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Ecommerce Forum

PayPal, and related type 'banks in waiting'.

 2:32 pm on Aug 7, 2000 (gmt 0)

I've been looking for a low cost credit card solution. Going the route of my own merchant account will add between 4% and 10% of gross sales. The overhead to get setup is significant. From the large bank merchant account fees, cc fees (2%) to the validation time, it is an expensive prospect for a small business.

Enter PayPal and the others like Propay who do it straight away with no hassles for a mere 1.6% with no minimums.

The question is how professional do you think it is to use such services? Can a small ecom site get away with going this route? It sure is attractive from all accounts but appearances.



 3:35 pm on Aug 7, 2000 (gmt 0)

My gut tells me that customers won't go for it, on the whole.
Anything that looks at all non-standard tends to make some precentage skittish. And after all, eCommerce in general is still pretty unfamiliar territory for the majority. Add in one element that seems odd, and you've lost a percentage of sales.

Merchant account fees have caused more than one of our clients to restructure their pricing -- one of them hid the costs in S&H, and the rest upped their retail prices.

However, I do like the PayPal service -- I have friends in Fiji and Maylasia and it's been a godsend for us on a personal level.


 4:56 pm on Aug 7, 2000 (gmt 0)

I use ccnow and was using ccslide. A step just above the paypal stuff (in my opinion). Personally, I think if you conceal it well enough by using your own buy buttons, by the time they hit the processors screen more than 90% of customers are gonna go thru with the purchase regardless of whether they're put off by your choice in processors. I think by the time they get there, they've already invested too much time. I watch my logs really carefully for this and have yet to see someone reach the processor page and not complete the transaction. As for Paypal and Propay, I've looked into them and for me, they need to come up with better shipping charge arrangements. Thats a very big deal for me. When they come up with that, I may jump over to one of them.


 6:16 pm on Aug 7, 2000 (gmt 0)

The problem I have with CCNow, Cslide, and similar services are the imposing fees (9-14%). That is above the profit margin of most competitive net products.

Ez, ya I read that story. Since they merged with X.com, they have changed their policies completely. You do not have to become a paypal member anymore to pay with a credit card - thus, you get the same protections now as any other credit card purchase.

x.com's [paypal.x.com] buyer protection.


 6:31 pm on Aug 7, 2000 (gmt 0)

>Can a small ecom site get away with going this route?

I would say no. The smaller the site the more need there is to reassure the customer of the integrity of the transaction. To me this means partnering with one of the major providers and associating your brand name with theirs.

I have always been under the impression that setting up online CC transactions in the US was far easier than over here in the UK, wrong again?

>they need to come up with better shipping charge arrangements.

Been working with worldpay lately. We have our own shopping cart software which can be programmed with any options we like. The customers requirements are dropped into a dB before they jump to worldpay, we pass a unique transaction id and use this to tie up the order with the confirmation. Works very well.


 2:22 pm on Aug 9, 2000 (gmt 0)

It's not a hassle NFFC, it is the cost associated. A merchant account can cost anywhere from $500 to $5000 to setup to process cc's. Going the route of systems similar to ccnow will cost you 9%-25% of sales.

I'm working with a dozen sites that want to take online cc's and they are all in shock over the costs involved. Taking the cc's eats away their expected profit margin. You can get away with it on a big site, but a small site that is looking for $100-$500 added daily income, cc fees can be a stopper. That is why Propay or paypal at 1.6% is SO attractive.


 3:35 pm on Aug 9, 2000 (gmt 0)

The merchant account setup and processing fees have been a challenge for bricks and mortar businesses for years, and even worse for mail order.

About ten years ago a lot of smaller merchanmts began to drop American Express because their processing fees were significantly higher than Visa and MC. Net profit margins are often a lot thinner than people assume, and they can easily vanish by being nickel and dimed.

The slice that credit card fees take off the top is a reality of doing business, especially with the rise of the ATM card. Nevertheless, there are solutions that cost less and it pays to shop around a lot until you have a deal you can live with.

Many of our clients have had good results with one of the banks that are AuthorizeNet [authorizenet.com] members. That includes clients who have never had a merchant account before. AuthorizeNet member banks seem to understand
better than some others what ecommerce is all about -- wheras walking into your regular bank and talking about merchant accounts for an Internet business has often been a recipe for frustration.

I was operations manager for seven years in a company that ran a catalog -- and mail order presents risks for credit card companies that are similar to the risks in online transactions.

The credit card companies respond by cranking up their processing fees. They need to cover the inevitable rise in costs that will come from bad transaction and chargebacks. These will increase any time you don't have a physical card in hand for a swipe and sign. Our mail order cc rates were often as much as a whole point higher than the rates for our street stores.

I've always hoped that eCommerce would grow to the point where card swipes are standard equipment on a home PC. The added level security could allow fees to come down closer to the levels enjoyed by storefront merchants.


 8:49 pm on Aug 9, 2000 (gmt 0)

Amen Tedster. I agree Authorize.Net was very resonable in my mind. I think the person who invents the software to interface with the CC card swipe mcahine and the Gateway would be rich!!



 9:05 pm on Aug 9, 2000 (gmt 0)

Clickbank.net is pretty reasonable, too, and has a built-in mob of affiliates.



 9:15 pm on Aug 9, 2000 (gmt 0)

>A merchant account can cost anywhere from $500 to $5000

Wow! Taking worldpay as an example [in the UK]; Annual fee 125.00, 4.5% per transaction, no monthly fees and they accept almost anybody. The only bad news is that they pay 5 weeks in arrears.

The average costs involved in establishing offline cc transactions are approx.; 250 set-up, 18.00 per month [for the swiper] and 2.5% per transaction.

>a dozen sites that want to take online cc's

I'm not sure of the exact figures but for approx. 900 you can become an authorised reseller and receive 75.00 of the sign up fee and a percentage of each transaction [0.25% I think].


 9:23 pm on Aug 9, 2000 (gmt 0)

Oh yes, setting up a bank based commercial merchant account is expensive. All the liability rests with you. Going through a third party is a different deal. Mine wants $750+setup fees for one and that is not uncommon.


 1:12 pm on Aug 10, 2000 (gmt 0)

>>Oh yes, setting up a bank based commercial merchant account is expensive<<

Actually if you're stuck on getting a "true" cc processor the place to go is goemerchant.com.
I can say without a doubt you won't find any cheaper. No setup fees no leases, $49.95/month + $10/month gateway fee + 2.49% + 0.30/transaction...$15/month minimum in transaction fees. Comes out to $65/month (more if you have tons of sales,obviously).

I emailed them and talked to their sales reps and told them I was still shopping around. They basically challenged me to find a better deal. I thought I did a few times and then they pointed out to me the particular "catch" with the one I found. They agreed to beat whatever deal I found, and I couldn't. I still spend a couple hours a week looking and haven't found anything better on a true "merchant acct based" cc processor.

The 49.95 is for the full "internet store" including site hosting plan which isn't too great a plan. But they also offer the components piece-meal for less. If you're serious about going the full blown merchant acct setup, they're definitely worth a look. And, no, I am not affiliated with them in any way.

Edited by: scott

Edited by: scott


 5:13 pm on Aug 28, 2000 (gmt 0)

Well not the most timly post but whatever... ;-)

As for Paypal and Propay, I've looked into them and for me, they need to come up with better shipping charge arrangements. Thats a very big deal for me. When they come up with that, I may jump over to one of them.

Actually that can be done pretty easily. You set up a normal shopping cart script but instead of sending the information to cybercash etc.. You incorporate shopping cart info into your paypal URL.

something like this:

$user_email = "john@jrmstudios.com";
$item_name = "Order number 132453";
$order_id = "aqwe-23452";
$order_price = "300";
$shipping = "12.50";
$thank_you_url = "http://www.jrmstudios.com/thankyou.html";

echo "<a href=\"https://secure.paypal.x.com/xclick/business= $user_email&item_name=$item_name&item_number=order_id &amount=$order_price&shipping=$shipping&return= $thank_you_url $order_id\">Checkout</a>";

The customer will not have a full list of the stuff they purchased at checkout time, just an order# but It is a very good option for smaller shops IMHO. I'm going to give this a try in place of ccNow on a clients site.


 3:39 pm on Aug 29, 2000 (gmt 0)

Interesting. Thanks Hotrodder. (I added a few spaces to the url there so we don't have to scroll to the right)

The way you link into PayPal from your site needs a bit more improvement. I was considering using them for strictly services where shipping and other addons where not an issue.

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