Tuesday, May 24, 2011

Direct Merchant Account or PayPal?

Today I was asked “are your rates better then paypal” and I gave two answers.

1. Yes

2. PayPal and a direct merchant account are two very different things.

I am sure you can find tons of articles on the internet about PayPal Vs Merchant Accounts, but I would like to give you my perspective. I think PayPal is great, I think there is definitely a purpose for PayPal. I strongly believe that Paypal is a great service for startup online companies, companies on a low budget that just need something to get up quick. However, if you are looking to do any serious volume, or if you are looking for something with flexibility, or if you are looking to do anything in what would be considered a high risk area, you need a direct merchant account.

What may make PayPal attractive, is first the cost. Its reasonably cheap, no setup fees, gatway fees, monthly fees, etc. With PayPal you are not really getting a merchant account, you are using their merchant account.

When it comes to getting your money, a direct merchant account may take longer, or shorter, it really depends. BUT the credit card payment system is one that has been around for over 40 years. Its trusted the world over. PayPal is a private company that in the grand internet scheme of things has been around for a while, but not as long. Also, if you do some google searches you will read stories from people around the world who have had their funds frozen by PayPal, for one reason or another. I am sure in a lot of these cases, there was a very valid reason to do this. However, I would also assume that it happened to a few people that didn’t deserve it. Just something you need to keep in mind.

Fraud protection is also something that every merchant really needs to take into consideration. With a direct merchant account/payment gateway, you will usually access to customizable solutions for Fraud protection. And you can base your settings on your business type and the history, its your choice. However, with PayPal, they have total control over fraud detection as its their merchant account that you are using. So, you may have instances where transactions are being declined that shouldn’t be.

Although the upfront costs are more, a direct merchant account/gateway allows the flexibility needed to make it easier for both the customer and merchant. For the customer, ease-of-use translates into more sales. For the storeowner, ease-of-use and automation translate into time (and therefore money) saved.

Overall, PayPal is an excellent payment solution for a business on a low budget that wants to get up and running quickly and easily. But a direct merchant account is a extremely flexible payment solution that will grow as your business grows. In the short term it will cost more to get up and running but in the end it's always worth it.

If you are looking to setup a direct merchant account or have any questions about this article, please contact me


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