Many small businesses and entrepreneurs want to take credit cards online, but are put off by the time and capital investment required by a Merchant account, a gateway processor, secure server space, and a security certificate…all tools you need to succeed with e-commerce.
For many of these people I suggest “dipping their toe in the e-commerce ocean” by starting with PayPal. However, there are both good and bad aspects to this popular online payment system.
The Good
It's damn easy to get started with PayPal. If you have a bank account you can set up your business account at PayPal in a matter of minutes. You can quickly generate buttons that allow your visitors to “buy now” or “add to cart.”
You don't need a Merchant Account. You don't need a gateway processor. You don't need secure server space. You don't need a security certificate. PayPal handles all of these issues for you.
You don't have any start up fees. You don't have any monthly fees. How does PayPal make any money you ask? They take 2.9% (less in some cases) of each sale plus $0.30 per transaction. That's not much more than your bank is taking now, plus you have no monthly fees.
But don't your customers have to be PayPal members to pay? Not any more. When PayPal first started visitors needed to become members, but PayPal now allows anyone with a Visa, Mastercard, Amex or Discover card to pay through their system without becoming a member.
PayPal is probably the simplest way to get going with e-commerce on your website.
The Bad
PayPal is cheesy. OK, that's just an opinion, but it's an opinion held by many people. I could give you statistics, but I'd just be making them up. The bottom line is that I talk about e-commerce to a lot of people because of my job and several have shied away from PayPal because they believe it will give their site an air of amateurism.
PayPal's shopping cart solution is a joke. Why PayPal doesn't improve their shopping cart experience is beyond me, but if you need a shopping cart I'd recommend looking elsewhere. By shopping cart I'm talking about the ability for site visitors to drop something into their cart and keep shopping before making a purchase. The PayPal shopping cart opens a new window and hides your site; not exactly the seamless experience you're going for. PayPal works best for “Buy Now” opportunities.
The Ugly
Working with PayPal isn't like working with your credit card company; you don't have the same rights or protections. PayPal may decide that you have a fraudulent account or payment and suspend your account without warning, in effect shutting down your online store until they decide to reopen it. Although these instances are statistically rare, you should be aware of them.
If you like reading horror stories, PayPalSucks.com is a place to start.
In Conclusion
So, if two of the categories above are “The Bad” and “The Ugly,” why do I still recommend PayPal to site owners? Because for many people the flexibility and simplicity PayPal offers is too good not to consider. Although it may not be right for everyone, it's an inexpensive, effective tool for many.
Although some people have had terrible experiences with PayPal, that's going to happen with any big company, whether you're Verizon, Time Warner, or Disney.
If you have some questions on e-commerce, please let us know.
–Rich Brooks
President, flyte new media
FAQs
Despite the benefits, businesses should be aware of PayPal transaction fees, account freezes, lack of customization options, high currency conversion fees, and the possibility of chargebacks.
What are the strategic issues with PayPal? ›
At the core of PayPal's problems lies a fundamental flaw: the company positions itself as a modern banking alternative without offering the perks of a traditional bank account. Unlike regulated banks, PayPal lacks robust fraud protection measures, FDIC insurance, and interest on account balances.
What is better than PayPal? ›
Popular alternatives to PayPal include Venmo, Apple Pay, Stripe, and Skrill.
What are the fees to cash out on PayPal? ›
Instant bank account transfer: 1.50% of the amount, subject to minimum and maximum fees and a withdrawal limit of $25,000.00 per transaction. The minimum fee for an instant bank account transfer is $0.25, and the maximum fee is $15.00.
Does PayPal refund money if scammed? ›
You have 180 days from the payment date to open a dispute. In a dispute, you can message the seller through PayPal to try to resolve any issues. If you cannot resolve the dispute, you have 20 days to escalate the dispute to a claim. In a claim, we investigate the case and decide the outcome.
Can someone access your bank account through PayPal? ›
We keep all your information secure. For example, when you use PayPal to send a payment, the recipient doesn't receive sensitive financial details like your credit card or bank account number.
What is the weakness of PayPal? ›
Weaknesses. Intense Competition: The payments industry is highly competitive and dynamic, with constant innovation and shifting consumer preferences. PayPal faces competition from traditional financial institutions, emerging fintech startups, and technology giants expanding into payments.
Has anyone had problems with PayPal? ›
Over the past 24 hours I have been through an absolute nightmare with PayPal, and it appears that I was targeted by a scammer who was working inside PayPal itself. A few days ago, I received the letter with my new PayPal debit card in it, because my old one was abut to expire.
What is high risk for PayPal? ›
Don't sell items listed as prohibited in PayPal's Acceptable Use Policy, such as drugs, illegal items, firearms, or obscene materials. In addition, PayPal requires pre-approval to accept payment for high-risk transactions such as tickets, non-profit donations, and high-value items like jewels.
What is safer, Venmo or PayPal? ›
Venmo: Safety and Security. Both PayPal and Venmo offer standard security features to keep your information safe. The services protect each transaction with encryption, two-factor authentication (2FA) of your account and a customer support team to assist you in the event of a problem.
How much is the PayPal fee for $100? For the most common PayPal fee of 3.49% + $0.49, the fee for a $100 transaction will be $3.98, making the total money received after fees $96.02. Example 1: You send an invoice to a client for $500 to be paid via PayPal Checkout or Guest Checkout.
Does PayPal charge a monthly fee? ›
With PayPal there are no monthly fees or set-up costs. You pay only when you complete a sale and can apply for discounted rates based on your sales volume.
Does PayPal charge a fee? ›
It's free to use PayPal to donate or to pay for a purchase or any other type of commercial transaction unless it involves a currency conversion.
Is it safer to pay with PayPal or credit card? ›
If you're still wondering whether PayPal is safer than a credit card, you should know that both payment methods come with similar security protections and features, though PayPal may have the slight edge with its built-in purchase protections (which may not be available on specific credit cards).
Can you trust PayPal with your money? ›
Security you can rely on. Whether you use PayPal to buy or sell, we help keep you and your payments safe. With data encryption, real-time transaction monitoring and buyer and seller protection policies, PayPal's a safe way to pay and get paid.
