With Paypal who needs a merchant account?

by DavidO
22 replies
I have both paypal and my own merchant account. But since Paypal Pro allows you to process credit cards directly within your own site and with no Paypal identification who needs a merchant account?

Even Paypals fees are less than those of many merchant accounts.

My main motivation to have a merchant account was to cover those people who for some reason mistrust or dislike Paypal. That's no longer an issue with Paypal Pro.

Some marketers also dislike Paypal and there are some valid issues here. I myself have never had a problem with them but it's a good idea to have a backup payment system.

Otherwise paypal seems to cover just about every possibility.
#account #merchant #paypal
  • Profile picture of the author Adrian Cooper
    PayPal is fine. People who say you need a dedicated merchant account are biased in some way.
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    • Profile picture of the author Alexa Smith
      Banned
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      • Profile picture of the author Korey Carter
        Originally Posted by alexa_s View Post

        The ways in which they can be "biased" include:-

        (i) A "bias" against PayPal because they're selling something listed in PayPal's "excluded sales"

        (ii) A "bias" against PayPal because their sales volume is such that having their own merchant account is cheaper than paying PayPal's charges

        (iii) A "bias" against PayPal because they don't like the way PayPal habitually takes the buyer's side in any dispute related to the product or payment for it

        (iv) A "bias" against PayPal because they have an aversion to having their PayPal account frozen, sometimes for as long as 6 months, while some allegation is being "methodically investigated"

        In short, some people may have perfectly legitimate and reasonable reasons for preferring one over the other.
        Well said Alexa.

        As I said before it's almost like anything in life some like it and some don't so why not take care of both?
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      • Profile picture of the author Gene Pimentel
        Originally Posted by alexa_s View Post

        The ways in which they can be "biased" include:-

        (i) A "bias" against PayPal because they're selling something listed in PayPal's "excluded sales"

        (ii) A "bias" against PayPal because their sales volume is such that having their own merchant account is cheaper than paying PayPal's charges

        (iii) A "bias" against PayPal because they don't like the way PayPal habitually takes the buyer's side in any dispute related to the product or payment for it

        (iv) A "bias" against PayPal because they have an aversion to having their PayPal account frozen, sometimes for as long as 6 months, while some allegation is being "methodically investigated"

        In short, some people may have perfectly legitimate and reasonable reasons for preferring one over the other.
        Excellent answer Alexa. The other "bias" I'd mention is that PayPal does not allow 2-tiered commission programs. And those who are involved in MLM can forget PayPal altogether.
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        • Profile picture of the author seasoned
          Originally Posted by Gene Pimentel View Post

          Excellent answer Alexa. The other "bias" I'd mention is that PayPal does not allow 2-tiered commission programs. And those who are involved in MLM can forget PayPal altogether.
          GOOD point! We always forget about that! I don't think I ever got an answer on my question about paypal pro. Paypal uses PAYPALS credit! They have a RIGHT to restrict. paypal pro uses the MERCHANTS credit, and paypal should stay out of it. Then again, paypal pro CAN use the express feature, which might use paypals credit, and many customers may be paypals customers, so they may feel they have a right to protect. 8-(

          Steve
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  • Profile picture of the author embrown
    I used to tell my customers that a merchant account looks more professional since you are processing payments on your own site instead of transferring customers away from your site onto paypal. But then, I was trying to sell the merchant account.

    In my own opinion, I would just use paypal, since they take care of all the work and is secure and easy to work with. If you estimate your average income and calculate the paypal transaction fees, I think you may still come out cheaper than a merchant account.
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  • Profile picture of the author Korey Carter
    I offer ecommerce services and I think it is very important to offer PayPal as a payment option but also have the option of paying directly with a credit card also.

    I did a test with one of my merchants that offers PayPal standard (where the customer has to go to PayPal to checkout) and PayPal Pro where they checkout through the shopping cart and never see PayPal. For a months worth of transactions (which for this merchant was pretty high) about 90% of people chose to enter the credit card directly into the shopping cart. The other 10% of customers chose to checkout through PayPal.

    It is my firm belief that if you only offer PayPal you will leave sales on the table. While there a lots of people who like PayPal there are also lots that don't like it or simply don't want to go through it to checkout.

    Again give you customers every way possible to pay. I would even suggest you offer google checkout as well.

    The best situation is if you offer all 3 options.
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    • Profile picture of the author jaywilsonjr
      I think it depends on your volume. If you are doing hundreds of transaction a day, I think you will come out better to have a standard Merch acct. Also one of the benifits of having a merch acct is the ability to set your fraud thresholds as you please. You control the CCV and AVS setting... This is a huge plus in my book!

      But at the end of the day, you'll need both. If however I had to choose one over the other, and I was in a traditional market (non IM related) I would get a merch acct...

      Just my .02


      Jay
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  • Profile picture of the author DavidO
    Good comments here. But my point is that with Paypal Pro the customer experience is exactly the same as if you used a merchant account set up with a gateway on your own site. The customer doesn't even know it's going through Paypal.

    When you add up a merchant account, payment gateway like authorize.net plus shopping cart Paypal is way simpler and cheaper too.

    So, other than for backup reasons, why bother with a merchant account?
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    • Profile picture of the author Korey Carter
      Originally Posted by DavidO View Post

      Good comments here. But my point is that with Paypal Pro the customer experience is exactly the same as if you used a merchant account set up with a gateway on your own site. The customer doesn't even know it's going through Paypal.

      When you add up a merchant account, payment gateway like authorize.net plus shopping cart Paypal is way simpler and cheaper too.

      So, other than for backup reasons, why bother with a merchant account?
      I agree with you here. If you use a combination of PayPal standard and Pro take care of both things and it is all in 1 place for you. I like PayPal Pro even though I offer and sale merchant accounts. A merchant account and PayPal Pro are really the same thing.
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      • Profile picture of the author seasoned
        Originally Posted by Ecommerce Guru View Post

        I agree with you here. If you use a combination of PayPal standard and Pro take care of both things and it is all in 1 place for you. I like PayPal Pro even though I offer and sale merchant accounts. A merchant account and PayPal Pro are really the same thing.
        Actually, they are NOTHING alike! Paypal pro is a GATEWAY that happens to come with a merchant account. Last I knew, it was wells fargo. A merchant account is a special account that basically allows you to get a loan based on a number that someone ELSE gives you, and they pay for(known as a credit card number).

        You sell merchant accounts and don't know that? Wells fargo, Nova, credit card int(supposedly), etc... are MERCHANT accounts! THEY are competitors.

        Paypal, Paypal PRO, Payflow, verisign, authorize.net, etc.... are GATEWAYS(paypal, but NOT payplow or paypal pro, being special in that you use THEIR merchant account).

        The nice thing about a REAL merchant account(the wells fargo one you get with paypal doesn't actually give you their number, from what I can determine) is that with the right gateway, you can do EVERYTHING your way, within reason! With PPP, they STILL have control. BTW I KNOW it is wells fargo, because it was mentioned, and they EVEN ran my credit!

        Steve
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        • Profile picture of the author Korey Carter
          They are functionally the same. With a merchant account and payment you get your merchant account through a merchant bank like Wells Fargo and then your gateway through whichever gateway you choose like authorize.net etc.... With PayPal they setup both for you without choices.

          The main difference is if you have a merchant account through anyone but paypal the money gets deposited into your checking account. With PayPal it goes into your PayPal account. Other than that it works the same way.

          So with either relationship you have a gateway and a merchant account.
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  • Profile picture of the author Mark Brian
    A company I've work for before offers 4 payment methods:

    Own Merchant
    Paypal
    Google Checkout
    Bill me later

    Overkill? I don't think so since they are making 6 figures per month, sometimes 7!
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    • Profile picture of the author Korey Carter
      Originally Posted by Mark Brian View Post

      A company I've work for before offers 4 payment methods:

      Own Merchant
      Paypal
      Google Checkout
      Bill me later

      Overkill? I don't think so since they are making 6 figures per month, sometimes 7!
      There is a reason for those high numbers. I call it customer convenience. Of course that is just one piece to the puzzle.
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  • Profile picture of the author The Pension Guy
    Ecommerce Guru,

    I have a question that you, hopefully, can clarify.
    The other day I was reading about the PayPal Pro on their website (since they are aggressively offering it now to Canadians, too) and I noticed that in case it is used without a 3rd party shopping cart it has very strict requirements regarding the security of your server. I think most of the non-techie marketers would fail on that test, including me.

    So, here is the question: is the site you were talking about set up with PayPal Pro AND a 3rd party shopping cart? I assume yes, and in that case the company providing the shopping cart is also the "gateway" and they have the responsibility for the security, right?
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    • Profile picture of the author Korey Carter
      Originally Posted by The Pension Guy View Post

      Ecommerce Guru,

      I have a question that you, hopefully, can clarify.
      The other day I was reading about the PayPal Pro on their website (since they are aggressively offering it now to Canadians, too) and I noticed that in case it is used without a 3rd party shopping cart it has very strict requirements regarding the security of your server. I think most of the non-techie marketers would fail on that test, including me.

      So, here is the question: is the site you were talking about set up with PayPal Pro AND a 3rd party shopping cart? I assume yes, and in that case the company providing the shopping cart is also the "gateway" and they have the responsibility for the security, right?
      Yes the 3rd party shopping cart takes care of the Security requirements and the API with PayPal. PayPal actually plays the function of the gateway. The shopping cart connects to PayPal though an API just like with any other gateway.
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  • Profile picture of the author Marian Berghes
    I don't think you can do true 1 click upsells with paypal pro.

    There are LOADS of shopping carts that will provide you with a merchant account for free just for subscribing to them.

    If your smart you can get your rates WAY lower then PayPal.

    If your not doing any big transaction it might not make a big difference...but when having multiple upsells and some of them are $500+ you will feel the rates of Paypal HARD.
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    • Profile picture of the author seasoned
      Originally Posted by Marian Berghes View Post

      I don't think you can do true 1 click upsells with paypal pro.

      There are LOADS of shopping carts that will provide you with a merchant account for free just for subscribing to them.

      If your smart you can get your rates WAY lower then PayPal.

      If your not doing any big transaction it might not make a big difference...but when having multiple upsells and some of them are $500+ you will feel the rates of Paypal HARD.
      It IS technically illegal to do true 1 click upsells. As I recall, you need to have the CVV code, and US, and I believe VISA, MC, AMEX, law prohibits storing it. Amazon.com wants to sue anyone using 1 click though. That is how they stopped barnes and noble. And HOW do you get rates WAY lower than paypal? $30/month is about par for the course. And transaction rates of 1.9% to 2.9% + $0.30 USD? $.30 is probably on the low side. Last I knew, 1.9% was pretty good for a moderately successful company with good credit.

      BTW Paypal does NOT offer a TRUE direct credit card interface unless you go with payflow, which used to be cybercashes and/or verisigns service. paypal pro LOOKS like a direct interface until you read the fine print! They require you to provide "EXPRESS payment" as an option. Sometimes, like with subscriptions and stored CCI, that is just NOT possible! Further, it means you have to have 2 very different ways to do things.

      I HATE it when companies do that! They come up with option #1, and get popular. THEN, they say they have #2, which you REALLY want/like. THEN they say you can't use option #2 without option #3 which could be considered the worst of all worlds. #3 is like #1, but doesn't offer things like subscriptions, last I knew.

      Steve
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  • Profile picture of the author Marian Berghes
    If its illegal to do 1 click upsells then how come so many people use it without any problems? How come Internet marketers that make 20+ million dollars per year in sales, use 1 click upsells and don't have any problems?

    Idk where you heard that...but as far as I have done my research, is totally legal as long as you have the proper facilities.

    For the rates...maybe...I didn't do alot of research on that so you might be right.
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    • Profile picture of the author seasoned
      Originally Posted by Marian Berghes View Post

      If its illegal to do 1 click upsells then how come so many people use it without any problems? How come Internet marketers that make 20+ million dollars per year in sales, use 1 click upsells and don't have any problems?

      Idk where you heard that...but as far as I have done my research, is totally legal as long as you have the proper facilities.

      For the rates...maybe...I didn't do alot of research on that so you might be right.
      Maybe amazon doesn't consider them big enough. But they DID sue barnes and noble. I forget if it went to court, but barnes and noble has THEM doing it!

      It IS legal to do one click(if you forget about amazons stupid and worthless patent. Though such patents have held up in the STUPID US courts.), but paypal pro, as I recall, requires the CVV code and, as I recall, it is illegal to store that(The US has laws regarding credit, and I believe the card companies have rules as well.). Of course, they won't do anything unless there are enough complaints, etc....(How would they even know you were saving it, etc...) Last I knew, most gateways did NOT require the CVV code, even though many merchants now ask for it. ALSO, I don't know how strict visa and mastercard are about it. Basically, there are only five bodies that determine the ability to do that.

      1. Gateway
      2. Processor
      3. Account issuer
      4. Card Brand
      5. Country

      Of course, #5 may only issue laws, and not really enforce. USUALLY, #1 stays out of it, but paypal pro DOESN'T.

      Steve
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  • Profile picture of the author Tyrus Antas
    Edit: ahhh forget it.

    Tyrus
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  • Profile picture of the author Marian Berghes
    I read abit of the CISP and all I could find is that your not allowed to store the CVV code, the rest you can store as long as you have the proper security measures.
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