Practical Ecommerce

Analysis: The New PayPal

To more than 50 million users, PayPal used to signify a peer-to-peer payment exchange that relied largely on email notifications. Not anymore. While PayPal still stands as one of the most recognized brands in the ecommerce world, it’s no longer a single payment system: It’s a suite of different payment options that can assist merchants to start accepting payments online or enhance their existing payment functions.

What are they? How do they differ from each other? Which ones should you use, if any? Let’s take a look.

Website Payments Standard uses PayPal’s own website to process payments for you. Customers temporarily leave your store and pay on the PayPal website, with or without a credit card (e.g. they might use their PayPal account, which contains funds deposited from their checking account). Customers are taken back to your website at the end of the transaction.

Website Payments Pro combines two payment systems:

  • Direct Payments, whereby customers pay at your store via credit card, without knowing that PayPal is involved. No PayPal branding appears on the payment page. This is an alternative to establishing a merchant account and payment gateway relationship yourself: PayPal will be both your merchant account provider and payment gateway.
  • Express Checkout, essentially PayPal’s answer to Google Checkout — although PayPal developed the concept first. Users can opt not to register or login at your store; instead, they complete their purchases at PayPal, where the same login information can be used for any store that supports Express Checkout.

PayFlow Payment Gateway presents two choices that incorporate the PayFlow payment systems from VeriSign, which PayPal purchased in November 2005:

  • PayFlow Pro is a standard payment gateway, which translates into a credit card form shown to customers during checkout. Customers don’t leave your store during the transaction. A component must be installed on the web server hosting your store. You will need an Internet merchant account through your bank or other merchant account provider.
  • Payflow Link directs customers out of your store to the Payflow Link page, where they pay for the order. This system is typically used when you don’t have a shopping cart, and you are simply in need of a payment page to collect payment for a product or service.

Are you confused? I was. Website Payments Pro (WPP) Direct Payments and PayFlow Pro both allow credit card payments, on a merchant’s own website, without any PayPal branding. What’s the difference? Why does PayPal offer both? Here we go:

  • For your customers: there is no difference.
  • For you: it’s speed of setup, cost, and reporting features.

If you are a new or very small business, go with Website Payments Pro as getting setup is likely faster and easier since you don’t need to obtain an Internet merchant account.

Cost-wise, WPP is cheaper until the number of daily transactions becomes substantial. Specifically, PayFlow Pro costs $40 more per month than Website Payments Pro and has a setup fee of $249, but a much lower cost per transaction ($0.10 versus $0.30 for WPP). The credit card processing rates that you can obtain through your bank (if you are an established business) might also be lower than the rates charged by Website Payments Pro, which vary between 2.2% and 2.9% depending on volume and other qualifications.

Do the math and – depending on the average order amount on your web store – you’ll find that PayFlow Pro becomes cheaper when the number of transaction hits a certain threshold, which is normally a few hundred orders a day.

There are also differences in functionality. In my experience, large stores that process hundreds of orders a day typically use PayFlow Pro. It provides more advanced reporting and transaction reconciliation features, for example, on top of the lower cost per transaction.

How about Express Checkout? Once it has been integrated into a shopping cart, it can be used with any gateway supported by the cart, not just PayPal’s. So you could be using Authorize.Net and Express Checkout on the same store, for instance. If you opt to use Website Payments Pro (Direct Payments), Express Checkout is enabled automatically (a PayPal requirement that your shopping cart provider had to comply with).

And PayFlow Link? It’s for merchants that typically don’t have much experience with ecommerce and want a solution to cut and paste HTML into their website to allow the purchase of a few products or services. In other words, if you are using a shopping cart, you will not use Payflow Link. So don’t worry about it.

Let’s recap.

  • Website Payments Standard: Use it to offer PayPal payments if your shopping cart does not support Express Checkout. If it does, then Express Checkout basically replaces it.
  • Express Checkout (Website Payments Pro) Activate it on your store if you want to provide an alternative checkout option, similar to Google Checkout. Customers that hate to register with a new store will appreciate the ability to bypass your registration form.
  • Direct Payments (Website Payments Pro): This offers an easy way to support credit card payments on your store without having to get an Internet merchant account. Customers stay on your store and there is no PayPal branding.
  • PayFlow Pro: If your store processes several hundred orders a day, go with PayFlow Pro to take advantage of more robust reporting and transaction reconciliation tools. You will need an Internet merchant account through your bank.
  • PayFlow Link: If you use a professional shopping cart, you don’t need it.

Check with your shopping cart software provider to determine which of these payment options could be used on your store. If you are looking for new shopping-cart software, PayPal has a list of compatible carts on its website.

Massimo Arrigoni

Massimo Arrigoni

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  1. Legacy User April 26, 2007 Reply

    The New Website Payments Pro 2.0 only Costs $20.00 A month and Doesn't have the $249.00 set up fee It has the same fees as the Regular website payments pro.

    — *Hillel Zafir*

  2. Legacy User April 26, 2007 Reply

    Great summary, I could have used this a month ago when were trying to sort our way through the PayPal jungle.

    Unfortunately all options but the Website Payments Standard are only offered to US merchants.

    — *Jens*

  3. Legacy User April 26, 2007 Reply

    Be very careful selling using PayPal. I sent an item that was received damaged. The buyer informed me the box was torn open. I advised him to file a claim with the USPS since the item was shipped insured. I also requested a picture. None received and a claim with the USPS was never made. Buyer instead filed a complaint with PayPal. After two months, no discussion and no emailing anyone at PayPal, they decided to refund the buyer's money and took my funds without authorization. No recourse for me at all. I have to eat the sale and shipping fees.

    Paypal has a strange way of treating its customers (merchants).

    — *steve*

  4. Legacy User April 26, 2007 Reply

    From experience, you are much better off getting your own merchant accounts. Don't get me wrong . . . PayPal is a good payment option to have for your customers but don't make it your primary payment option. If a complaint arises from a customer, you will have a hard time getting any help from PayPal and in most cases the funds disputed will be held by PayPal for weeks and maybe months while they investigate. In most cases the merchant will loose the dispute and the funds will be withdrawn from the account. Anyone new in the credit card processing with get burnt at some point in time by fraudulent transactions. Do your homework and learn how to minimize credit card fraud. When it happens, and beleive me it will, consider it as a "cost of doing business." Just like shoplifting, you can do a lot to prevent it but you will never be able to avoid it completely.

    — *Fred Robson*

  5. Legacy User April 26, 2007 Reply

    I have had issues with PayPal as well. They don't communicate well when problems arise and you're definitely at their mercy.

    — *Steve*

  6. Legacy User April 26, 2007 Reply

    Very nicely done.

    Anyone notice how bizarre it is that PayPal is invalidating the seamless (WPP) solution? By forcing Express on WPP users it's alienating the heck out of my customers. They are defecting to other merchant solutions. I've investigated alternatives for my own projects as well. What's the point of a seamless solution if the cart also has to have a garagey PayPal interface as well?

    — *Caroline*

  7. Legacy User April 26, 2007 Reply

    Be careful using PayPal. There is no communication with PayPal especially if there is a problem. PayPal is quick to freeze an account. Your account funds are froze until PayPal decides you can have access to your funds. There is no communication. During this time, PayPal will process payments but you don't have access the the account or funds. The forums have thousands of complaints about PayPal. Be careful.

    — *James*

  8. Legacy User April 26, 2007 Reply

    Hillel: the pricing information listed in the article is correct. WPP costs $20 a month. PayFlow Pro costs $59.95 a month (so around $40/m more than WPP), plus a setup fee of $249. For details, see the PayPal Web site at: https://www.paypal.com/cgi-bin/webscr?cmd=_profile-comparison

    — *Massimo Arrigoni*

  9. Legacy User April 27, 2007 Reply

    PayPal is famous just because it is the oldest and is "widely used and accepted". Over a period of time the number of PayPal members (personal, premiere and business) have increased drastically and are increasing continuously as the sales made over the Internet are surging high; but to my surprise PayPal has done nothing to tackle this increase and to improve its customer service. You still get a reply from them after 3 to 4 working days and in some cases no reply at all followed by a mail after 20 to 30 days indicating to contact phone support people as PayPal cannot reply due to heavy increase in the number of mails. Google Checkout will soon make PayPal history just because PayPal is not aware of the fact that "business is all about making new customer's but at the same time keeping current ones happy." All in all, go in for PayPal if you don’t have any better alternatives like Authorize.Net, Google Checkout, etc.

    — *Rishi Sachdeva*

  10. Legacy User April 27, 2007 Reply

    I want to backup the comment about poor communications. It's impossible to e-mail or call any decision maker at PayPal. When you call the customer service number the people are not empowered to do anything other than listen and quote policy. In my dispute I was unable after two weeks of effort to call or even get an e-mail address. I will be shutting down my Paypal account within a few days.
    If Paypal feels the customer is always right, I guess they forgot who the customer is: The people paying them a percent of the sale, us, the merchant. I would recommend Practical eCommerce run an article about PayPal and the relationship issues between merchants and PayPal.

    — *Steve J*

  11. Legacy User April 30, 2007 Reply

    We offer our customers various alternatives for payment selections on our websites at AvanteHandsFree and DakotaLady. They can choose to use a direct credit card payment, PayPal or Google Checkout.

    We have used PayPal services for more than three years without any problems, and customers seem to like the choice. We move funds a several times a week to our regular bank account.

    So far…. so good!

    — *Bonnie*

  12. Legacy User April 30, 2007 Reply

    I have had a PayPal account for little more than five months now. The response time is pretty bad. I can also relate to the customer issues. I have had an issue with a customer, and I just refunded him and let him keep the product to avoid a negative review on accepting payments. I am also concerned about giving them a bank account number, and I also would not like to set up another. I am letting my money sit there and earn interest, but how much should I let sit there?

    — *Scott Wiese*

  13. Legacy User May 7, 2007 Reply

    I hope PayPal will soon start supporting Estonia. I hate being left out like this while most of the e-trade is done using PayPal.

    — *Hans*

  14. Legacy User May 11, 2007 Reply

    I encountered serveral times when PayPal refunded my money to customers who complained they never receive my software items. These items are download from our server. It is rather frustration when PayPal always refund money to any customer who complain to their credit card company.If I got a choice, I will give PayPal a run for their money…:xxxx

    — *robert*

  15. Legacy User May 14, 2007 Reply

    To the OP.

    I had many problems with PayPal and after 89 emails I contacted the Nebraska Attorney General's office. This was very helpful and PayPal paid attention. Problem was solved within one day from the receipt of the AG's letter.

    Never leave any money in your PayPal account.

    PayPal is not governed by the FDIC. They make their own rules. Proceed with caution.

    — *Nan*

  16. Legacy User May 14, 2007 Reply

    There is aother global payment alernative, similar to a Paypal like service, competitive in rates, particularly for digital content sellers and subscription services, called ClickandBuy.com

    — *Michael*

  17. Legacy User May 24, 2007 Reply

    WOW
    Thanks for these great comments. I have a PayPal account but have not sold anything through it yet. Now I will use caution. Thanks again.

    — *Steve*

  18. Legacy User May 31, 2007 Reply

    Nice article, though the title is kind of misleading. Google Checkout is a competitor of Express Checkout (not the other way around). Payments Pro along with Express Checkout was launched in October of 2005, almost a full year before Google Checkout was introduced. The latter looked like it was prematurely released, which may have created a backlash resulting in more interest in Paypal.

    — *Ross*

  19. Legacy User August 28, 2007 Reply

    Paypal is horrific when it comes to customer service and taking care of the ones who actually make them money…you, the merchant. They will freeze your account and lock it and then won't free up your SSN or FEIN ever, at no time, it's closed for life, so you can never get another Verified account under your same, legal information by using your SSN or FEIN.

    No budging on this, they flat out won't listen or change a thing. Go with Google Checkout.

    — *Aric*

  20. Legacy User October 22, 2007 Reply

    I have been on hold waiting for Paypal merchant support for almost 2 hours right now. This is typical for paypal. They are consumer oriented, not merchant. I'm looking for another provider, will take a look at Google's offering. Having access to knowledgable support people is mission critical for a merchant. Paypal doesn't have it. Look elsewhere. Here is the number for Paypal merchant support, if you want to try to call and see how quick you get to a human: 888-883-9770.

    Don't hold your breath! Since PP took over Verisign Payflow products, support has become non-existent

    — *Ed*

  21. Legacy User October 24, 2007 Reply

    I have been completely shut down by PayPal for the second time this week. First their servers were having problems and were not resolved for an entire business day. Today every sale is immediately voided because of a problem "upgrade"…it is still not resolved. They give a generic "we are sorry for the inconvenence and are working on the problem" response after being on hold for hours, and have not been responding to emails. I use Payflow LInk and will be switching to LinkPoint as soon as I am approved.

    — *Melissa*

  22. Legacy User October 26, 2007 Reply

    I will never use PayPal as a merchant again! They have exhausted my time and efforts without budging an inch after demanding proof of shipment of one out of over 100 sales of the same item (a book) that was not confirmed. We had lost that one shipping number, but no amount of explanation, calls, emails, etc. were accepted. As noted by others, the more you argue the more they restrict your account until they freeze it completely. I finally was told after six months that I could transfer my funds to my bank — we'll see if they actually do it! I hate PayPal.

    — *James S. Ketchum*

  23. Legacy User January 4, 2008 Reply

    "Analysis"? Maybe, but certainly not an unbiased one… ECommerce, PayPal and ProStores are all the same company, probably the one paying Mr. Arrigoni to write this "article." Caveat emptor..

    — *Lori*

  24. Legacy User January 4, 2008 Reply

    We asked Massimo to write the article because of his knowledge and integrity and because his company, Early Impact, does not operate in the payment space. I'm not sure what Lori means when she includes "Ecommerce" as being within the same company as PayPal and ProStores. Certainly it is not Practical eCommerce, which my wife and I own.

    We look forward to Massimo contributing for us in the future, which he always does for free, by the way.

    Kerry Murdock
    Publisher

    — *Kerry Murdock*

  25. Legacy User January 5, 2008 Reply

    PayPal. OMG. Too many problems, I'm a power seller in eBay, and they froze the money. more than one week to resolve problems. I only can send 500.00 to my cheking account at month. too many problems, bad customer service.
    (people don't know what they are talking about. PayPal. is only for ecommerce (100.00 USD) no more. In the end, I changed, too.

    — *Danimir*

  26. Legacy User February 9, 2008 Reply

    Hi
    I'm Troy
    Owner of host it plant

    Yes we have had the same problem,
    Pay pay froze $12,000.00 of our funds and after sever so called customers are making fruadulant chargeback, paypal will not fight for your money!
    charge back fraud. 15 U.S.C. 1601 and Electronic Funds Transfer Act.

    as stated from your page
    https://www.paypal.com/us/cgi-bin/webscr?cmd=xpt/cps/securitycenter/sell/ChargebackGuide2-outside
    Reducing chargeback fraud.

    Chargebacks are also used as a tool to commit credit card fraud. Fraudsters complete a legitimate transaction, receive the goods, and then dishonestly request a chargeback from their credit card company

    in the end , Us merchants suffer, basically people ares stealing from us and paypal is allowing them to take our product while paypal collects transaction fees from is so we are losing double ..

    do a search on Google or visit our site, look for the paypal info, you will see that since 2003 in California alone, over 250 companies or individuals have files lawsuits against them for illegal activities, don't trust them,
    Troy
    Host it Planet

    — *host it planet*

  27. Legacy User March 13, 2008 Reply

    I agree with all the above. I've only had problems with Paypal. I am selling services and have my clients sign a contract with a clear refund policy. Paypal disregards the legally binding contract siding with the client all the time.

    — *BJ*

  28. Legacy User April 7, 2008 Reply

    Given the number of complaints listed in these comments against PayPal, we at Practical eCommerce thought it was only fair that they have the opportunity to respond. You can listen to Publisher Kerry Murdock’s interview with Colin Rule, PayPal’s Director of Online Dispute Resolution [here](/podcasts/episode/436-PayPal-Director-of-Online-Dispute-Resolution-Colin-Rule)

    — *Brendan Gibbons*

  29. Legacy User April 23, 2008 Reply

    Is there a good alternative to paypal for Canadian merchants?

    — *Shawna*

  30. pcpartsplus August 5, 2008 Reply

    I do use PayPal some have had a few problems but once I give them the confermation of delivery they tok care of it ,once the customer recieves the item it means they accepted it and it was good unless noted at the time if they did not note damage at the time,there SOL,I had 5 reversals from people saying they did not recieve or box tore up found out gave them the copy of confermation they recieved and was money in my account right then ,al they needed ,I do have a merchant account too it great to ,but you have to do the fighting with PayPal they do it,The advantage of merchant account though a lot cheaper on fees by far

  31. flaps August 5, 2008 Reply

    I have been using PayPal as my main payment option for customers since 1999. I have had my share of chargebacks, and in all but a very few the customer truly had an issue that I needed to address. As far as communication they send you multiple emails, they let you log into your account where tons of info is located about the issue, as long as you followup with the correct info and tracking on the item, its hard to lose unless the customer has a very real issue and you have not done a good job with follow-up on the issue. I have won more, or lost less with PayPal than any other payment system. Most of the issues I read about on here sound like more of an issue with how the seller is handling the issue and lack of follow-up. Calling in to solve problems is not an option, nowadays in many cases, but PayPal provides an amazing well set-up account system for sellers and a good way to provide info and follow-up. Just my 11 year user’s opinion. I have used other payment systems and all cost around the same in the end, and provide absolutely zero protection for the seller, and most of the time you need to call, talk to about 6 different people and none will actually help.

    Chris / Tristar

  32. David December 12, 2008 Reply

    My experience as a paypal seller is the same as most. Unpleasant. One guy forgot what he paid, contacted Paypal and they immediately put a hold on my account. The first I knew about it was an email that looked like spam from paypal. It was a big headache to get paypal to reverse the freeze, even after the customer contacted them and said he recovered from his amnesia. But as a buyer paypal has been fine. I have never had problems and never made any for a seller. Sellers are guilty until proven innocent on Paypal.