Paypal is the giant for online transactions. Everyone that has an ebay account know what Paypal is: the safer easier way to pay online. While a host of competition has emerged, no one has near the presence or market share as Paypal. So since they are the leader, it’s a safe bet to use them for ecommerce purposes. Right? Wrong! While that seems logical, it’s not the best idea. While Paypal is easy to set up and start accepting payments, there are many business practices that make them less than ideal as your online payment processor.
Do a search on Paypal. What comes up? I guarantee Paypal trouble sites like Paypal Sucks or Paypal Warning is on the first page. Whole sites with horror stories. While it is worth noting that many of these sites link to alternative payment services and therefore have a mixed motive in ad revenue, there is reason for concern. Don’t believe me? Some well known industry leaders like Seth Godin have recently published problems with Paypal. So while some people are certainly using the complaints to cash in by sending people to competing services, many are truly abused customers.
You might have guessed (and correctly so) that I have had my share of problems with Paypal in the past (both as a buyer and seller) but I’m resisting the urge for this to be an axe grinding session. If you want to read some common problems and horror stories about locked accounts and frozen assets of honest paypal users, visit the sites above. I’m not going to dwell on those things but rather give you some real world guidelines for paypal. So let’s get to it:
1. If you’re on ebay it’s a necessary thing (evil) – Ebay users have grown accustomed to the ease of use in an integrated paypal auction. You will lose sales if you don’t accept paypal. Discourage it’s use, give reasons to pay through another service, check or money order, and read the terms of service to protect yourself as much as possible (there is no fool proof way). Realize that scammers have many options to rip you off using Paypal for a false sense of security. In the end you will have to take some percentage of payments via Paypal. That’s life, deal with it.
2. Offer Paypal in your ecommerce solution – Paypal has become a name that people look for and there are users that only want Paypal. It will help you convert some sales. Again, provide reasons not to use Paypal but there will be users that use it exclusively.
3. Don’t let funds build up in Paypal – Paypal is not a bank. They don’t follow the rules of a bank and shouldn’t be treated as such. Think of it as the middle man for getting revenue from your site. You pay them a fee to make the payment transaction (and there fees are quite reasonable) but don’t be fooled into believing they are there to keep your money safe. They offer little to no real protection and funds need to be removed from your paypal account as soon as possible to an actual bank account.
4. Have a primary or at least backup payment processor – Sooner or later you will have a locked Paypal account. You will encounter a drawn out process that may or may not put your account in good standing. Have a backup plan, have a second payment processor ready. If Paypal pulls the plug on you, have a backup that let’s you pull the plug on them and keep accepting payments. Otherwise you’re entire site’s revenue is based on whether Paypal likes you or not.
Paypal can’t be ignored. It is a market leader and for many, a trusted name. Until Bidpay or Google checkout make up some ground, Paypal is a necessary evil. That doesn’t mean you should cast a trusting eye toward Paypal. Anticipate problems and have options.
Paypal is easy to set up on a website to take payments, that doesn’t make it the best solution. You’ll get out what you put in. Set up your ecommerce solution with a processor that falls under federal bank guidelines. Integrate with that and you have a federally protected transaction processor. There are rules they have to follow that protect you the seller. By all means don’t let the loyal Paypalers slip by. Use Paypal too for getting those sales too but limit its control on your online business.
There are few things as damaging to an Internet revenue stream than suddenly and unexpectedly finding that your successful business no longer takes online payments. Worse yet is that users continue to pay, expect their product or service, but you can’t access those funds. That’s the horror that faces the unprepared Paypal only ecommerce solution. Have a robust solution that is ready for the reality of losing a paypal account. Don’t put all your payment processing eggs in one basket that can be overturned at another company’s whim.