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And for that privelege you've got to pay big bucks in monthly account fees, pass the 'merchant application' process and pay a percent on top of all your transac

by brc 16y ago

And for that privelege you've got to pay big bucks in monthly account fees, pass the 'merchant application' process and pay a percent on top of all your transactions. You'll also have to setup a credit card processing system and secure all those credit card details you've been collecting on your site. Good luck with getting an online-only merchant account as a new company with no trading history, because it's not going to happen. With PayPal you can be operating in an hour. They're also cheaper than all banks, unless you have some serious transaction volume. You can hook it into a simple website and start processing payments without even a https cert. Of course, any serious site will want their own merchant account, credit card processing and the rest. But before you get to that point PayPal is a very handy shortcut that has enabled millions of small sites and sellers. When PayPal starts charging and acting like a bank, then you can compare the service levels. I personally think, that for the transaction scale and amount of fraud they have to deal with, PayPal does a relatively good job. They aren't saints, but for the vast majority, PayPal transactions work as designed. In other words : you get what you pay for.

netcan 16y ago
I agree, but I think you exagerate. Banks are often harder to work with. But, since they are the alternative (actually businesses often have both) most businesses I know deal with, it's worth comparing them. It's not that hard to get an account, especially if you already exist as a customer, even a private one. The costs tend to even out over a certain volume but again, they aren't that high. I'm not sure how easy it would be if you weren't a company, didn't have an address and weren't a customer. In Australia the most common setup is site + payment gateway (bank or 3rd party) + merchant account. If you are using some existing ecommerce software (hosted, bought or OS) it usually integrates pretty easily with large payment gateways. It all costs about 2-$400 per year plus processing fees, not much different to in store CC processing. I think it ends up at parity with paypal at around 50-$150k depending of total transaction volume (depending on transaction sizes), so you are right that it doesn't scale to micro business levels very easily. But banks, difficult and bureaucratic as they are do compete for business clients and they do it mostly on the back of customer service. With paypal you don't get what you pay for. If you transact $7.22 per year you get the same service as $722k.
- brc 16y ago
  >With paypal you don't get what you pay for. If you transact $7.22 per year you get the same service as $722k. That's a good point actually. Maybe the anti-PayPal meme might die a little if you could actually get preferred service (and not frozen accounts) if you have a history of processing payments over a certain level. They already know who that is because they give you better pricing for volume.
  - netcan 16y ago
    One meme is businesses launching on paypal, transacting a lot on week 1 and getting frozen for being a suspicious newcomer - also variations on that. For many types of business (eg retail), that's a cash flow showstopper. Banks' solution to this sort of thing is low tech. Have a local banker talk to you, maybe pay a visit.

by brc 16y ago

netcan 16y ago

I agree, but I think you exagerate. Banks are often harder to work with. But, since they are the alternative (actually businesses often have both) most businesses I know deal with, it's worth comparing them. It's not that hard to get an account, especially if you already exist as a customer, even a private one. The costs tend to even out over a certain volume but again, they aren't that high. I'm not sure how easy it would be if you weren't a company, didn't have an address and weren't a customer. In Australia the most common setup is site + payment gateway (bank or 3rd party) + merchant account. If you are using some existing ecommerce software (hosted, bought or OS) it usually integrates pretty easily with large payment gateways. It all costs about 2-$400 per year plus processing fees, not much different to in store CC processing. I think it ends up at parity with paypal at around 50-$150k depending of total transaction volume (depending on transaction sizes), so you are right that it doesn't scale to micro business levels very easily. But banks, difficult and bureaucratic as they are do compete for business clients and they do it mostly on the back of customer service. With paypal you don't get what you pay for. If you transact $7.22 per year you get the same service as $722k.

brc 16y ago
>With paypal you don't get what you pay for. If you transact $7.22 per year you get the same service as $722k. That's a good point actually. Maybe the anti-PayPal meme might die a little if you could actually get preferred service (and not frozen accounts) if you have a history of processing payments over a certain level. They already know who that is because they give you better pricing for volume.
- netcan 16y ago
  One meme is businesses launching on paypal, transacting a lot on week 1 and getting frozen for being a suspicious newcomer - also variations on that. For many types of business (eg retail), that's a cash flow showstopper. Banks' solution to this sort of thing is low tech. Have a local banker talk to you, maybe pay a visit.