PayPal vs Merchant Accounts

So you’ve finally decided to get your new business online… you have your website up, product ready, marketing tweaked, and now all you have to do is wait for the orders to roll in. But wait, you still need a way to process those online orders. For most people, the decision falls between using PayPal or using a traditional merchant account. For a business new to the web, PayPal has some attractive advantages.

The first advantage, and the biggest for most business owners, is cost. A merchant account can set you back anywhere from $99 to $600 just for the application, not to mention the monthly service fees charged by many. PayPal has no application fee, no set-up fee, and no monthly service fee, unless you decide to go with the Website Payments Pro account, which has a $30 monthly fee. The Pro account is a more sophisticated solution for businesses that need more customization in their payment process and requires a website developer for use. If you’re at the level to need that much customization, you can probably afford the monthly fee anyway. For the rest of us just getting started, a free account is practical and appealing. The only time you pay anything is when you make a sale and get paid yourself and PayPal’s transaction rates are just as competitive, if not better, than the majority of merchant accounts.

Another plus for PayPal against merchant accounts is the ease of set up and use. With PayPal you simply fill out the necessary information to easily add it to your site and you can be up and running in twenty minutes or less. No need for a programmer or website designer. Anyone that can follow simple directions can do it by themselves with no trouble. The process of getting a merchant account has an application process, you may need to speak to a representative, have a credit check run and then you have to integrate it all into your site. You may have to hire a web designer or programmer which means more money spent and more time before your first sale online. If you do want to look into merchant accounts, the myriad of choices is so huge it’s almost overwhelming; PayPal makes the decision easy in this regard.

Security is also handled by PayPal. PayPal is an external payment processor, meaning the customer briefly leaves your site to pay, you don’t have to handle any of the security or worry about any of the credit card charge-back fraud risks. PayPal also handles the verification and protection of your customers’ sensitive credit card information, leaving you free to focus on running your business. With a merchant account, you’ll be handling all this by yourself. Again, keep your web designer handy if you go that route.

Since your customer is going to be handing over their hard-earned money and sensitive data to purchase your product, there also lies the benefit of the PayPal name. PayPal is all over the web. It’s pervasiveness and ubiquitousness means that many of your online customers are probably already familiar with, and using it. These people know and trust PayPal and anyone who hasn’t already used it can quickly do a search to check its reputability online. When it comes down to it, they’ll be submitting their information to a site they may not know and most people will easily make the choice between PayPal or your site with a no-name merchant account processing application on it. PayPal can even be accessed and used from a mobile phone, meaning not only can you can process payments from the 500 million credit cards in use, but you gain access to most of the 5 billion mobile devices in use in the world.

There can also be an issue with international currency when it comes to merchant accounts.  While there are some merchant accounts that accept multiple currencies, a majority can have issues in the conversion process, charge fees for it, or not allow these currencies altogether. PayPal works with all major currencies, making your business a truly global one.

There are more advantages in using PayPal than there are drawbacks, but there is one that comes to the forefront of any conversation about online payment processing. That drawback is customization. PayPal is, again, an external payment processor, and so there won’t be a fancy page on your own site where a customer can enter their information.  Easily overlooked by most, some people absolutely must have their site be seamlessly integrated from day one. If that’s you, you will need to research the merchant account options.

A business owner new to the web has a lot of work ahead of them and a whole new world of opportunity to explore. To simplify things and get the sales flowing quickly, PayPal is affordable, easy to set up and use, highly secure, can take you global, and is trusted by millions already shopping on the web. You may actually want more bells and whistles as your business grows, but for most applications, and especially for a business that is new online, PayPal will be an ideal choice.