Why we're dumping PayPal

[sysops]

Background. We run a bunch of online shops. Two years ago we started accepting PayPal in addition to our main card payments (which are SagePay + merchant account). We thought it would be nice to offer an extra option for those who like to use PayPal, and that it would increase conversion rate.

Over the past 12 months, 12% of all of our turnover has been processed though PayPal, with the rest through our merchant account.

I've taken the decision to no longer offer PayPal as a payment option from the 5th Jan, for the following reasons:

1. Fees. Our average fee paid to PayPal over 12 months is 4.4%. This is ridiculously high compared to the sub 2% we pay for our CC processing (and that's SagePay + merchant account fees combined).

2. Chargebacks. It seems that a lot of PayPal users use chargebacks as a routine mechanism for saving some cash. Over the past 12 months, we've had 2 CC chargebacks (88% of our turnover, remember) and 9 PayPal chargebacks (12% of our turnover). The figures are not huge, but they are very annoying.

3. Rolling reserve. We haven't had this imposed yet for some reason, but as far as I can gather it's being rolled out to all accounts, so it's coming soon.

4. Account management. What kind of payment gateway requires you to log in every day to move money out?

Will we see a drop in conversion rate? I don't know. I'll be keeping a close eye on it.

PayPal was ground-breaking, and is a fantastic p2p payment mechanism. But as a business solution is it truly dire.

 

[Tin]

Couldn't agree more with your comments. PayPal needs to sharpen it's act if it's going to survive but sadly I fear account holders will keep using as there's not a mainstream viable alternative.

Cheers

 

[bluedreamer]

I think you will see a drop in sales because there are many shoppers who won't buy unless Paypal is offered. Some will use the other methods you offer them but I'd reckon on losing between 5-10% overall.

Paypal's fees might not be the cheapest but I think you should be looking at it from a customers perspective - what do your customers want?

Paypal's 4.4% sounds a lot but what's worse, losing up to 12% of your total sales or paying the 4.4% as you do now?

 

[lesliedocherty]

I want to only accept paypal payments from confirmed accounts, but they wont allow it.

I agree, we are considering not doing paypal either going forward

 

[sysops]

Well, this is the question - adopting PayPal resulted in almost no change (impossible to say without split testing), so I don;t know what dropping it will do.

Another interesting phenomenon is that while our average order value is around £35, PayPal orders average at around £14. So if some of those users currently paying by PayPal don't buy, but some do buy but spend more, who knows what the numbers will look like.

Whatever happens, it's going. I won't accept a rolling reserve, even if it meant a 5% drop in sales.

 

[sysops]

I agree, we are considering not doing paypal either going forward

I think this coming year will see a lot of established retailers dropping PayPal as an option.

 

[Willself]

Could be worst! just imagine how Globespan feel!!:|E-Clear reportedly
held on to 30Million Pounds!!belonging to the group!!

 

[Liybpg]

I was selling headphones on eBay for a bit for 3 pounds. I had to pay 30p from each transaction to PayPal (which was the only method of payment that I accepted). I found that ridiculous. My business was more like a game, and my profit margin was good enough to pay that much, but if I were a real business, I probably would be able to afford PayPal.

 

I can see your reasons, and this 'rolling reserve' sounds like another nightmare. Its bad enough that anyone can use the chargeback option to con their way out of paying for something anyway, but to make you hold a reserve too seems overly harsh.

I don't understand their reasoning behind this reserve, unless they are getting caught over some chargebacks.

I always tend to try to offer as many differing payment options as possible, but I don't sell just so much directly on the internet these days, so it isn't just so much an issue.

I am noticing more clients, when we are getting involved in their websites, looking at alternative solutions.

 

[TotallySport]

I was selling headphones on eBay for a bit for 3 pounds. I had to pay 30p from each transaction to PayPal (which was the only method of payment that I accepted). I found that ridiculous. My business was more like a game, and my profit margin was good enough to pay that much, but if I were a real business, I probably would be able to afford PayPal.

Look up a paypal micrpayment account and change the settings you will save alot infees

 

[silvermusic]

Firstly to get one myth out of the way rolling reserves are not being applied to everyone, only to those that PayPal consider a risk. That all depends on several factors your history with them, what you sell and how much money you put through them every year.

Don't forget that there's many small time and casual eBay sellers with money sitting in accounts burning a hole in their pocket.

 

[paul870]

Im not 100% but i thought after so many sales per month that paypal fees went down.
Or is it on value of 1 sale.

Regards Paul

 

[deniser]

You won't notice any difference when you drop Paypal except that you will save yourself a lot of money! We dropped it some time ago having done the opposite to you and added a payment gateway as well as Paypal. That doubled our sales overnight. Then after yet another chargeback, we dropped Paypal and there was no difference in sales.

Sure, Paypal is quicker for people in that they don't need to type in their card details but if Paypal isn't an option then they will use the payment gateway.

The Paypal chargebacks are irritating enough but what I found utterly frustrating was their inflexibility in dealing with the chargebacks. They give you a ridiculously short time to respond, paperwork has to be faxed, you can't send email attachments, you are given no information at all about the cardholder or what they are disputing so it is difficult to know how to approach them.

The only time I won one was when an old lady admitted she had forgotten that she had bought something from our site and accidentally complained about it. Even then it would have been easy to lose the chargeback on some technicality because they make it so difficult for the retailer to respond.

In comparison, I have only had one chargeback from the payment gateway, for a small amount. Everything was very clear in terms of how to dispute it and details of why the transaction were disputed were also provided including other payments which the cardholder was disputing at the same time. I had a month to respond. With the information I had I decided not to fight it. In terms of annoyance it ranked very low compared to Paypal where their systems cause more annoyance than the chargeback itself.

I would say that Paypal is only useful for new websites. Once you are getting a few orders, the other system is far cheaper anyway.

 

[SillyJokes]

Initialy we tried paypal, then we dumped it again. Now we offer it because it comes alongside WorldPAy. However I don't think the intergation with WorldPay was done brilliantly and we do seem to get an inordinate amount of techy problems resulting from PayPal like payments apparantly going through and then being cancelled.

 

[4little1s]

They recently sent me a Customer Service (?) questionaire about how they were doing. Like the last one they sent, I complained about Chargeback policy and rolling reserves.

Got an email back saying 'thanks' etc etc

 

[bdw]

IMHO Paypal is here to stay. AFAIC see it is gaining in popularity everywhere. Up until a couple of years ago Paypal was seen as being a non-professional way to take payments but I think it is much more mainstream nowadays. Almost everyone who uses the Internet is aware of it. How many of them are aware of Sagepay et al?

Paypal's charges are high - there is no denying that, but customers are not affected by this. I use Paypal as a buyer and as a seller but I only sell a couple of downloadable things with negligible volumes so the cost does not really matter to me. I do always have money in my Paypal account and what I have found is that when I am looking at something online for sale I am much more likely to buy if it offers the Paypal option because it is so easy.

 

[Silverlight]

As a past casual seller on ebay I can say nothing annoys me more than being fleeced twice by both ebay and then paypal.
I don't think I've ever used paypal except on ebay, if I can use a card, I will.

 

[movietub]

The paypal monopoly is probably one of the scummiest areas of internet life. I hate the coldness of their approach, there is never any feeling that they need your business, they assume you need them as the 'standardized payment gateway and ebay payment partner'.

We use them because we notice an increase in sales when we do. Some people only feel safe shopping if they can use paypal, for whatever reason.

Have faith though, although Google checkout is in its infancy at the moment, several extensions are rumoured including a paypal esque move to google checkout becoming a bank. In time, going head to head with paypal should make both reduce costs and focus on keeping their customers (business owners) happy and feeling secure.

I just wish Google would hurry up a bit...

 

[silvermusic]

Im not 100% but i thought after so many sales per month that paypal fees went down.
Or is it on value of 1 sale.

Regards Paul

This is what you're looking for. It's how much money you put through per month.

https://www.paypal.com/uk/cgi-bin/webscr?cmd=_display-receiving-fees-outside&countries=

 

[cjd]

We've never used PayPal and never will. It attracts the wrong sort of customer, costs too much, is inconvenient and gives the wrong image.

Anyone with a PayPal account has also got a credit or debit card so you're only not going to lose and real customers.

 

[movietub]

We've never used PayPal and never will. It attracts the wrong sort of customer, costs too much, is inconvenient and gives the wrong image.

I agree with that dependant on what you are selling, and who you are selling too. If a good % of your trade is B2B paypal looks a little 'ebay' in my eyes.

Anyone with a PayPal account has also got a credit or debit card so you're only not going to lose and real customers.

Whilst its true that paypal is tethered to a credit/debit card its not always the case that it is the card owner who uses the paypal account. Also I notice from forum discussion regarding our online shop that a lot of our customers are very paypal friendly. I joined in a thread on one forum and was asked if we accept paypal, I confirmed we did and the response was 'yipee'! No doubt an under 18 yo fishkeeper that used paypal to shop online.

We tried to ditch Paypal when we moved cart systems and we noticed a small drop in sales which were ressurected when we turned on Paypal once more.

Thats why I use Paypal, although I really dislike them! Thats not ideal I know, although I'm sure many are in the same boat.

 

[Matt1959]

if a seller takes credit/ debit cards it inspires much more trust for me as opposed to one that takes paypal only. To the extent that I would be very wary of buying anything from a site using paypal only (ebay excepted). There must still be many people around thinking this way??

 

[movietub]

if a seller takes credit/ debit cards it inspires much more trust for me as opposed to one that takes paypal only. To the extent that I would be very wary of buying anything from a site using paypal only (ebay excepted). There must still be many people around thinking this way??

Sure, anyone who only accepts paypal is shooting themselves in the foot repeatedly.

Not only for the reason you mention, but also paypal is expensive! The difference between paypal fees and cheaper solutions can often be more than the margin on some products sold online.

We use sagepay as our main processor. We use Paypal as some people look for it and Google checkout for the same reason, also the checkout reviews give our business a boost (people trust google).

Other than laziness or stupidity I can't think of a reason anyone would want to use paypal only :|

 

[Matt1959]

what are the main card providers like Streamline etc like for dealing with buyer disputes because theres plenty of horror stories about payal when a dispute gets going. Its surely easier dealing with a UK Bank in this instance than the likes of Paypal or am I wrong??

 

1. Fees. Our average fee paid to PayPal over 12 months is 4.4%. This is ridiculously high compared to the sub 2% we pay for our CC processing (and that's SagePay + merchant account fees combined).

Bit confused been with paypal for many years our fee's are 2.5% plus 30 pence per transaction.

As our average sale is over £100 don't see any problem with it.

In fact never had a problem.

And as the largest payment processor in the world and the peoples favourite.

I can only assume you may be selling to a dodgy market.

Earl

 

[movietub]

Bit confused been with paypal for many years our fee's are 2.5% plus 30 pence per transaction.

As our average sale is over £100 don't see any problem with it.

In fact never had a problem.

And as the largest payment processor in the world and the peoples favourite.

I can only assume you may be selling to a dodgy market.

Earl

How did that confuse you? 4.4% is made up of the base paypal fee of 2.9% + the 30p I would assume! If the average sale value is relatively low that 30p will easily bring the total to 4-5%.

Paypal is the largest because in the early days of internet shopping it made it possible to pay at many websites with any type of card, paypals breakthrough was to create an internet standard method of payment.

I know so many people that accept paypal, but hardly any that actually say anything positive about the company. Its one of those things, you offer it becasue people use it, and people use it because a lot of people offer it. Thats doesnt mean they are the best.

 

[movietub]

what are the main card providers like Streamline etc like for dealing with buyer disputes because theres plenty of horror stories about payal when a dispute gets going. Its surely easier dealing with a UK Bank in this instance than the likes of Paypal or am I wrong??

Streamline paired with Sagepay (formerly Protx) is probably one of the best combinations around. We just had a chargeback which we disputed and of course lost... But thats not due to sagepay or paypal etc policy, more their responsibility to the public interest.

The problem with Paypal is they can be very heavy handed. A small dispute, if it ticks the right (or wrong) boxes can end up with an account being frozen (so you cannot withdraw your funds) for exteneded periods.

With streamline/sagepay there was no question of a review of our trading/website etc and suspended services. They simply applied the chargeback (it was a stolen credit card used on our site) and are now working with us and the police to track down the thief and hopefully at some stage we can reclaim the goods and/or have someone to prosicute.

It's a bugger when it happens of course but I have no criticism with the way they deal with such things.

Perhaps most importantly with sagepay and the like they give you a card fraud report and rating so you can judge each transaction. We had one the other day, the post code and house number didnt match, the fraud score was 80 points with a 'very high risk' rating and the item cost £400. A quick call to the bank and they were able to contact the card holder who confirmed they made no such transaction! Thats a better way than getting the dispute in the first place. Paypal does not make such useful information available.

 

[Matt1959]

you see, when you read the above, I don't know why sellers bother so much with using paypal unless its all they can set up due to credit worthy issues- . From the buyers point of view, if you can use paypal, you can use a credit/ debit card as payal is funded via the cards in the first place, so whats the appeal of paypal:|

To Sirearl, bearing in mind what I've written, why do you sing the praises of paypal so much:|

 

[deniser]

Perhaps most importantly with sagepay and the like they give you a card fraud report and rating so you can judge each transaction.

Another very important factor.

 

[bdw]

Thats doesnt mean they are the best.

To Sirearl, bearing in mind what I've written, why do you sing the praises of paypal so much

I don't think that anyone is saying that they are the best or singing their praises. The fact is that they are probably now the most popular payment method by a country mile. Most Internet users know about them and only have the experience of using them to buy online. That is the people that most of us are trying to reach is it not? By the way there is no longer any sort of stigma attached to Paypal. That is just not true anymore. To most buyers they are a well known and trusted name.

From the buyers point of view, if you can use paypal, you can use a credit/ debit card as payal is funded via the cards in the first place, so whats the appeal of paypal

The appeal of Paypal to buyers is that having a Paypal account makes it very quick and easy to make an online purchase. That is a major attraction to many people including myself. When making a purchase I will generally use Paypal by preference if it is available. It's much easier than going through the whole rigmarole of finding my wallet choosing the card and entering all the details required to make the purchase.

None of the above is in praise of Paypal. Like many others I have had my problems with them but the fact is that they are growing all the time and to dismiss them would be foolish in my opinion.
.
.

 

[deniser]

When making a purchase I will generally use Paypal by preference if it is available.
.

So if it is not available on the site you are on when you have selected your goods, put them in your basket, decided to buy, you will log out of that site and start shopping all over again hoping that you will find the same product at the same price somewhere else where they will accept Paypal?

 

[bdw]

No.

I believe in checking what payment method(s) is/are in place before going through the checkout process. Don't you?

 

[deniser]

No.

I believe in checking what payment method(s) is/are in place before going through the checkout process. Don't you?

No, I assume that I will be able to pay with a card somehow - I also prefer Paypal out of sheer lazyness - but if Paypal was not there it would not stop me from buying at all.

So you would enter the site and then check that Paypal was accepted before looking for the product?

 

[gibby]

we started off using payapl & it was nothing but a pain.
We had more complaints about paypal than anything else.
Customers do not like having to create an account to pay by card. Lots of issues with forgotten passwords, fraud, clsoed accounts etc

Our sales jumped by 30% once we went to protx. We did a little customer servey on it & many customers seem to think a major card gateway means your a more professional operation.

One thing we could never understand with paypal was why they make it so difficult to conatct them or to get issues sorted out.
On 3 occassions they sent us customer complaints that customers had paid but not got the goods. We never managed to find out who these customers were as a the references did nto match anything.

We also had dozens of fraudulanet orders/false orders & no matter how many times we pushed them they never sorted it out.

Im told paypal pro is far better, we did apply to set up an account but they never responded to request for info on integartion, thsi pushed us to Protx and we have had no hassle with them really.

G

 

[bdw]

Customers do not like having to create an account to pay by card.

They don't have to create an account. This was changed about three years ago.

 

To Sirearl, bearing in mind what I've written, why do you sing the praises of paypal so much:|

well for our business's they suit us very well,bearing in mind we have never had a problem in many years trading.

As said we are charged 2.5% + 30 pence per transaction.

But I take your point that if your per sale value is low it is far more expensive.

So for us there are no drawbacks yet.:|

Maybe we have been lucky or it is related to the clientel that frequent our business's.?

Earl

 

[sysops]

well for our business's they suit us very well,bearing in mind we have never had a problem in many years trading.

Easy to achieve on very low transaction volumes ;-)

As said we are charged 2.5% + 30 pence per transaction.

That's not part of their payment structure - I'm guessing you mean either 2.9% + 20p or 2.4% + 20p.

https://www.paypal.com/uk/cgi-bin/webscr?cmd=_display-receiving-fees-outside

In either case, even if your transaction value averages at £300 per transaction, why willingly give away 1% of your turnover?

And have to login every day to transfer money?

And wait 3-4 working days for the money?

 

[silvermusic]

Easy to achieve on very low transaction volumes ;-)



That's not part of their payment structure - I'm guessing you mean either 2.9% + 20p or 2.4% + 20p.

https://www.paypal.com/uk/cgi-bin/webscr?cmd=_display-receiving-fees-outside

In either case, even if your transaction value averages at £300 per transaction, why willingly give away 1% of your turnover?

And have to login every day to transfer money?

And wait 3-4 working days for the money?

If it's a case of making that £300 sale or making nothing I know which I'd prefer.

 

Easy to achieve on very low transaction volumes ;-)



That's not part of their payment structure - I'm guessing you mean either 2.9% + 20p or 2.4% + 20p.

https://www.paypal.com/uk/cgi-bin/webscr?cmd=_display-receiving-fees-outside

In either case, even if your transaction value averages at £300 per transaction, why willingly give away 1% of your turnover?

And have to login every day to transfer money?

And wait 3-4 working days for the money?

Oh great its lower than I thought,fish and chips tonight.

Earl

 

[sysops]

If it's a case of making that £300 sale or making nothing I know which I'd prefer.

Yes, but we have no data which says that we'll see a drop in conversion rate. I'll be sure to post some as soon as I have it.