Should You Be Relying On Paypal For Your Web Business?

Written by Yaro

September 18, 2005 | 8 Comments | Print This Article

Paypal Vs PaymateI have been considering directing my credit card paying clients back to Paypal.com. The current majority of my clients are from Australia and as I have written and podcasted about (and here 2) I prefer and recommend Paymate.com.au to any Australian online businesses. I prefer Paymate because it is Australian based, has simple and quick email support and best of all, has a very good anti-credit-card-fraud system in place, which I am sure is mostly to thank for my perfect 100% record of no fraud at BetterEdit.com, trades at eBay and other business transactions I complete (touch wood!).

However there is a price for this perfection. Paymate’s fees are higher than Paypals and with Paypal recently dropping the rate for Australian users it’s becoming very tempting to make the switch back to Paypal. I also have a 100% no credit card fraud rate with Paypal but I’ve always been a little bit concerned about how much protection Paypal offers (listen to my podcasts if you want to hear more about this). Lately though Paypal has started to get it’s act together, clean up its reputation and given the ubiquitous nature of the service, I never have clients scratching their hands wondering how to use it.

I actually emailed Paymate to tell them I was considering switching to Paypal but that I wanted to stay with them and would they consider dropping the fees to match Paypals so I wouldn’t need to swap. As usual I got a quick response which offered a little reduction in my fees but not a match to the current Paypal structure. Certainly with the information products I will be launching in the near future Paypal will be the main credit card payment option I implement and I will always rely on it as a backup solution, the main question now is whether to direct my current BetterEdit client-base to Paypal or keep them going to Paymate.

If you believe in omens and signs (I do) then I have just experienced what could possibly be considered a sign to stay away from Paypal. I sent through a question through their email support system asking whether their fees include a GST (goods and services tax) component for Australian users. The GST is a significant tax in Australia and if Paypal is charging the tax then I would want to claim it back against my own GST collecting. Given that Paypal is a USA based company I didn’t think they charged GST but I wanted to be certain they weren’t operating the Paypal Australia service from a registered Australian company that might have to charge GST.

Here is the initial response email I received from Paypal:

Dear Yaro Starak,

Hello my name is XXXX, I will be happy to assist you with your
question regarding taxes.

Merchants who sell a mix of taxable and non-taxable items and services,
can tax each transaction separately. You can now set a
transaction-based tax parameter that will override the tax you have set
in your Profile.

This will affect Buy Now buttons, Donations and Shopping Basket
transactions that require a tax calculation.

· The tax variable value is a flat amount that is applied
regardless of the location of the buyer. The seller must, therefore,
calculate the value based on the respective percentage and add it on a
per-item basis

· The syntax is

….Snip! (cut short for sake of brevity)

Okay so perhaps I didn’t phrase my question clearly enough. So I sent this back:

I think you misunderstood my question.

I just want to know if your company charges me a Goods and
Services Tax on your fees.

This has nothing to do with charging my customers tax.

Regards,
Yaro Starak

To which I got this response from Paypal:

Hello my name is XXXX, I will be happy to assist you with your question
regarding taxes.

In accordance with our Privacy Policy, PayPal will not give third parties
individually identifiable information about users, except for these limited
purposes:

PayPal is not compelled by the government to release user information for
the purpose of tax implications upon the member.* However, if you are using
PayPal to conduct business, you may be responsible for reporting your
business activity and/or profits.

To view our Privacy Policy and further information on Our Use and
Disclosure of Information click https://www.paypal.com/privacy#use or copy
and paste the entire link into the address bar.

I gave up trying to get a clear answer from Paypal support. I am thankful my question wasn’t any more complicated or time sensitive then it was. This experience has reminded me that if I ever have a really important issue with Paypal, such as a chargeback or a frozen account, I should be prepared for struggle to get it resolved. An omen about using Paypal? Perhaps it could be.

(For the Australians out there interested, Paypal does not charge a GST on their fees. I checked my records and I found out the answer to this question many months ago after dealing with Paypal support when I first started doing proper account keeping.)


Related Articles

Categories

Forward to Friend

Email a copy of this article to a friend

* Required Field



Separate multiple entries with a comma. Maximum 5 entries.



Separate multiple entries with a comma. Maximum 5 entries.

Loading ... Loading ...

 

Add your comment

8 Comments

MyAvatars 0.2

I still enjoy paypal…but recently I have begun the task of setting up an online store to which I think I may actually need to get a real merchant account — but they are all so darn expensive. argh.

Comment by Jason @ 2005-09-18 15:54:59
Reply to this comment
 
MyAvatars 0.2

LOL - yes paypal from my experience are renowned for coming back with totally stupid responses. I had one dealing with them - went on for over one week - almost 20 emails from them. About half had nothing to do with my query, a quarter said to do what i was originally asking about and the remaining quarter had something,but not all to do with my question.

I have only been using paypal for 6 weeks, but don’t find them especially cheap, especially when doing business in USD and then bringing it home in AUD as there exchange rate is REALLY BAD

Comment by PlusOne Marketing @ 2005-09-18 16:44:44
Reply to this comment
 
MyAvatars 0.2

Wow, I think PayPal seem to have been doing a fair bit of copying and pasting in there support e-mails - it just doesn’t seem to answer your question! Oh, and well done on e-mailing Paymate and getting a slight reduction in fees. I’d say two sayings that I love apply here: If you don’t ask, you don’t get AND every little helps (actually a Tesco slogan!). Well done :D

Comment by Benjamin Riches @ 2005-09-18 19:50:09
Reply to this comment
 
MyAvatars 0.2

An update on this - Paymate have offered a deal that will effectively reduce my fees by just under $400 for the next 12 months, which will still be slightly more expensive than Paypal but much more reasonable given the extra protection and advantages of using Paymate.com.au.

I’ll be leaving my set-up pretty much as it is, encouraging Paymate as the first credit card option but making Paypal available too.

There is a good lesson in this - companies want your business so don’t be afraid to ask for something in order to keep your loyalties. I’m sure I would do the same if I was in Paymate’s situation given I’ve been worth quite a bit of money to them over the last couple of years, not to mention the 4 referrals I’ve brought in as well and probably a few more from this blog.

Comment by Yaro @ 2005-09-19 13:06:11
Reply to this comment
 
MyAvatars 0.2

At the end of the day you need to consider more that just this in my opinion, because you are ignoring the extra market you get when you offer Paypal as opposed to Paymate. I suppose the best way to explain it is like this: a lot of people use Paypal like a bank account, they’ll get payments in for things and then pay for things out of it. I get advertising payments into my Paypal account and then I pay them out for things such a domain registeration, advertising, and other bits and pieces. If a company offers paypal I’m more likely to use them as well. Sure, its a hangover from the days you couldn’t set up an Australian account so it was difficult to get the money out, but I know a lot of people who use paypal like this.

Until recently I was also doing a fair bit on ebay as well and used Paymate and Paypal side by side. I’m not sure whether anyone ever used Paymate but plenty of people used Paypal (and these were Australian before Paypal.com.au was established!) Paymate’s fees were excessive and I dumped it after a couple of months.

I suppose the use of a service like Paymate depends on what you are selling, but I couldn’t possibly recommend the service. Paypal equals extra customers. Its not perfect, the exchange rate is pretty poor, but if you manage your account well and minise your withdrawals by using your Paypal funds to by services you require its a great service.

Comment by Duncan Riley @ 2005-09-19 13:25:34
Reply to this comment
 
MyAvatars 0.2

Your point about using Paypal as a sort of Internet wallet is a good one Duncan. I often do the same thing, paying hosting bills and buying info products using my paypal account so I never need to transfer the cash into my bank account in Australia, provided my cashflow is good. It makes my bookkeeping painful but it gets done.

I believe the best option, and what I intend to do now, is make both Paypal and Paymate available to my clients and see which get used more often.

Comment by Yaro @ 2005-09-20 13:31:33
Reply to this comment
 
MyAvatars 0.2

I will perfer paymate, my experience is that paypal customer service are useless. Most important is no way to complaint them.
How can you host an Help Deskside without any complaint department? well, paypal do.

Comment by windwood @ 2006-04-06 13:18:06
Reply to this comment
 
MyAvatars 0.2

I’ve recently had some trouble with Paypal, and I’ve never been too thrilled about their fees. I’ll definetly be giving paymate a try!

Comment by Tabster @ 2007-09-14 00:07:30
Reply to this comment
 

Leave a comment

Previous Article

« SEO Myth Busting - Does Rank Leak Exist And Are We Suffering From PageRank Paranoia?

Next Article

Entrepreneur’s Journey Joins 9rules Network »