A question I get asked all the time is "should I accept PayPal payments?" most of the time the reason for the question is something like "I've heard bad things about it". I'll admit I've heard some bad things about PayPal too, but I've also seen our customers process over a hundred thousand pounds worth of sales through it, and so far not had seen any problems first hand.
PayPal is a service which allows businesses and individuals to collect money for products and services.
Like every third party service you may use to conduct your online business you need to read the terms and conditions and weigh up the pros and cons to ensure it suits your business, for example, if your average transaction value is £1000 you shouldn't choose a payment processor who only offers you protection for transactions under £500, similarly if your average transaction value is £10 you shouldn't choose a payment processor who charges a flat rate of £5 per transaction with no monthly fee
Here is a few of the general pro's and con's of using PayPal.
Why Should I Accept PayPal
No Sales, No Costs
Sometimes problems occur when starting up your business and you may not be quite ready to sell as soon as you planned, this may be problems in documentation, manufacturing, supply or a whole host of other reasons, even when everything does go to plan it could take a little while before sales really get going.
When using PayPal there's no startup costs and for most account types no monthly fee, this means if you don't make any sales you won't have to pay any fees.
Instant Set Up
A PayPal account is quick to set up, in fact the longest part of the process is the time it takes to read the terms and conditions. It's also a quick payment method to integrate into a website, and offers many levels of integration from a simple buy now button to more complex shopping cart systems.
No Unknown Variables
Often when applying for a merchant account from your bank you have to negotiate your fees based on projected turnover, which is great if you've been selling online for a while and have enough turnover to get a good rate, but if you don't hit your projected turnover you risk being hit by a higher percentage rate. With PayPal you know exactly where you stand, PayPal fees work on a simple scale, the more you sell in a month, the less you pay in fees.
Instant Access To Funds
If you start fresh with a merchant account from a bank they will probably put your money on hold for 30-60 days to ensure you have funds available in-case of charge backs, this can cause severe cash-flow problems for small businesses.
With the PayPal Access Card, you can have instant access to your PayPal funds, and while the fees for taking money out of a cash machine, the access card, which is simply a prepaid Mastercard can be used to pay for stock and other essential business costs seconds after your customer has paid.
"PayPal Money Isn't Real Money"
PayPal being outside of people's standard bank account is often considered as bonus money not earmarked for anything such as bills, and with a price to withdraw small amounts to a bank account people often look online for things to buy rather than transfer money into their bank.
What's more, PayPal make it very easy for individuals to receive money from others and it's not just people who sell unwanted goods on eBay who are receiving PayPal payments. Mobile PayPal apps are making it much more common for friends to give each other money via PayPal, splitting meal bills, birthday presents and even trading PayPal cash for real cash with a friend on a night out because the cash machine is broken all add up to people having healthy a PayPal balance waiting to be spent.
People Feel Safe Using PayPal
Some people like to pay via PayPal, it's a method which requires no real trust in the seller, as PayPal offers buyer protection, customers also know the process to pay with PayPal and are aware that a seller will never see their card details.
Reasons Not to Use PayPal
People don't like PayPal
For one reason or another some people will not use PayPal, this could be because they have had a bad experience in the past or may just be because they have heard bad stories. Offering no alternative to PayPal will fail to convert these customers.
Solution : Offer an alternative alongside PayPal
"I Don't Have A PayPal Account"
Not many people are aware that buyers can make purchases through PayPal using a debit or credit card without a PayPal account and PayPal doesn't make the option very obvious during the payment process either. Unfortunately it's tough to educate these users, so offering only PayPal could fail to convert people who don't want to have a PayPal account.
Solution : Give clear instructions or offer an alternative alongside PayPal
Your Product Doesn't Qualify for Seller Protection
You must check your products and processes qualify for seller protection, for example if you sell digital goods you will not qualify, or if you use a shipping service with no online tracking, which includes in-house shipping solutions.
Not qualifying for seller protection is not always a reason not to use PayPal but you you must decide if you can take the risk of charge backs, often these are the same risks you take when accepting other payment methods, for example accepting credit cards but not requiring 3D secure authentication for every purchase.
You Might Get a Better Deal Elsewhere
There are many payment processors and many different fee structures, if your transactions are high value you may be able to find a processor who charges a small one off fee per transaction which will be much better than one which charges a percentage, if your transaction value is low a percentage may be better than a fixed fee.
PayPal May Not Match Your Brand
In some cases PayPal may not fit in with your product image, for example; if you have a particularly high class or exclusive product.
PayPal May Put Holds On Your Funds
Much in the way a bank may impose a long clearing period, in some rare cases PayPal has been known to put a hold on an account when they feel it necessary to review, PayPal are also not the quickest to complete reviews. From research this seems to be more prominent with businesses who collect money for things other than the sale of goods (donations etc.).
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