I like this sort of advertisement. It's just a useful thing that people using PayPal will discover at some point and start playing around with. Naturally, they'll realize that they should get themselves a merchant account and... hey whaddayaknow, that link up at the top takes me to a place where I can get one.
I think the earliest and most successful implementation of this idea was that "What's your political affiliation" test from the 90's that framed all the questions so that you'd end up discovering that you were a Libertarian. Who knew? Better follow this link that tells me who I should be voting for...
Exactly, I love this type of advertising. It's useful, pretty, non-intrusive and works well. It's the same way Mint advertises by having large infographics. They're pretty to look at and advertise Mint at the same time.
1) You will need to be PCI compliant (cost 2k +)
2) You will may need to spend 30 days going through due diligence
3) You may be considered high risk and have to pay much more
4) You may have a high rolling reserve (up to 10% for 6 months).
5) You will need to redesign according the merchants API, while paypal is pretty much 1,2,3.
6) You will probably be not taken on if you have no previous history...
Yah, getting a merchant account is a pain in the butt, but I think you are overstating it a little. The jury is out on whether merchant accounts or paypal have more onerous reserves.
There is a wide ecosystem of payment processors that like to sign up startup ecommerce businesses. Note, your local bank isn't included in that group, they probably won't want you as a customer.
If you use tokenization or recurring transactions and don't store the card data on your local server (same situation as paypal, btw) PCI requirements are very minimal and won't cost you anywhere near $2k.
Note: I am one of the people who have moved away from Paypal, I have become PCI compliant (which I did myself for 250 euros) but this I think would really cost 2k plus for any company. It took me a week to navigate. I ended up setting up a simple solution for others to help them efficiently with this http://www.pcicompliancesaq.com
However, the whole process was tedious, I went all the way through due diligence which took about 4 weeks with one merchant who then wanted a 5.25% rate plus about 500 month in fees.
I finally found a sensible merchant who offered me 3.5% and sensible rates, who I am extremely pleased with, their support is great and now I'm through the other side I am very pleased I have.
The payment gateway is much quicker and smother than sending clients to Paypal and then having them be returned to my site (which in a small % fails because clients interrupt the process needing me to manually configure).
But all in all it's easier to start your company with Paypal then move to a merchant account later when you have some trading history and the time and resources to invest.
But don't be under the impression that you will get going as simple as you did with Paypal.
This is misleading. The 1.9% interchange fee is going the MINIMUM of many many different interchange fees especially Amex's and the vast number of 'rewards' cards. For online 'e-retail', expect at least 2.5% as well as many new and exciting monthly fees that have been recently added by visa/mc and your processor.
Going with a merchant account probably wont save you money, but it does increase your purchase rate since many people may not have a paypal account and don't want to deal with getting one.
Actually its not misleading. That 1.9% interchange fee is a blended average of the interchange fees that an online business is likely to encounter, including debit (which is less than 1.9%), standard credit (less than 1.9%) and rewards (more than 1.9%) and business (more than 1.9%). Its a reliable estimate based on a huge database of transaction history. In the "More info" we give you the ability to modify the assumptions and see the result.
Amex is a non-issue since it costs online businesses the same 3.5% whether you use paypal or not (note - this is new as of next week, previously Paypal always gave you the ordinary 2.2% rate for Amex and lost money doing it).
Paypal is a very competitively priced product, for a lot of transaction profiles it is cheaper than a traditional merchant account + gateway.
If you get a shitty deal on your merchant account then Paypal will always be cheaper.
How would a online merchant get PIN debit rates? I mean this in a very practical manner: I have never seen a merchant with any way to use a card as Debit - only as a credit card.
Going with a merchant account probably wont save you money, but it does increase your purchase rate since many people may not have a paypal account and don't want to deal with getting one.
Actually you don't need a PayPal account to buy via PayPal -- you can use a credit card. However, this message does not always get through to the customer, and PayPal can be picky about some cards (or vice-versa).
Its been a while, but I recall that you -do- need to make an account - it gets created when you make your first purchase. But having to send people off to another site (where they get to reenter all their address info -again-) is a PITA and is not as 'professional'. Its getting more common... but if you made it through the hassle of getting a merchant account there is a bit of respectability there.
Also, we have encountered institutions (schools and businesses mostly) where there is strict policy that they may not use paypal.
There's an interesting edge condition i ean into during user testing. If you created a paypal account in the past, associated your credit card with it and then forgot how to access it - you cannot pay with your credit card. Paypal forces you to login with your old account. This along with paypal strongly encouraging people to create an account no doubt contributes to the "paypal requires an account" confusion.
If you use paypal as your payment processor, your customers don't need a paypal account. They can pay directly with credit card without signing up for Paypal.
I don't think anyone using Paypal thinks it's a cheaper solution, but it's probably the easiest and quickest integration solution.
> Going with a merchant account probably wont save you money, but it does increase your purchase rate since many people may not have a paypal account and don't want to deal with getting one.
You don't need a PayPal account to pay with PayPal.
With PayPal PayFlow Pro you can set up PayPal so that the customer never even sees a PayPal logo. They just go through the payment process as if you had a regular merchant set-up.
... Except you do need to have a regular merchant set up. PayFlow is just a gateway like any other (Authorize.net, Braintree, etc).
One difference is that they now require you to accept PayPal to get the lowest rates. One of my clients is going through that now, if it's not up by the end of July their rates go up.
When I did some website commerce programming a while back, the merchant account we had came with a monthly fee that for many just-starting situations would be a sizable fraction of the total fees ($70/mo or so). Perhaps this has changed, but it isn't accounted in the app.
I was struck by how close the levels were until revenue gets quite high. The convenience of Paypal probably wins in most cases until the mid-to-upper six figures.
The average monthly fee (including gateway) on the transfs marketplace is $16 / month, which is included in the calculation (try putting the volume slider to $0). Likewise, Paypal Pro (which you need if you want to accept payment without sending the user off-site) has a $30 / month fixed fee.
Of course there are certainly crooked merchant account providers that will hose you with bigger monthly fees, so it pays to be careful. The last thing a startup needs is extra fees.
This changes the equation at the low end ($1 and $2 transaction sizes) and makes PayPal come up extremely favorably when compared to the merchant account.
I understand the point of this site is actively encourage people to switch away from PayPal, but in the interest of fairness, it would be nice if the author factored in the micropayment rate when you move the slider to $1.
Yeah, but the premise is that people start off with Paypal when they have low volume and this calculator helps them figure out when they should be starting to look at "real" merchant accounts. I'm pretty sure the number of people who willingly go from merchant account -> Paypal is close to zero.
In PayPal's court, they don't have a merchant reserve - typically your merchant account will require 5 - 10% of your monthly processing to be held for up to 6 months after your last transaction is processed.
On the other end of things most Merchant accounts offer substantially better chargeback resolution, customer service, and flexibility.
So pretty much: if you make >= $1,000 from a site you should use a merchant account (if the amount is really close to $1,000, you may want to use Paypal if the transaction amount is above $10) otherwise you are better off with Paypal Standard.
Can't resist... FaceCash (http://www.facecash.com) is cheaper than both options at 1.5% flat, though we haven't launched an internet payment solution yet.
If you're going to make a mini-app and don't want to support certain values just don't make them possible rather than have buggy/wrong behavior.
If at least both refused to update it would be a little better than now where one of the prices can update with the other staying the same and thereby throwing the comparison completely out of whack.
So this is essentially somebody whom I never heard about charging the same price (ie 478 vs 500) that PayPal does? Why am I supposed to chose them now?
I like this sort of advertisement. It's just a useful thing that people using PayPal will discover at some point and start playing around with. Naturally, they'll realize that they should get themselves a merchant account and... hey whaddayaknow, that link up at the top takes me to a place where I can get one.
I think the earliest and most successful implementation of this idea was that "What's your political affiliation" test from the 90's that framed all the questions so that you'd end up discovering that you were a Libertarian. Who knew? Better follow this link that tells me who I should be voting for...