Why we're dumping PayPal

[sysops]

Well, that's me told.

I'm not aiming my comments at any one particular person. It just drives me nuts when the same person who would spend half a day comparing car insurance quotes to shave £20 off their insurance happily accepts much higher transaction rates than they could easily get.

 

[shadesofblue]

I would be interested to know what people on UKBF are paying for their transactions. I would hazard the average to be higher than the ones you give. Certainly the experience I have is that the figures are more in the region of 2.4 2.75% for small businesses and its no an issue of laziness but the ability to dictate terms.

.

I work in the industry and can honestly say that anyone paying those prices hasn't reviewed their rates for at least five years.

I wouldn't even consider paying a % on debit card transactions - it's madness.

 

[Parrot Hosting]

I'm not going to argue over your pricing except I think that 1.2 - 1.5% is well out of reach for most companies and even 2% might be unattainable to many. If everyone was able to get those prices then PayPal and the other online portals would be competing with them without fail as it is a competitive business.

I still disagree with you over whether it is laziness, or not. Its going to be impossible for a small business to dictate terms without a track record. This friend you got a good rate for, if he didn't have you batting his corner would he have got such a good deal? I don't think so but, I cannot know the circumstances so I am happy to accept that you can obtain good terms where others might not achieve the same.

I will be talking to my bank next week to see what terms they are currently offering and if they are prepared to negotiate better than a year or so ago when I last discussed such things with them. I also have a new bank which I will talk to as well and in all fairness to this thread I will post my results on here.

 

[Parrot Hosting]

I work in the industry and can honestly say that anyone paying those prices hasn't reviewed their rates for at least five years.

I wouldn't even consider paying a % on debit card transactions - it's madness.

Which industry?

and we were not talking Debit Card transactions which I agree would be mad on percentage basis.

 

[sysops]

I'm not going to argue over your pricing except I think that 1.2 - 1.5% is well out of reach for most companies and even 2% might be unattainable to many.

It isn't! Why do you think this? What are you basing this on?

As I stated previously, I recently helped a friend with a brand new company setup, no history, and very modest turnover (first month was £5k), and he was offered 1.5% from the outset.

If everyone was able to get those prices then PayPal and the other online portals would be competing with them without fail as it is a competitive business.

Ah, so that's the source of your information. Your assumption is incorrect (and is a sign of laziness )

PayPal succeeds because it is easy and everyone can use it. But it is not a good payment solution for business.

I still disagree with you over whether it is laziness, or not. Its going to be impossible for a small business to dictate terms without a track record. This friend you got a good rate for, if he didn't have you batting his corner would he have got such a good deal?

I didn't battle! I just told him to get in touch with my local HSBC branch. That's all. I am powerful, but not that powerful.

I will be talking to my bank next week to see what terms they are currently offering and if they are prepared to negotiate better than a year or so ago when I last discussed such things with them. I also have a new bank which I will talk to as well and in all fairness to this thread I will post my results on here.

Call Streamline, HSBC and HBOS. Get those quotes. None of them will be over 2%, unless you are selling pr0n.

 

[shadesofblue]

Which industry?


and we were not talking Debit Card transactions which I agree would be mad on percentage basis.

.

Card Processing Industry

I'm no expert on Paypal but was under the impression they charged a % across the board on debit and credit cards

 

[Parrot Hosting]

unless you are selling pr0n.

Selling what?? lol

Okay, I give in I'm talking to my banks next week and as I said I will post the results.

 

[Parrot Hosting]

I'm no expert on Paypal but was under the impression they charged a % across the board on debit and credit cards

They charge per transaction but I am never aware whether it is a CC or a DC or a PayPal account I'm paid by. Which is the point of PayPal really.

 

[shadesofblue]

Selling what?? lol

Okay, I give in I'm talking to my banks next week and as I said I will post the results.

Don't presume the banks will give you the best deal. Their are a number of independents that will probably be able to get you a better deal. Totalwebsolutions on here seems to have good rates.

 

[shadesofblue]

They charge per transaction but I am never aware whether it is a CC or a DC or a PayPal account I'm paid by. Which is the point of PayPal really.

As a general rule more people use debit rather than credit cards for purchases. If they buy £100.00 package on your site through paypal you'll pay say 3%+20p which equates to £3.20.

Through an acquiring bank and payment gateway you'll pay a fixed pence per debit transaction. let's be conservative and say 0.30p per debit transaction and a gateway fee of 0.25p. (usually first few hundred are free)

That's a 0.55p charge rather than £3.20. You obviously need to take into account your monthly fee for the gateway but you'll soon be making a saving.

 

[andygambles]

It is not always about fees though. The integration and service provided can have an impact.

I can get slightly better rate than PayPal give me but struggle with the multi currency options that PayPal provide with ease and a single point of management.

 

[Parrot Hosting]

As a general rule more people use debit rather than credit cards for purchases. If they buy £100.00 package on your site through paypal you'll pay say 3%+20p which equates to £3.20.

Through an acquiring bank and payment gateway you'll pay a fixed pence per debit transaction. let's be conservative and say 0.30p per debit transaction and a gateway fee of 0.25p. (usually first few hundred are free)

That's a 0.55p charge rather than £3.20. You obviously need to take into account your monthly fee for the gateway but you'll soon be making a saving.

This is only true of UK, many of my transactions are overseas and Paypal allows me to even run multi-currency and gives excellent exchange rates. The few times I have tried to use my Debit card on foreign transactions I have been shafted on fees when it landed in my bank so, it is unlikely that people will use Debit cards online.

The other thing is that using Debit Cards online is far riskier than using a credit Card because of the a) risks of unauthorised withdrawals and b) difficulty of recovering disputed payments.

Whilst I will not dispute the financial benefits of having all your transactions on a debit card - it don't work that way in the real world.

At least PayPal takes away much of that risk for me and my customers.

 

[Wiggy]

Every so often, I assess the Pros and Cons of adding PayPal to the payment methods we accept.

I like the idea of picking up new customers who only ever use PayPal to shop.

but

I would hate to see existing customers change payment methods, particularly from debit card to PayPal, which from what I can gather from buyer-oriented feedback in this thread is likely.

I hate the idea of targeting a demographic who are 1.9 times more likely to return an item as much of what we sell can not be resold if returned.

I hate becoming exposed to fraud and or chargebacks; with the 3d-secure liability shift, we haven't had a chargeback in over a year. Customers have to direct complaints to us and can't just deny receiving goods.

It's been 8 months since the last post in this thread and I'd love to know if anybody had a change of heart or if there has been a shift in landscape.

I'd love to know if Parrot Hosting negotiated better rates and maybe now offers customers integration with something other than PayPal. I was confused by this:

The other thing is that using Debit Cards online is far riskier than using a credit Card because of the a) risks of unauthorised withdrawals and b) difficulty of recovering disputed payments.

Whilst I will not dispute the financial benefits of having all your transactions on a debit card - it don't work that way in the real world.

At least PayPal takes away much of that risk for me and my customers.

This appears to be about buyer risk and not protection of the merchant which is actually an argument against PayPal integration?? Up to this point, I thought Parrot's customers were businesses.

If there's a more recent thread running on this subject, please point.

Thanks.

Wiggy

 

[Tom McClelland]

I hate the idea of targeting a demographic who are 1.9 times more likely to return an item as much of what we sell can not be resold if returned.

It is at least possible that this is a statistical misunderstanding. It may be that the people who were going to shaft the merchant choose Paypal if there is a range of choices, but it doesn't follow that those people wouldn't try to shaft the merchant anyway if Paypal weren't available at that merchant.

This appears to be about buyer risk and not protection of the merchant which is actually an argument against PayPal integration?? Up to this point, I thought Parrot's customers were businesses.

The perception that Paypal is a safe purchasing method that favours buyers in the event of a dispute is a significant benefit for vendors. The speed and ease of their payment processing screens whether buyers are Paypal members or not helps conversion ratios. We simplified our Paypal buying form to collect the bare minimum information and our conversions went up and point-of-sale queries went down. That benefit is well worth a few extra reversals. (and in our case the number of reversals is perhaps 0.1%)

I'm not saying that Paypal is the be-all and end-all. But I still say that some of the arguments against Paypal and in favour of other processors are at least part based on misunderstanding of the buyer's thought processes.

 

[andygambles]

PayPal is by far a significant added value service for us.

Also helped by the fact that the majority of our customers are reselling our products. They accept payments online via PayPal so it is easier for them to pay us via PayPal and avoid the need to transfer funds to the bank and cost them more money.

 

[kulture]

When I offered Paypal as an alternative payment method about half my customers choose Paypal. When I shop for myself I typically choose Paypal, because it is easy. HOWEVER Paypal costs the merchant more per transaction, and carries more risks. When I stopped using paypal for a week conversions stayed the same and orders stayed the same. The lack of choice was not a deciding factor. So I have stopped using Paypal.

I also stopped using Paypal because they suspended my account for a few days accusing me of having two accounts (I don't). It was sorted out in a matter of days, but only because I kept on the case and managed to find a Paypal customer service guy who actually read e-mails and sorted them out rather than send stock replies.

 

[Websitehandyman]

I think it depends on what sector you are.

If you trade in items very popular on ebay like music, football stuff and hobby stuff then most your customers will want to buy with Paypal I'm afraid. The main reason might even be that they know they have credit in their paypal account from selling on ebay. And that where they get ya... some people are just too bone idle to move money out their paypal account.

So when shopping the know they have that spare cash sitting there and that why they look for the paypal sign.

Also depends on how much your customers want to shop with you. If you are the only place they can get want they need then you ask them to pay in buttons and they'll do it. So you have no need for paypal and it's way of doing things.

I guess you could always not merge paypal as an option and offer it as an extra and treat just as you would someone asking for a 5% discount.

 

[Wiggy]

That '1.9 times more likely to return' is a stat I grabbed from earlier in this thread and it may be dated or just plain wrong. I haven't attempted to verify it.

I do, however, seem to be seeing a pattern; The folks who sell physical goods seem to be more likely than the folks who sell services and downloadables to have problems with PayPal. (Sir Earl seems to be an exception here but then, he's alway been exceptional)

Is this fair comment or am I barking again?

 

[Tom McClelland]

That '1.9 times more likely to return' is a stat I grabbed from earlier in this thread and it may be dated or just plain wrong. I haven't attempted to verify it.

I do, however, seem to be seeing a pattern; The folks who sell physical goods seem to be more likely than the folks who sell services and downloadables to have problems with PayPal. (Sir Earl seems to be an exception here but then, he's alway been exceptional)

Is this fair comment or am I barking again?

I agree that the physical vs digital thing may be an issue. It cuts both ways. We can't prove delivery because our product don't exist physically. But not many chancers buy payroll software and try not to pay for it, perhaps.

The other issue is that reversals and chargebacks hurt physical goods sellers much more, because they have a material marginal cost of sale. Whereas our marginal cost of sale is zero, so a successful Paypal reversal just costs us the £7 reversal fee, which is essentially irrelevant.

 

[midiman]

I am in the process of setting up my online store and I will not be accepting PayPal.

My margins are tight and I can't afford their fees.

PayPal want 3.4% +0.20p per of the total transaction!!!

If I can get a merchant account, all that I will be charged is 0.27p per transaction + the price of my PSP montly fee. Which will be roughly £20pm.

PayPal is not for me.

 

[andygambles]

PayPal is great for vendors selling intangible items as they always side with the seller in any dispute.

 

[bdw]

Not in my experience. I sell a downloadable report and someone bought one a year or two ago. While doing so they messed up and paid twice. They then cancelled both payments but they still had the download. It took me four months to get it sorted out.

Other than that I have few problems with Paypal in the 7 or 8 years I have used them.

.

 

[Wiggy]

But not many chancers buy payroll software and try not to pay for it, perhaps.

Yeah, hard to sell later on Ebay or in a pub for a 10th of its value

The other issue is that reversals and chargebacks hurt physical goods sellers much more, because they have a material marginal cost of sale. Whereas our marginal cost of sale is zero, so a successful Paypal reversal just costs us the £7 reversal fee, which is essentially irrelevant.

I use a deferred payment system, a bit like a car-hire or hotel's deposit so reversals are free, I wouldn't like a lot of £7s adding up.

I can't begin to say how happy I became when 3D-secure eliminated chargebacks from my life ... Our orders range from about £3-£2000 averaging at about £40 (many more of the £3 type than the £2k type) but the fraudulent ones are always huge, which used to sometimes lead us to annoy potentially amazing honest customers who genuinely wanted to spend hundreds on their hair ...

TBH, the thought of having to deal with chargebacks again is probably making me slightly irrational in my view of PayPal right now.

I sell a downloadable report and someone bought one a year or two ago. While doing so they messed up and paid twice. They then cancelled both payments but they still had the download. It took me four months to get it sorted out.

This is currently impossible in my world, they would have to call me and ask nicely for me cancel one ...

This sort of thing is why despite my head saying I need to trial PayPal, my heart is saying no effin way pal!

 

[Rosco1112]

you forgot point 4

4. The WORST customer service in the world, Paypal make me sick

 

[Tom McClelland]

you forgot point 4

4. The WORST customer service in the world, Paypal make me sick

They have a dedicated helpline if you have a business account or a pro account. You get a number to call and a token number to enter on your phone keypad when you raise an issue, and invariably within seconds you're talking to someone knowledgeable. I've found their customer service for business accounts to be excellent.

But I have heard that if you haven't got a business account it is terrible, and you can completely forget the email based support they offer, which is utterly useless, a total waste of time.

 

[Rosco1112]

yep, dont have business account so thats probably why

 

[Rhyl Lightworks]

We have a PayPal business a/c and have never had a problem with them in over 6 years of using them. Moreover, when we started with PayPal it accounted for only about 15% of payments online. Now it accounts for about 70%.

I think it is useful to bear these two points in mind:
1. Many members of the public prefer to use PayPal because it is easier than using a card, although if they really want the product most will pay by card if PayPal is not an option.
2. Most businesses do not use PayPal, but if you customers are mainly not businesses, I think having payment by PayPal is most desirable.

Barrie

 

[bdw]

You only have to look at the number of major online retailers and large companies who are now using Paypal to see the leverage it has.

.

 

[RevaxMedia]

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

I remember thinking Google wallet would put them out of business after all the lawsuits but they still chug along, someone has to pay for it. I think eBay took the same route but they have sorted themselves out.

 

[bdw]

but they still chug along

That is most definitely an understatement.

Paypal Growth.


.
.

 

[RevaxMedia]

That is most definitely an understatement.

Paypal Growth.


.
.

Chug along on rocket fuel

 

[midiman]

Am I missing something here?

What do PayPal fees go down to for business transactions?

As a personal account holder I know there is no way I can afford to use them on my site.

3.4% of an order is a cut of profit I cant afford to take. My margins will be around 5%-6%!!

 

[Tom McClelland]

Am I missing something here?

What do PayPal fees go down to for business transactions?

As a personal account holder I know there is no way I can afford to use them on my site.

3.4% of an order is a cut of profit I cant afford to take. My margins will be around 5%-6%!!

Firstly 5-6% is supermarket-chain margins. I'm struggling to understand how any small business could survive on margins like that, because the volume needed to make enough money to cover even minimal overheads is vast.

And volume helps with Paypal too. Here are their merchant rates according to monthly sales volume:

£0.00 GBP - £1,500.00 GBP3.4% + £0.20 GBP
£1,500.01 GBP - £6,000.00 GBP2.9% + £0.20 GBP
£6,000.01 GBP - £15,000.00 GBP2.4% + £0.20 GBP
£15,000.01 GBP - £55,000.00 GBP1.9% + £0.20 GBP
above £55,000.00 GBP* 1.4% + £0.20 GBP

As you can see, if you're doing the kind of volume that makes 5-6% margin a viable proposition you'll be paying 1.4%, not 3.4%. Still higher than with other merchants.

But I suspect that another problem with such a low margin is chargebacks and reversals; regardless of the merchant service you go with they'll be crippling.

 

[andygambles]

If you consistently rip £500k a year you get a dedicated account manager and negotiation on rates.

The great thing though is at least PayPal publish rate tariffs.

If you go PayPal go Pro. The support is better by far.

Back to the intangibles comment I made. They can still reserve the funds but I have never lost a dispute but can take 180 days to get the money back. Same as a normal chargeback.

 

[Tom McClelland]

If you consistently rip £500k a year you get a dedicated account manager and negotiation on rates.

That's interesting, I noticed the "*" on the £55k/month figure. Do you have direct knowledge of people paying less than the quoted 1.4%? We're moving up towards that kind of turnover, currently paying 1.9% most months and 1.4% in our big months and I've been wondering about ringing them up and asking if the rates are negotiable for a good client.

 

[andygambles]

That's interesting, I noticed the "*" on the £55k/month figure. Do you have direct knowledge of people paying less than the quoted 1.4%? We're moving up towards that kind of turnover, currently paying 1.9% most months and 1.4% in our big months and I've been wondering about ringing them up and asking if the rates are negotiable for a good client.

Get them rung up and ask about rate negotiation for a large seller. You may then find they start negotiating the PayPal to PayPal transaction rates down a lot more (since they can play with these more than transactions that involve credit cards).

 

[midiman]

Firstly 5-6% is supermarket-chain margins. I'm struggling to understand how any small business could survive on margins like that, because the volume needed to make enough money to cover even minimal overheads is vast.

And volume helps with Paypal too. Here are their merchant rates according to monthly sales volume:

£0.00 GBP - £1,500.00 GBP3.4% + £0.20 GBP
£1,500.01 GBP - £6,000.00 GBP2.9% + £0.20 GBP
£6,000.01 GBP - £15,000.00 GBP2.4% + £0.20 GBP
£15,000.01 GBP - £55,000.00 GBP1.9% + £0.20 GBP
above £55,000.00 GBP* 1.4% + £0.20 GBP

As you can see, if you're doing the kind of volume that makes 5-6% margin a viable proposition you'll be paying 1.4%, not 3.4%. Still higher than with other merchants.

But I suspect that another problem with such a low margin is chargebacks and reversals; regardless of the merchant service you go with they'll be crippling.

Welcome to the world if reselling IT Equipment.

We are talking a markup of pounds. Not tens, hundreds or thousands of them.

How much profit do you think you make on a mouse, or a hard drive?

Volume sales are the only way to drive profits and there are plenty of big players out there doing that.

Most smalls guys like myself will find it hard to compete.

 

[RECOVER Money From PAYPAL]

do not inform of your them of your intentions until all your funds are recovered if you have informed them then they will more than likely freeze your account for 180 days and you wont be able to close the paypal account
if you need any more evidence of how bad Paypal is please go to paypalsucks.com nopaypal.co.
these sites also show alternative methods to paypal
good luck to you
P.S.I have succeeded in reduce my customers use of pay pal
by using a small incentive for using bacs transfers saves you time and money and no chargebacks at all

 

[bdw]

Sorry, but I am always suspicious of people who create a name for themselves related to some point they are trying to make and join a forum just to make a single post like this.

.

 

[andygambles]

Yep he is talking crap. Yes most likely people will have had problems. That's what happens when you have a few hundred million customers!