Why Paypal Is A ‘Must Have’ Payment Option For Your E-Business

Published by 38 Comments

I’ve written about Paypal plenty of times in previous articles on this blog. I did a review of Paypal, I talked about Paypal vs Paymate, the Australian competitor to Paypal and I reviewed the book, Paypal Wars, which chronicles the rise of the company and the battles it went through against eBay before it was eventually purchased by the online auctions giant.

I like Paypal a lot – I love getting those “money received” emails – who doesn’t. I’m well aware of the controversy the company faced in the past but I still recommend it as a solid online payments solution for any Internet business because I believe the worst is behind them. My Paypal review says just that (with a few more words to back up my argument of course).

Today though, I present an even stronger case for using Paypal – I believe no online merchant can afford not to offer Paypal. If you don’t provide a Paypal payments option you are leaving money on the table. It’s as simple as that.

Here’s why:

  • Paypal is the standard. Whether we like it or not, Paypal is the de-facto, it’s what everyone uses, everyone has an account and everyone knows how the system works. Okay, not “everyone” who is online uses Paypal, but chances are if a person has made an online purchase before they know what Paypal is and how it works. The awareness factor is only going to increase as more people become comfortable with online shopping.
  • People treat their Paypal accounts like play money. Initially I was frustrated that Paypal kept my money in a “paypal account” and I had to withdraw the money before I could see it in my bank account. This was one of my original complaints in the Paypal Vs Paymate debate. Paymate deposits my money directly into my bank account (minus fees) while Paypal pools my money in a virtual account where it gains no interest and runs the risk of being frozen, as so many Paypal horror story victims recount. I thought this was a bad thing.

    Now I realize this is actually a genius move by Paypal. People leave money in their Paypal account so they can use it to buy things online. That’s why they treat it as “play money”. It’s great psychology – since the money doesn’t show up in a bank account or on a credit card bill once you spend it online it feels like you are not spending real money. You might think I am foolish saying this and you may value your Paypal just as high as any money, but the fact is a lot of online consumers don’t look at their Paypal balance the same way as their bank balance. Your business has to accept Paypal “play money” because it psychologically reduces buying barriers.

  • EBay creates Paypal dependent consumers. The most common form of online commerce is eBay. Many thousands of people are first introduced to buying and selling on the Web thanks to the miracle that is EBay, either by selling or buying something at auction or under a “buy it now” purchase. As we all know Paypal is well integrated with eBay and many first time eBay users will very quickly become first time Paypal users as well. It’s very likely they will keep a balance in Paypal purely as “auction money” that they spend at eBay. This process is where they first experience the “play money” psychology and at some point in the future when an eBay user decides to buy outside of eBay, they will feel very comfortable using Paypal, yet they may consider using their credit card not safe. In that case if you don’t have Paypal as an option, you potentially lose the sale.

I Just Bought New Skates

I left Australia for Canada without my inline skates. I love to skate. I planned on buying new skates when I arrived in Canada, and since it is the home of hockey, I believed their would be plenty of shops were I could get a nice pair of new recreational inline skates. Unfortunately after some research it became apparent that there are no inline skate specialty stores in Toronto and because winter is closer than summer most stores had put away their stock of inline skates and ice skates were getting all the attention.

The solution – look online. I’m no stranger to online buying and I quickly found plenty of specialty skate shops in the USA. In particular I was recommend one online shop by a sales attendant in Toronto who said she “always buys her skates from there”. This particular store was first in the search engines for inline skates and had a huge selection – exactly what I was looking for in the offline world in Canada, but unfortunately this store’s physical presence is in California.

I arrived at the Inline Warehouse skate shop and the first thing that greeted me was a huge banner at the top that said “Now Accepts Paypal”. I grinned and instantly felt more comfortable buying from them – I could use my “play money”. This factor was a major consideration for me because, surprising as it sounds, many traditional online stores only offer credit card via a merchant facility or offline payments methods like checks/cheques. Finding a merchant that uses Paypal in my mind is a tick of approval and definitely reduces my resistance to buy from them.

Paypal Must Be An Option At Your Website

The moral of this story is by having Paypal as a payment option and proudly displaying this factor, you will increase your sales. At the very least even if you don’t want to slap a big banner on your website front page saying you take Paypal, make it an option when it comes time to pay. People need to be able to spend their “play money” at your business and if you don’t have this option you are losing potential customers.

One caveat – as I mentioned in my Paypal review, it is foolish to rely on any one single online payments provider, and that includes Paypal. You should have Paypal as an option but that doesn’t mean you don’t continue to have a credit card merchant facility, perhaps another online payments service like 2Checkout or StormPay and offline payment methods such as bank deposits or Western Union money transfers.

Further Study

You can find more on taking payments in my podcasts – Taking Payments Online – Part 1 and Part 2. These were created last year and are a bit rough around the edges but they contain a rundown of how I eventually chose what payment providers I went with for my online business.

Enjoy!

Yaro Starak
E-Commerce Evangelist

About Yaro Starak

Yaro Starak is the author of the Blog Profits Blueprint, a report you can download instantly to learn how to make $10,000 a month, from only blogging 2 hours per day. You can find Yaro on Facebook, Twitter and .

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38 Comments

  • I agree with everything you have said, it is just so sad that Paypal is not accepted in South Africa. You can pay for goods but cannot accept money, which I feel really restricts online business in SA.

    http://www.jasonbagley.com/2006/10/18/paypal-in-south-africa/

    I will have a look at 2checkout and Stormpay to see if they might be able to help us Saffa’s. :-)

  • Hi Yaro:

    Bullseye with the theory of “play money”!

    You have reason about less barriers to shop with a Paypal option, I experienced by myself when I buy online and in my online business.

    Although Spain is light years behind USA and English speaking countries in online buying, we are growing fast and the greater % of orders my business take are paid with Paypal, I think, like you, that Ebay has had a great effect in making Paypal a wide spread tool.

    Regards.

  • Yaro,

    Looks like your header in blog got distorted.

    Kumara

  • Kumara,

    I’m not sure what you mean? It looks fine for me?

    Yaro

  • Might be a resolution issue for your layout. I am viewing your blog on 12 inch screen laptop.But I remember it was displaying correctly earlier. I have the snapshot. let me know your email so that I can mail you the snapshot on how it looks.

    Kumaran

  • They recently announced new countries and currencies too so there’s even more Paypal buyers out there.
    http://www.hostingdiary.com/2006/10/paypal_adds_new.html

    (Yaro your header is distorted for me too)

    Andrew

  • I had a look in IE and saw the problem. It should be fixed now.

    Thanks guys.

  • mcp

    I am still waiting for Trinidad and Tobago to be added.

  • I would have agreed with you about a year ago, but I have to say that I now strongly disagree with your statement. The reason is that Paypal has made alot of changes to their security.

    If someone does not have a paypal account set up and ready to go, you can forget about a spur of the moment buying decision. Now, Paypal requires the every new paypal account to be validated by the bank, and once that is done, the credit card needs to be validated. This entire process can take up to 10 days. Most likely the buyer will give up on the purchase.

    Additionally, if you have a subscription through paypal, and you set it up on a credit card, only the first payment is done on a credit card. The subsequent payments are taken out of the buyer’s bank account, which can be a surprise to the buyer, as they assume that the charge will occur on their credit card. This leads to a bunch of customer service issues for the merchant.

    I think Paypal was a good service at one point. Now… I don’t have alot of good things to say about them..

  • Rita I can see your point. What I am saying is that there are millions of people online who keep a running paypal balance which they like to use to spend online.

    If they come to your site and don’t have the option of spending their “play money” in paypal you may just lose the sale.

  • Buyers don’t need to have a Paypal account to make purchases. They can pay with their credit card.

    Andrew

  • That’s if the merchant has a Paypal Pro account. A regular business account requires the buyer to have a paypal account too.

  • Andrew – that’s true, but again, not the point.

    The point is people keep a running balance in their paypal account which is their play money. This is money they have built up from perhaps selling on ebay or just from the course of buying and selling online.

    People also have an established comfort barrier with buying using paypal.

    It’s about the marketing psychology, not the practical abilities of the Paypal service.

  • I can see the benefit of ‘play money’ for existing paypal users. I think, for a merchant, paypal can be an additional option. I wouldn’t keep it the only option for payment, as many people will be unable to pay, or give up trying.

  • Right Rita, which is exactly why I have the caveat in my artitlces.

  • Rita I think you’ll find Premier and Business account holders can indeed accept credit card payments.

    While I realise it’s not the point of Yaro’s post, it is certainly another big reason to use Paypal.

    Andrew

  • PayPal is easy to set up on any website for accepting payments but one should not ignore the negative factors which are not favourable especially for online merchants selling digital items. Paypal always favor customers and even if customers send fake complaints to paypal that they could not download the product, Paypal refunds the money to the customer. It is a loss for the merchants.

    For online merchants selling expensive tangible items like cars, car Parts etc. PayPal is not recommended. Why? PayPal is a favorite target of phishers. Many times you would find unexpected money in your PayPal account – which the scammers get from PayPal accounts they have phished. And then they will demand a refund of the money. In the mean time the genuine PayPal account holder complains to PayPal about the fraudlent activity and your PayPal account gets frozen for something which is not under your control. Once the account is frozen your online business comes to standstill.

  • I can’t have Paypal. Romania is not on their list of accepted countries.

    Even If i get an account with one of my off-shore companies, I still can’t access it with a Romanian IP. So damn them.

    I think I get an e-mail from 1 in 5 customers, asking me : “Can’t I pay with Paypal ? I can’t pay trough 2CO, sorry”.

    So, bad business for anyone who wants to sell products/services to US, and doesn’t have a Paypal account.

  • m

    Cristian Mezei’s problem is an example of how PayPal has been a blight on ecommerce for the past 9 years.

    But of course only those in his pradicament understand or even care.

    I could go on but I’ll stop right there

  • Christian let me know if you sell digital or tangible goods.
    I’ll show you how to accept Paypal indirectly(higher fees may apply but it is still worthwhile)

    Andrew

  • Andrew, I am open to anything, as lonmg as it’s legal and it doesn’t brake any TOS.

    I sell only online services/products (marketing servics, links in directories etc). None tangible.

  • Christian I’ve emaield you at your blog.

    Andrew

  • Got it. I have to go into a meeting now, but I’ll read it later.

    Thanks a lot.

  • Did you read today’s news that PayPal office was bombed? You can check it here

    http://www.searchenginejournal.com/?p=3964

  • [...] In his Blog, Entrepreneur’s Journey, Yaro Starak makes some very good points re using PayPal as an e-commerce payment solution. Forgetting for the moment all of the PayPal negatives that pass for wisdom on-line(e.g. Google search results for “PayPal Sucks” = ~ 87,000 results) , Yaro instead focuses on PayPal’s strengths….and end-of-the-day, these strengths are foolish to ignore. [...]

  • [...] I’m not backing off my criticism, of course, and no one has contacted me from PayPal regarding these posts. I do think their customer service could be improved a little bit to make it less rigid and more accommodating to users actual requests. I have to wonder, though, if this type of service is much better than the bored, gum-chewing customer service operators we used to get back in the good old days. Regardless, I’m thankful for a service like PayPal and I think they’re a necessary part of doing business on the web these days. For a more in-depth viewpoint on why you should be using PayPal, check out this post on Entrepreneur’s Journey. Share this post:These icons link to social bookmarking sites where readers can share and discover new web pages. [...]

  • Cristi Serban

    Can you send ma an e-mail for “I’ll show you how to accept Paypal indirectly(higher fees may apply but it is still worthwhile)”?

    I am from Romania too and I inted to use paypal for software sell/buy.

    Thank you.

  • I hate Paypal’s policy how they choose countries which can accept money through their program.

    My country Slovenia is more than 2 years a member of EU and on 1/1/2007 we are going to use Euro as our currency but PayPal still doesn’t allow us to accept payments. It looks like this will never change.

  • Cristi Serban

    We should try to use other payment methods and avoid pay-pal related sites…

  • [...] The above providers are what I considered for Blog Mastermind and still consider for future membership sites. I’m also considering a fully fledged merchant solution with a local bank, which would hopefully eliminate unwanted cancellations. I’d offer it as an addition to Paypal because many people prefer to use their Paypal balance rather than their credit card (see this article to explain why not having Paypal is not an option – Why Paypal Is A ‘Must Have’ Payment Option For Your E-Business). [...]

  • I hope that there will be a alternative to paypal soon.

  • Nigerians residing in Nigeria are not allowed to open paypal account. It is a major headache for many online businesses operating from Nigeria. The little transactions I have done with using PayPal were routed through friends living outside the country. I do wish there is a better alternative to PayPal ;-)

  • I accept paypal payments for some of my products on my blog at the moment via the “linkloc” script but I was wondering if anyone could recommend me a decent (meaning pretty and quick) shopping cart plugin for wordpress that will accept paypal payments?

    Thanks in advance,

  • Paypal is a must because we don’t have an equally good service or better.

  • A friend of mine in 2003 lost about $14,000 after paypal blocked him. 6 months later when they released his account, there was nothing there. It took a long battle without much success.

  • Paypal no doubt is the best online and widely recognise merchant account online as of recent,but i dont like thier monopoly of the online market because of product you will like to buy …requires you having apaypal account…

  • There is a massive change underway in the mobile media market as it becomes unshackled from the operators’ portals that have dominated it for a decade, all without having made any significant inroads into the content use of mobile users. The new capped data packages, fuelled by further competition, will see a total revamp of the mobile media market. It will no longer be based on portals but on direct services by content and services providers via open source phones and mobile-friendly Internet-based services. The next step is the continued emergence of m-commerce and in particular m-payment services. 

    http://www.google.com

  • Just found this and couldn’t believe the date. You were well ahead of the curve here Yaro. Paypal is totally necessary now in so many ways. I couldn’t imagine life online without it now. Is there anything better upcoming, I don’t think so.

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