Entrepreneurs-Journey.com Down-To-Earth Advice For Bloggers and Internet Marketers

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.

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

A few years back I was running a little ecommerce service as part of my Magic: The Gathering trading card site MTGParadise.com. Back when I was in the thick of things playing the game I used to win a lot of cards and did a hell of a lot of trading and selling at every tournament. More often I enjoyed the trading and selling more than the tournament itself.

Once my site became huge and I realised that there really wasn’t a good online card shop for Australians I decided to try and be that card shop. I had the audience and that’s usually the hard part. I managed to locate some wholesalers and went to work creating what I called MTGParadise Mail Order. I listed a lot of my personal collection which I had built up over the years from winning, buying and selling. I also listed sealed new product which was sold in boxes and booster packs which I located from the wholesalers. Because I had no wish to expose myself to too much stock investment I would almost “drop ship” before drop shipping became common for the public to do, in the sense that I would buy sealed product as sales came through rather than maintain a new stock inventory. Unfortunately it wasn’t real drop shipping since I had to still order the products, have them shipped to me, and then ship them out to the client which slowed things down.

The service did reasonably well. It was a horribly manual process because I would have to update card lists and inventory counts all by hand and I spent a lot of time running to the post office. I didn’t plan the service to be a proper business so I wasn’t considering systematising my inventory and having an online shopping cart like overseas card stores (which I would for sure do now, manual updates are a pain!). Another problem was that card selling has tiny margins and if it wasn’t for the fact that I managed to win cards I don’t think I would have made much profit. I did enjoy it for the most part though so I kept it going for a good year or so while studying at university.

One day I got a query from a person in Thailand wanting to buy boxes of cards. The profit wouldn’t be much because of the aforementioned tiny margins, but it would be significant enough that I was very keen to get his business.

He wanted to pay with credit card.

I asked my father about taking credit cards since he did for his business. My dad offered use of his “click-clack” manual credit card processor for the order. The customer emailed his credit card number and details and we checked the number against the ‘reported stolen’ list and it was fine. I processed the order, shipped the cards and was pleased with my first big sale.

Over the next few months I continued to have increasingly significant orders from this client which I carefully processed through my father’s credit card processor. Since I was doing such a regular amount I decided to get my own merchant account and after some looking around a bank was willing to provide me with the account. I then started to process orders through my own account.

One day many months after the first Thailand order I got a call from my father’s wife about a chargeback that had been initiated on the first credit card order I had processed from this customer in Thailand. I was worried, but not too worried because I thought that since we had verified the card for every purchase and it checked out that it just must be a mistake. I emailed the client and he told me it was just a mistake at his end so I relaxed a bit.

Unfortunately it wasn’t, the customer was a credit card fraudster and I had been very stupid. Over the next few weeks I came to grips with the fact that many thousands of dollars of sales would be ‘bouncing’. Initially I was angry with the banks that they didn’t offer more protection but as I slowly investigated the whole merchant account system I realised that the merchant is usually always the one taking the risk and that when no signature from the customer is present, which for web based orders is not really feasible, then the customer has all the power. I also read over the communications from the months of dealing with this client and realised that there were plenty of warning signs that I just refused to take notice of. I was caught up in the ‘business’ of it all and being very naive.

It was a lesson learnt. I learnt about credit card fraud, merchant accounts and the risk involved with selling over the Internet. I learnt to be more cautious and not jump with eagerness at every significant order that comes through. Call me paranoid, but it’s from experience. Note that I am complaining from the point of view of a merchant but there are instances where the customer has problems too.

When I then went on to setup credit card payment options for my clients at BetterEdit.com I was very careful. By this time I had discovered paypal and later I would also learn about Paymate, an Australian version of Paypal. These services were reasonably good solutions to provide online payment options and to this day BetterEdit processes many transactions online through them.

I have not had one problem with credit card fraud for any Betteredit essay editing service order (touch wood) but on many occasions I have been contacted by the staff at Paymate regarding suspect orders. After my experiences I really appreciate the extra layer of protection provided by Paymate. They protect you before an order is processed and offer personalised protection. As an Australian running an Australian based business I can recommend Paymate as one of the safest ways to accept credit cards and I don’t mind paying the fees for that extra level of security. Sure there are features I’d like to see and things I’d like changed at Paymate, but for the moment they offer the best option available.

I would also like to say I feel secure with Paypal but to be honest I do not. I’ve heard a lot of horror stories from other Paypal users. I’ve read through the chargeback policies at Paypal and while they do have a ‘department’ to deal with fraud, they make every effort to argue the case on behalf of their sellers and have an ‘industry leading’ low fraud rate I don’t feel 100% confident. They seem very reactive rather than proactive when dealing with credit card fraud. Their system doesn’t talk much about how they protect you from first taking fraudulent credit card orders, rather they help you to argue your case after a chargeback occurs. I know from experience that for online orders the merchant has little hope because the credit card company almost always is in favour of the cardholder.

The Paypal website seems designed to make it difficult to contact a person. I’ve tried to contact them over the phone and spent an annoyingly long time waiting and trying to navigate a phone system clearly designed so they don’t have to employ too many phone staff. Their web support is much the same. Their whole system tries to avoid providing any personal support. They point you to look for an answer online via their FAQs which is great for the easy questions but often leads to a wild goose chase if you want to find answer to your very particular question. Even just timely and helpful customer service email support would be good but I always seem to find myself waiting a few days for a response that only half answers my question. Paymate on the other hand has a simple ‘Contact’ link which pops up an email that goes direct to a real live person that responds within 24 hours with a good answer. What more could you ask for.

All the problems at Paypal seem symptomatic of a business that got too big too quickly and I hope over time their customer support will improve as it ‘catches up’. All in all though I should note that Paypal has been good for my business and since it is the market leader in online payment processing it will most likely remain as a payment option at BetterEdit.com.

Yaro Starak
BetterEdit Manager