The Pros and Cons of Using PayPal as Your Primary Payment Processor
It's Not All Plain Sailing, With EBay's Payment Platform.
Paul Smithson - 29th January 2009
PayPal is without doubt the most widely-known and widely-used payment processor for Internet
marketing. They offer a wide range of benefits, which makes them a very popular choice, but there are a few
drawbacks to using PayPal, too.
As payment systems go PayPal is pretty easy to set up compared to standard merchant
accounts. This is one of the major reasons why so many people choose to use them. They don’t require
you to fill out and sign a ton of paperwork, they don’t do a credit check, and the money you earn can be instantly
available for withdrawal at an ATM if you have their debit card.
With standard merchant accounts, you often have to fill out and fax, or mail in, mountains of
paperwork, submit to a credit check, and wait several days, or weeks to be paid. Merchant accounts can also
hold back a percentage of your money for several months. PayPal doesn’t do this.
Another benefit to PayPal is the fact that their fees are generally cheaper than many other
alternatives. PayPal currently charges 1.9% to 2.9% plus $0.30 per transaction. Some merchant accounts
charge as high as 10% or even 15%!
PayPal is also much easier to work with than many of their alternatives. They have a
built-in recurring billing system, although you’ll need some sort of software to handle automatic cancellations
through their IPN if you don’t want to deal with that yourself. They also make it very easy to set up payment
buttons through their system. This can be quite complex and confusing with many payment
However, it’s not all one sided. There are some downsides to PayPal
One of the biggest drawbacks is the fact that they have a long list of rules you have to comply
with. If you intend to have a multi-tiered payment structure for an affiliate program, or if you want to sell
anything that has anything to do with MLM, you’ll have to look elsewhere.
And there are plenty of other rules you’ll have to comply with and failure to comply with these
rules can result in your account being locked, and your money being held for as long as six months during the
Other payment processors can be more lenient - especially if you have your own merchant
account. Most conventional merchant accounts don’t really care what you sell, within reason, as long as it
isn’t illegal and your chargebacks stay within normal parameters.
Another big drawback to accepting PayPal is that if you’re selling physical goods, you’ll be
bound by the buyer protection policy. If a buyer complains they haven’t received an item, you’ll have to
provide proof of delivery to PayPal. This makes shipping a bit more complex, because you have to make sure to ship
via a method that gives you verifiable confirmation of delivery, in case the buyer decides to file a complaint with
PayPal is also known to lock accounts temporarily for various reasons. This could be as simple
as a large increase in the amount of money you are putting through their system. If your account does get
locked, you may have to jump through hoops faxing in documents and waiting for several days for their investigation
to be complete. All this time, you can’t use the money that’s in your account.
One final downside of PayPal, which is unfortunately, typical of many newly successful
companies, is that they can be a little difficult to contact in the event of an emergency. Even if you do get to
speak to somebody they won’t always have the authority to do what is necessary to solve the crisis, and so you can
end up going ‘round the houses’ to solve what in reality could be a relatively simple and straight forward
Despite the negatives, PayPal offers a huge amount of positives and taking both into account it
would be safe to say that in most cases the positives far outweigh the negatives. So, don’t rule PayPal out when it
comes to providing a payment system on your site. It can be an excellent alternative to a conventional merchant
account and is usually far easier and quicker and easier to set up.
About Paul Smithson - Paul Smithson is the founder of Intellimon and the
driving force behind the best-selling XSitePro web site development tool. Since graduating in Business Strategy and
Direct Marketing from two of Europe’s leading business schools, Paul has set up five multi-million dollar
companies, one of which is now owned by the BBC. His areas of expertise include business strategy, e-commerce,
on-line and off-line marketing, software development, and maximizing the potential of on-line
For more information about this, and many other Internet Marketing-related topics,
visit Paul Smithson's site, www.xsitepro.com.
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