were reversed, we were out the money, and there was nothing we could do about it.

It also depends on what you're selling. If you're not selling tangible products, PP's "Seller Protection" is worthless.

AffiliateDreamer




msg:4198538
 4:03 pm on Sep 8, 2010 (gmt 0)

With the seamless option with paypal where the user doesn't leave the site, do they still cover the PCI part of things or you have to have the checkout-leave-site option for that?

rocknbil




msg:4198620
 5:31 pm on Sep 8, 2010 (gmt 0)

Many shoppers are scared to death of payPal or have a dead set grudge against it.

I don't like relying on a third party service to process CC's. I know that's a contradiction - my CC processor is a third party - but it's not a CC processing mill, it's specifically for business transactions and our customers never leave our site.

payPal adds a layer of management issues. You have to log in, move moneys around, it takes time for the money to move . . . . a formal merchant account allows you to automate your batches (payPal may too, never looked into it.)

trinorthlighting




msg:4198783
 7:56 pm on Sep 8, 2010 (gmt 0)

Usually merchant accounts charge less per transaction. Plus, they are a bit easier to work with during disputes.

Paypal, I can not say the same, they will lock your account up in a second if they suspect fraud from a buyer or seller and good luck in getting an account turned back on the same day. Look at some of the paypal sucks stories online about ebay merchants having their accounts frozen for months at a time over low dollar item disputes.

BeeDeeDubbleU




msg:4198857
 10:21 pm on Sep 8, 2010 (gmt 0)

Look at some of the paypal sucks stories online about ebay merchants having their accounts frozen for months at a time over low dollar item disputes.

Paypal has millions of customers (over 200 million with about 73 million active). I would be very surprised if they did not have some problems.

jwhansen




msg:4198933
 1:44 am on Sep 9, 2010 (gmt 0)

One drawback of PP is that if shipping is more than expected or there is another charge incurred that you need to charge the card for...you can't. I have ran into that on more than one occasion.

Adam5000




msg:4200026
 3:02 pm on Sep 10, 2010 (gmt 0)

Interesting discussion. It looks like both options have merits and drawbacks. Thanks for your input everyone. You're all brilliant!

Digmen1




msg:4200362
 1:47 am on Sep 11, 2010 (gmt 0)

I am using Paypal at the moment as my sales are very low.
If my sales grow I can justify a merchant account.

dpd1




msg:4200374
 3:07 am on Sep 11, 2010 (gmt 0)

Paypal, I can not say the same, they will lock your account up in a second if they suspect fraud from a buyer or seller and good luck in getting an account turned back on the same day. Look at some of the paypal sucks stories online about ebay merchants having their accounts frozen for months at a time over low dollar item disputes.


Has that actually happen to you? Seems like those stories always come out, but rarely from people who actually had it happen. In ten years, I've had a few hiccups. Nothing more than what you would have with any service. Are there needs for improvements? Of course, there always are. But honestly, some of the most disturbing stories I've heard came from other payment gateways. Like the thread started by somebody on here the other day about them holding a bunch of their money. So nothing is perfect.

I have serious doubts about the credibility of those people who make it their life project to bash an organization by creating '___ sucks' sites and all that. Any normal person would just be done with it and move on. The fact that some people obsess over it, tells me that maybe some of them are a couple quarts low to begin with. And if they are, that maybe means they weren't as innocent as they made themselves out to be. People have a tendency to leave out some key details in a lot of those stories.

trinorthlighting




msg:4200402
 4:34 am on Sep 11, 2010 (gmt 0)

Yep, it sure did. We were doing about a million in sales a year, one small sale less than $20 on a stolen pay pal account and bam, they shut us down for two weeks. Imagine what that does to a large company cash-flow. So, while we waited for pay pal to make a decision to turn our account back on, we ended up moving to a full blown merchant account. Since pay pals customer service was so bad, we dropped them. Then they decided to try to hold all the money they froze for 6 months. Now, I can understand holding a reserve, but not the whole amount. Needless to say after a month, a lawyer and a $5000 legal bill pay pal agreed to release the $20,000 or so they were holding and keep the reserve that was built in place for 6 months like usual.

Needless to say, always have at least two payment processors in case one goes down, you can flip a switch on your site and have the back up running. We use authorize primarily and have google check out as a back up. This came in handy last year when authorize had a major data center outage for a weekend.

We learned our lesson the hard way and Make sure you read pay pals terms of service carefully then compare it to other processors before you make a decision. Oh, and as far as all those stories goes, read the one from former ebay power sellers and you will see a pattern. Ask yourself why you do not see a huge volume of complaints online about other credit card processors.......

dpd1




msg:4200437
 7:48 am on Sep 11, 2010 (gmt 0)

Yep, it sure did. We were doing about a million in sales a year, one small sale less than $20 on a stolen pay pal account and bam, they shut us down for two weeks.


And so, what was their reasoning behind this? I mean, you don't have to repeat word for word... But when you asked them why they were doing it, what did they say basically? Because obviously, that makes no sense at all. Not to mention, it hurts them as well. When they DO have screw-ups, I just get the impression that they are so big, there's nobody at the controls, so to speak. It's like they're just sitting there doing what the screen tells them to do. But you would think at some point, there would be some sort of human intervention before it gets that far.

gpilling




msg:4200526
 3:23 pm on Sep 11, 2010 (gmt 0)

I have done about $1M with Paypal Pro in the last 4 years. No problems, but since I am paranoid I keep a backup system handy and just pay the extra fee every month.

A friend of mine (someone I actually know in real life) had to file bankruptcy and PP seized about $50K on him, even though it had nothing to do with them. He has been fighting them in court for three years now. Still not over.

jecasc




msg:4200639
 9:36 pm on Sep 11, 2010 (gmt 0)

The amount of people using Paypal drastically increased for us in the last few years. We offer wire transfer, credit card payment, direct debit and cash on delivery and Paypal as payment options. For some reason Paypal payments have increased from about 5% to 30%. Actually myself I use Paypal to pay more often than I used to. The reason is I only need to remember my Paypal login information and do not need to have my credit card present or the TAN list for my bank account.

As to those horror stories you hear about Paypal - I find them a little confusing. You hear people telling their account was frozen for no reason and they wrote emails that were not answered and could not get someone on the phone. I don't know what to say about this. If there is a problem with my Paypal account I press the speed-dial button for Paypal on my telephone and 20 seconds later I am talkin to the customer support.

I only lost access to my account once when I was stupid enough to log in from China while on busines trip there. The account was locked because of the chinese IP but I could still receive payments, so my customers didn't notice. The issue was resolved however when I returned, with the help of the customer support.

Accepting credit card payments with Paypal of course means there is the risk of chargebacks - like there is with any other provider. I guess part of the negative reputation Paypal has received in the last years is due to the fact that with Paypal anybody - every private individual or amateur seller can receive payments. And those people then are very very surprised to learn that such a thing as a chargeback exists and a payment can be reversed although they already shipped the goods to Lagos. (Despite the fact they probably issued chargebacks themselves in the past because "they did not like the goods".)

trinorthlighting




msg:4200888
 9:15 pm on Sep 12, 2010 (gmt 0)

Reasoning was a fraudulent charge and they needed time to investigate if there were other fraudulent charges. They wanted to keep our account locked down for that reason only. We offered to work through it with them, but their customer service was non existant.

trinorthlighting




msg:4200889
 9:19 pm on Sep 12, 2010 (gmt 0)

Btw.. This happened in 2004 and their customer service might have improved. I would never use them again after such lousy service. My merchant accounts are great, I have an assigned person and they do provide great service.

jecasc




msg:4200895
 9:47 pm on Sep 12, 2010 (gmt 0)

Reasoning was a fraudulent charge and they needed time to investigate if there were other fraudulent charges. They wanted to keep our account locked down for that reason only.Btw.. This happened in 2004

We use Paypal since 2005. Sometimes single payments may be frozen for investigation for a short time - happens about 1 in 2000 payments - but never the whole account. So maybe they have changed their policy. However I prefer they withold a supicous payment for two or three weeks to other merchant account providers where you can only withdraw your whole funds with a four to six weeks delay. With Paypal I can withdraw all the money every day and two days later its on my real bank account. There may although be some differences in the policy between Europe and the US, because here in Europe they are registered as a normal bank and subject to European banking regulations.

dpd1




msg:4200927
 10:58 pm on Sep 12, 2010 (gmt 0)

No, that's basically the way it is here too... Withdraw everything if you want, then in your account a couple days later.

I don't know, I guess maybe I made it through their bad period unscathed. The couple problems I had were sort of annoying, but I was able to call them and stuff, whenever I wanted. I think maybe they've improved since then.

As I've said... They're not perfect, but honestly... I don't think we could do all the int. sales we do without them. It makes it extremely easy.

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