Why You Should Drop Paypal And Get A Merchant Account

37 replies
Due to some technical issue, I was forced to use Paypal for 2-3 weeks.

I noticed that my sales dropped after I switched to Paypal though I've been marketing and selling as aggressive as usual.

Then I reviewed all transactions and was surprised with these results:

Successful Transaction Using Paypal:

Apr-11 39.13%
Apr-12 41.67%
Apr-13 34.38%
Apr-14 42.86%
Apr-15 50.00%
Apr-16 27.78%
Apr-17 42.86%

Successful Transaction Using Merchant Account (Beanstream):

Apr-25 96.00%
Apr-26 83.33%
Apr-27 86.67%
Apr-28 82.61%
Apr-29 81.82%
Apr-30 94.44%
Apr-31 93.33%

Honestly, I can't tell why.

The point is, you can simply DOUBLE your sales and income with the same marketing that you do by...

Stopping the the bucket from leaking.
#account #drop #merchant #paypal
  • Profile picture of the author mjones70
    Hmm that's interesting. I'd also like to know why the successful transactions take such a hit with Paypal. Paypal is widely used on the internet because it's so convenient, but it's a shame that there are so many pitfalls associated with it.
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    • Profile picture of the author JJOrana
      Maybe it's convenient for some market but definitely not in most market.

      Not to mention that paypal gets a bigger cut in each transaction.
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      • Profile picture of the author Des Lau
        Originally Posted by JJOrana View Post

        Maybe it's convenient for some market but definitely not in most market.

        Not to mention that paypal gets a bigger cut in each transaction.
        What market are you in out of curiosity?

        There are many merchant account providers who charge a lot more to what Paypal does, so I don't think that statement is entirely correct - especially if you live outside of the US and Canada.

        For example 2checkout charges 5.5% on each transaction as opposed to Paypal's 2.4% (if you are in an International country)

        Looks like Beanstream only accepts US and Canadian businesses as well.

        I guess it's more about your location and business at the end of the day.
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        • Profile picture of the author firedancer
          Originally Posted by Des Lau View Post

          What market are you in out of curiosity?

          There are many merchant account providers who charge a lot more to what Paypal does, so I don't think that statement is entirely correct - especially if you live outside of the US and Canada.

          For example 2checkout charges 5.5% on each transaction as opposed to Paypal's 2.4% (if you are in an International country)

          Looks like Beanstream only accepts US and Canadian businesses as well.

          I guess it's more about your location and business at the end of the day.
          Agree, am in Western Europe, Paypal business a/c has given me no problems
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  • Profile picture of the author Bill Hugall
    Great post! Makes a ton of sense, and most bigger names will say the same thing. Not to mention the ability to do one click up sells comes into play.
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  • Profile picture of the author hirechrisgunn
    This is really great information. Thank you for posting it.
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  • Profile picture of the author Osman_M
    However, I do think it has something to do with the market you may be in.

    People should get away from Paypal for tons of other reasons, but the reason you have listed is very interesting and intriguing to say the least.
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  • Profile picture of the author Dayne Dylan
    Banned
    It could be because of the checkout process.
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    • Profile picture of the author celente
      Originally Posted by Dayne Dylan View Post

      It could be because of the checkout process.
      yes, this is correct read my post above.

      We do a lot of testing with this....WHY?

      Because one of our niches we found that people always got close to signing up but never did, .....made it easier and viola increase the sign up rates to recurring income quickly.

      So there you have it. Paypal is ok, not the best out there, you just have to make it easier for people to say yes and pay quickly. I hate to think of how many sales I have lost over the years because I did not set up this properly and make people click 8 times before they could actually pay. Its well worth noting here anyway. And we need to test test test all the time.
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  • Profile picture of the author travlinguy
    Originally Posted by JJOrana View Post

    Due to some technical issue, I was forced to use Paypal for 2-3 weeks.

    I noticed that my sales dropped after I switched to Paypal though I've been marketing and selling as aggressive as usual.

    Then I reviewed all transactions and was surprised with these results:

    Successful Transaction Using Paypal:

    Apr-11 39.13%
    Apr-12 41.67%
    Apr-13 34.38%
    Apr-14 42.86%
    Apr-15 50.00%
    Apr-16 27.78%
    Apr-17 42.86%

    Successful Transaction Using Merchant Account (Beanstream):

    Apr-25 96.00%
    Apr-26 83.33%
    Apr-27 86.67%
    Apr-28 82.61%
    Apr-29 81.82%
    Apr-30 94.44%
    Apr-31 93.33%

    Honestly, I can't tell why.

    The point is, you can simply DOUBLE your sales and income with the same marketing that you do by...

    Stopping the the bucket from leaking.

    I'll stick with Paypal. I've been with them for 13 years with no complaints. I understand there are some markets that they don't serve. But you draw vague conclusions without giving nearly enough information on what you're doing. Paypal prospers because many people using them can't get merchant accounts.
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    • Profile picture of the author mojojuju
      Originally Posted by travlinguy View Post

      But you draw vague conclusions without giving nearly enough information on what you're doing. Paypal prospers because many people using them can't get merchant accounts.
      I agree.

      There are too many unknowns here. OP seems to have a site that's normally used with his merchant account. I'd guess that every part of his sales funnel has been tweaked while using the merchant account. Therefore it may easily be the case that some unmentioned variable(s) that work well with his merchant account simply don't perform well when the merchant account is replaces with the Paypal account.

      IOW, there are probably many unmentioned factors at play which we don't know about and probably should before drawing any conclusions from this.
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  • Profile picture of the author netmatrix
    What criteria did you use to determine "Successful Transaction"?
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  • Profile picture of the author WillR
    People would be mad to change their payment processors based on such as basic test from yourself. Since you were not running the test over the exact same time period it kind of makes this test irrelevant.

    If you wanted to do any type of real split test then it should be alternating between both payment processors at the same time so the same traffic is being used... and it should be a much longer test than just a few days.

    It could have been a number of things that accounted for the difference. But because this was not tested properly you will never know. At the moment you are only just assuming it was caused by your payment processor.

    If this is how you test all your metrics then you really need to rethink things.
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  • Profile picture of the author anhthoai
    I'm sure that using paypal is not safe and I don't pay through paypal. I only pay by credit card directly.
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  • Profile picture of the author NataliaF
    I was planning to use PayPal and even did for some time but then switched to a merchant account. Found more advantages as well.
    You've provided good statistics. Thank you for sharing!
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  • Profile picture of the author Dan Grossman
    I see just the opposite in terms of successful transactions; more sales and fewer abandoned checkouts with PayPal.

    I also see just the opposite in terms of cost; when you add the downgrade fees, AVS fees, batch settlement fees, customer service fees, statement fees, gateway fees, network fees, PCI compliance fees, cross-border fees, etc. that come with a merchant account, it's very unlikely your effective transaction rate is lower than the single flat rate PayPal is charging you.

    Especially once you move some volume and qualify for their 2.3% or 1.9% tiers.

    Take every actual cost into account and a huge number of internet merchants are paying 4-6% effective rates through traditional merchant accounts even though they're quoted a base transaction fee of half that before applying.
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    • Profile picture of the author sowens
      Yes - I was just going to head over to a big box to buy something (I may or may not need) because they take PayPal and that's my only account with disposable income. I'm more inclined to push the Buy Now button when they take PayPal.

      On the other hand, when there are funds in my checking account, I'll use my debit. And there has been an explosion of debit cards recently aimed at the "unbanked." Wal-mart has some blue debit card that is somehow for people without checking accounts. Not sure how they fund it (must be similar to a pre-paid Visa but with lower fees.)

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      • Profile picture of the author sowens
        By the way - thank you for getting us to discuss payment systems, even though I don't agree with the thread title -- sounds like you are affiliate marketing for the merchant account. You'll notice I have not tried to sell you my merchant account here.
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    • Profile picture of the author GlenH
      Originally Posted by Dan Grossman View Post

      I see just the opposite in terms of successful transactions; more sales and fewer abandoned checkouts with PayPal.
      That's exactly what I've found.

      Buyers trust PayPal, much more than they do a third part merchant account connected to an ecommerce store or some shopping cart
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      • Profile picture of the author celente
        Originally Posted by GlenH View Post

        That's exactly what I've found.

        Buyers trust PayPal, much more than they do a third part merchant account connected to an ecommerce store or some shopping cart
        Yes I agree with this statement,

        and also, We have found if you are selling stuff properly, and writing good copy in your emails, and soft selling, and using proof it does not really matter people will buy your stuff. This is the most important process to get inside the buyers mind and want and get him / her to crave for your stuff.

        If you can do this properly, the merchant is pretty much irrelevant, as they will whip out their credit card and buy within a jiffy. Just make sure whatever merchant you are using, it is easy for them to actually buy without having to go through too much rigours work, paypal is not too bad in this department. That is why we still use them.
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  • Profile picture of the author derricks4
    PayPal obviously has it's pros and cons. The largest benefits are that it has no overhead, and is widely known and used for transactions by consumers. These are both very crucial for the "little guy", or those starting in IM. If you can, having your own merchant account would be ideal. However, jumping the gun too soon and going after a merchant account when you're not yet sustainable is asking for problems.
    My advice: start with PayPal, and stick to it as long as you feel very comfortable transitioning, then use what the major players use -your own merchant account.
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  • Profile picture of the author seasoned
    There is NO way you could view "successful" results for the two. The ONLY thing you could check is YOUR use of that at that time, which really is not the same.

    You ALSO have to determine if the checks are the same. Did you use a business account? Did you change the header appropriately? Is your email weird? Are they expats from the US? If the answer to any of those is no, you my lose customers! Do they have a history of chargebacks? are they against paypal? If so, you may lose customers.


    And beanstream is owned by digital river! THEY once had a problem with THEIR fulfillment, and #$%^ me, so I disputed the charge, and they blackballed me. The result? Several companies that I WAS a customer of lost THOUSANDS of dollars, because they switched to digital river! They also lost me as a customer. And what of beanstreams "developer page?"

    "Our developer documentation team is busy compiling information, and will be posted in the next weeks. We’re close to having it ready for you – and in our defence, please notice the absence of any animated “under construction” .gifs."

    ************SERIOUSLY***********? You want me to translate? "We decided not to tell you about this! It wasn't worth our time! You should be happy though! We forced you to have to read this, as opposed to seeing a standard graphic." You really have to wonder about the nationality and intelligence of a company that would make such a statement.

    ALSO, do YOU have a merchant account? Beanstream doesn't look like it is for that.

    Of course, a statement like "drop paypal, get a merchant account" is dumb anyway, as it implies that nobody prefers paypal and that paypal doesn't offer transparent merchant card action, and BOTH statements are WRONG!

    Steve
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    • Profile picture of the author Dan Grossman
      Originally Posted by seasoned View Post

      There is NO way you could view "successful" results for the two. The ONLY thing you could check is YOUR use of that at that time, which really is not the same.
      Eh? You just measure what percentage of people who click through to the payment stage of checkout eventually arrive at the "thank you" page post-payment.
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      • Profile picture of the author Captain Speaking
        Never had a problem with PayPal before but on the other hand, I never used or compared my sales using a merchant account...

        I think, perhaps, people feel more trust in a merchant than paypal??

        D.
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        • Profile picture of the author seasoned
          Originally Posted by worldwidesvc View Post

          Never had a problem with PayPal before but on the other hand, I never used or compared my sales using a merchant account...

          I think, perhaps, people feel more trust in a merchant than paypal??

          D.
          With the average merchant, that is certainly NOT true!

          Steve
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        • Profile picture of the author ElaineBrown
          Banned
          I think many people consider PayPal safer and more convenient than any other system.
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          • Profile picture of the author Kay King
            But not all product and merchant sites accept paypal.
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      • Profile picture of the author seasoned
        Originally Posted by Dan Grossman View Post

        Eh? You just measure what percentage of people who click through to the payment stage of checkout eventually arrive at the "thank you" page post-payment.
        That is not successful results, but the results of people that DECIDE to order that are successful.

        ****ANOTHER**** thing! Do you do the STUPID thing that I just encountered this afternoon? There was a site that had a course and gave NO logistical or financial info. I had to click through to paypal to see the price. With the OPs, and YOUR, reasoning, that was a 0% success rate for paypal. *****WRONG***** it was a 0% success rate for the seller. I GUARANTEE many did as I did.

        Steve
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  • Profile picture of the author Joshua Lowenthal
    I think it has to do with the fact that Paypal has taken a large bit of criticism amongst internet users lately.

    I can honestly say it's nice to see a webmaster with a regular merchant processor than Paypal.

    It isn't that Paypal is evil or anything it just shows a more professional approach I guess.
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  • Profile picture of the author celente
    I am sorry to say that I do not think the results are the key mate.

    We switched to paypal for our recurring income site that does over 6k per month...and since switching to paypal our sign up rate doubled. LOL.

    Yes but what we did was make it easier for the user to sign up. So For this reason my friend I would not say it is your merchant, the reason would be in the way you have your checkout to actual transaction. That is key, we do alot of testing here....and you must know if someone really wants something of yours, they will not care how to pay, they just want it to be easy to set up, as most people are dummies or novices when it comes to this sort of thing, they want ease of use.

    Still, if I were you, you need to test things again, its more likely in your checkout procedures and page load times. This has alot more to do with it rather than you merchant account. We have proved this time and time again. So you need to look at more stats, and your overall gateways to payment more closely, because you do not have enough data and stats there too.

    Hope this helps.
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  • Profile picture of the author Charanjit
    As a buyer I would rather buy though paypal. Paypal does seem to favor the buyer.
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  • Profile picture of the author neaurons
    Shocking! Now, I think I understand even more better why networking companies such as Empower Network do not recommend paypal as main payment processor. There has to be some problems within paypal for sure. and its staff need to work it out.

    While, I think, it's just about how you sell your staff.
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    • Profile picture of the author Kay King
      Wal-mart has some blue debit card that is somehow for people without checking accounts. Not sure how they fund it (must be similar to a pre-paid Visa but with lower fees.)
      The WM cards are pre-paid debits that carry Visa logo and can be used just like a credit card online. Too many sites store the credit info you give them - and are open to being hacked.

      Funding the prepaid debit is as simple as paying cash in the checkout lane and you can check balances and transactions online. If the info is hacked - it doesn't lead back to your bank account or credit card.
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  • Profile picture of the author bss2t
    I have seen this happen personally and find it to be accurate.
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  • Profile picture of the author rodsav
    Most people use paypal because it's easy and convenient. Although, I use paypal, and several other merchant accounts. Interesting statistics - thanks for sharing.
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  • Profile picture of the author KirkMcD
    We actually use PayPal for our Merchant Account.
    Their Payflow gateway.
    https://www.paypal.com/webapps/mpp/p...ayment-gateway
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