Paypal review: A payment processor for SMEs

Accepting credit / debit card payments online is generally one of the first steps an online store owner will take. Trying to find the right card processor can sometimes be tricky, as each have different costs, requirements, benefits etc.. Most credit card processors require you to have an Internet Merchant Account (IMA), which again can be expensive and sometimes difficult to obtain.

Paypal offers a slightly alternative service as by definition it is an Online Payments Bureau, meaning that you don’t need to have an IMA as they process the card details for you, using their own acquiring services. Consequently Paypal, which is now called “Paypal Merchant Services” is perfect for SMEs wishing to trade online, as it has low (usually non-existent)  setup fees. This article reviews the pros and cons of the Paypal services for merchants.

In my opinion the most useful features of Paypal’s merchant services are Website Payments Pro and its Virtual Terminal – the combination of the two should satisfy a SMEs online card processing needs. An overview of the two services is given below:

1. Website Payments Pro - Once you’ve applied and been accepted into the Website Payments Pro scheme, not only can you accept credit / debit card payments through Paypal, you can also accept them on your site. This avoids the issue of having to redirect visitors away from your website, which can boost order completion rates. Paypal have released official payment modules for hundreds of shopping cart systems, such as osCommerce, Agora etc.. In my experience of intergrating the official osCommerce Paypal module, it was quite a simple procedure if you use a good file comparison tool like WinMerge. Customers simply go through the order process on your website, and then enter their payment details on your website, rather than going through to the Paypal website. An internet merchant account is provided as part of the package, so there’s no need to get one of these from a merchant bank. In addition to being able to accept payment details through your own website, access to their ‘Virtual Terminal’ is included – allowing you to take telephone, fax or mail orders and process the details in real-time online.Current Price: Free Until 1st July 2007 – then £20pm thereafter.
   Transaction Fees: Range from 1.9% to 3.4% dependent on monthly volume and each transaction incurs a flat charge £0.20.
2. Virtual Terminal - As I mentioned above, this is a great and powerful application, enabling any business to take payment details and process them through an online interface. You don’t need a PDQ to swipe the card – you can accept card details either over the phone or with a fax. In addition to accepting sales, you can also ‘authorize’ card details – which basically means that you enter the customer’s card details, and their card is authorized for the purchase amount to make sure they have sufficient funds, and then when you’re ready to complete the sale you can ‘capture’ the funds. An example of this use would be if you only take payment upon despatch of goods – you could authorise the card details and amount upon the customer placing the order, and then capture the funds when you dispatch the goods.

• No internet merchant account required – as mentioned before this can represent a significant cost saving, with some merchant accounts costing up to £250.
• Accept credit card payments directly on your own SSL enabled ecommerce store, rather than the customer having to be transferred to the payment processor’s website.
• Virtual Terminal allows telephone orders to be taken.
• Quick application review – approximately 2 weeks when I applied.
• Secure – if you are accepting credit card payments on your website, you will need to make sure that you have a Secure Sockets Layer (SSL) certificate for your business, or have access to a shared certificate through your own web hosting company. Payment details are then transferred securely behind-the-scenes to Paypal.
• Supports a huge variety of shopping cart systems.
• Offers integration support for their shopping cart payment modules.
• Currently no monthly fees!
• Quite low transaction fees, which decrease even further if you have a high monthly turnover.
• Telephone support – Paypal has had quite a bit of bad press regarding its support; some people say they can never get a helpful answer from their customer service. Generally I find that it can take quite a while (up to 5 days) to get an email response to a query, but if it’s urgent you can always phone them up. Whenever I’ve called their customer service department their agents have always been helpful and have sorted the problem out immediately, or followed up anything which needed attention. If you experience a real technical issue they transfer you to a tech rep, who helps you diagnose the problem and helps to get the problem resolved.

• If you run an offline business and have a PDQ terminal you will already have an Internet Merchant Account to use, and so other solutions may be more cost efficient.
• Sometimes debit card / Switch transactions have trouble going through – albeit quite rare.
• Slow email customer support – but as mentioned above their telephone support is fine.
• Low turnover businesses face higher transaction costs, although these are still lower than if you add up the potential costs that your Merchant Bank and other Payment Processors would charge.

In my experience features such as Website Payments Pro and the Virtual Terminal are a great tool for both ecommerce store owners looking to accept card payments online, and for small businesses who want to accept card details either over the phone or fax. I have experienced very few problems with their service and any issues I have encountered have been looked into and sorted out quite quickly. In summary, I would highly recommend that SMEs consider Paypal as their payment processor.