Views on PayPal Payments Pro & Reserves

[originaltrading]

I'm launching a new website and had planned to use PayPal, Google Checkout and process Credit/Debit Cards using someone like Sagepay.

I looked into this - and realised some of the hoops I needed to jump through to get a merchant account as well as sagepay..

.. and so was interested in the PayPal Payments Pro proposition which seems to offer the equivalent.

I've been approved for the service within 24 hours BUT they have a requirement to apply a 20% reserve for 90 days to cover chargebacks and fraud.

I hadn't anticipated this reserve and this would be a major issue for my cashflow !

PayPal say they will review this - but there's no guarantee on when or how much. I'm concerned about starting on something that may be an issue forever. I know there are strong views on the forum about PayPal freezing accounts too.

I wondered what views there were on this and if I'd see a different approach from Sagepay and others ?

I'm a startup ltd company selling home & garden products online.

[NetConneXions]

I would plum for sage pay, your transaction rates will be lower than with paypal web payments pro. I dont think sage pay hold back a reserve, if they do ive never encountered it myself or one of our customers. Most banks will happily give you an internet merchant number and its just a quick form to fill in and wait a couple of weeks.

[Coppock]

I'd avoid paypal at any cost. They are known to freeze accounts for upto 6 months without providing justification.

I was going to go with SagePay myself, but decided to go with RBS worldpay and Streamline for the merchant account. That way we can still take payments from customers paypal accounts but they go direct into our bank so we can stay clear of them.

Although the initial set up was quite costly, the reduction in transaction fees is worth it, plus I personally think it looks more professional to use a large gateway.

Good luck!

[ooh]

I'd avoid paypal at any cost. They are known to freeze accounts for upto 6 months without providing justification.

What about setting up a new account just for the purpose of connecting to PayPal? And regularly moving money out of your account attached to PayPal? That way if PP freeze your account they won't be able to freeze your main account. Just a thought.

Although the initial set up was quite costly ...

What kind of initial set up cost was that roughly?

Thanks.

[NetConneXions]

I was going to go with SagePay myself, but decided to go with RBS worldpay and Streamline for the merchant account. That way we can still take payments from customers paypal accounts but they go direct into our bank so we can stay clear of them.

You can do that with sagepay too :)

[PayPoint net]

Hi there -

I would recommend that you shop around for internet merchant account providers.

To give you an idea, a typical rate for rolling reserves at the moment for complete start-ups with absolutely no trading history and no bad credit is between 5%-10% for 6 months depending on how risky your business is; of course, the terms are much more favourable if you have good trading history and a straightforward business model, and terms can always be reviewed after 6 months.



Most payment gateway providers are integrated with Paypal too, so you can continue to offer it as a payment method.



Hope that helps :)

Rochelle

[Coppock]

You can do that with sagepay too :)

Yea, I signed up for sagepay initially, but ended up with worldpay (long story)

The set up cost for me was £400+VAT for streamline and worldpay, but we did add on recurring charges and telephone payments (£100 each)

Jen

[Jonpolygon]

I can say from experience that PayPal payments pro can get messy. It is strange that you have been hit with such a high reserve so early in the game. This could be that they see your business as being very high risk for fraudulent payments.

For our service we used PayPal payments pro and encountered a few issues. We had a few fraudulent transactions and PayPal decided to hit us with a reserve, although much lower than yours at 5%.

Thankfully PayPal have teamed up with Cardinal Commerce here in the UK, this adds on additional security in the form of Verified by Visa and MasterCard secure services. These services take away the chargeback liability on certain payments, however this is not fully integrated into PayPal. For example, a card holder may issue a chargeback, this is then flagged in PayPal in the usual way, then you have to go to additional effort by telling PayPal the unique payment identifiers etc, play the waiting game and hope that the payment is not reversed.

This service comes at no additional cost, you may want to talk to PayPal regarding this and see if they can remove the reserve in favor of a trial period using that service. If chargebacks do occur during the trial period it is likely they will sting you with a reserve again.

One other thing is that we did have some trouble with customers trying to pay with a card that has previously been subject to a chargeback. PayPal seem to simply decline these cards with a bogus return error that advises to use an alternate card.

Sage Pay is an excellent solution and worth investigating, I know a lot more business are adopting this. One thing to note, I have attempted to make a purchase on one particular site through sage pay, they declined my Visa but accepted my MasterCard, I am not entirely sure why, the error simply kept telling me my visa card number was wrong even though checked 5 or 6 times. This is worth looking into as you do not wish to alienate some of your payers.

I have also looked into PayPoint services, again these look great and the 5% - 10% that Rochelle stated seems a lot more attractive than your 20%, especially if you are concerned about cashflow.

It would be great if more payment providers offered incentives for running certain fraud checks, for example removing the reserve, but I do understand why this is put in place. Its better to know up front what the reserve may be rather than to find out later on and get hit with it and only have the one solution setup for payments, so certainly I would recommend investigating your options at this stage.

[thecyclingartist]

I use Paypal (via a private web page so you won't see it on my website) and am happy with it. But their new system of reserves is brutal for new members! Fortunately I've been such a longtime PP member with positive feedback that the reserve system isn't applying to me. Also be aware that they will 'review' your account, usually after 6 months, once you hit a certain amount in transactions. This is part of the European money laundering regulations. This is completely above board, but they'll ask you to confirm some information again, and possibly have to fax identification.

If you expect regular payments every month then it's worth looking into deals for internet payment/merchant accounts, as Rochelle said. The main advantage of Paypal is the lack of monthly/annual fee and that suits businesses with fewer transaction numbers (rather than values).

That is why it works for me - I need to take credit cards for large value purchases but don't necessarily have them every month. (sales through agents and direct sales with cheques are still the majority of my turnover) So for me the higher transaction % still works out better than a monthly fee with a merchant account.

Tina.

[disk]

Web hosting is very difficult details of the negative porous.

[Christiane]

If you search the forum, you will see that a lot of us are members of the FSB. If you quote your FSB number to Streamline, the fees are levied. They are part of RBS too. I use my Streamline merchant account with Sagepay.

Sagepay also offers to open a merchant account for new businesses but they make it too complicated (they want a business plan, etc).

I recently open another merchant account with Streamline for a new business I set up and I did it over the phone in 15 minutes.