In my recent posting about setting up an online shop I mentioned PayPal. What is PayPal? And how does it differ from merchant accounts from banks? These are questions I am often asked when I start to discuss online shopping with potential customers.
PayPal is a service that allows individuals or businesses to accept online payments. Most people who sell on eBay accept payment by PayPal and many small businesses use it as their online payment method of choice……
On the face of it a PayPal account performs the same function, for online purchases, as a merchant account. However, unlike a merchant account where, as a customer, you pay directly into the merchant’s bank account, PayPal is an “Escrow Payment System”. In other words you, as the customer, pay to PayPal and then PayPal pays to the merchant.
The main advantage of PayPal is that, unlike merchant accounts, there are no initial set up costs only transactions fees which are comparable to those for merchant accounts. Hence PayPal is very attractive for small businesses who want to start trading online without large upfront overheads.
All eCommerce systems have payment gateways which allow them to be integrated with PayPal. You can also sell individual products from your website by adding “PayPal buttons” which, when appropriately coded by your web developer, will take your customers directly to PayPal’s payment system. PayPal also have their own “PayPal Online Shop” which can be integrated into your website.
Accepting online payments from PayPal is easy. You simply set up a PayPal account directly from their website. Define a bank account which PayPal can pay directly into. PayPal then does a simple validation of the account whereby they deposit two random small payments into the account and then ask you to specify the amounts when they arrive. The process takes a couple of days.
Is PayPal safe? PayPal has been around since 2000. Since then millions of people have successfully used it and continue to do so. In the very early days PayPal did have a tainted reputation mainly because it was used by shady individuals and companies, but it has been completely respectable for many years. Incidentally PayPal was acquired by eBay in 2003 and is a wholly owned subsidiary of that company.
What about offline Payments? PayPal have just announce that they are introducing a chip and pin reader for small businesses in the Summer. The device is expected to cost under £100 with a transaction fee less that 3%. See below for the PayPal promo video.
In conclusion, there is now no excuse why any small business should not accept payment by credit/debit card. Any business that doesn’t is simply leaving money on the table for its competitors to pick up.