Is your business paying too much for the perceived convenience of PayPal?

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PayPal is undoubtedly convenient for your customers to use, but at what price? And is it worth it?

I got a PayPal account a few years ago, basically when I first started using eBay, largely because it seemed the only way that I could pay an unknown retailer in the outer hebrides, conveniently and securely (well it assured me it was secure) for a hand-knitted matching scarf and gloves set for my niece.

It was a bit of a bind at the time, I seem to remember setting up DD’s with my bank to transfer funds to my PayPal account so that I could then pay said retailer, and I really didn’t quibble about the charges, because it was only a few pence and all I really wanted was that rather pretty and quite unique scarf and gloves set. Which duly arrived so all parties were happy.  I assume the retailer got paid anyway!

I remember using it about once every 2 or 3 months, largely for buying gifts… or otherwise for receiving money when something fell out of my cupboard that I thought would have more value to someone else, so I decided would be worth sticking on eBay.

Possibly, but the reality is they are charging you a fortune.  And when I think about it, I have never thought twice about re-entering my card details if I am visiting a web-site for the first time, as ultimately it just depends how much I want their product or service.But lately I have found myself using PayPal more and more.  I can store my credit card details in my account, multiple cards even, debit cards too of course.  So if I see that all too familiar logo, click on it I do, select the right card (if I can remember which is which), and the payment is done. And to me it costs nothing! Happy punter, which has got to be good for retailers. Right?

So how much does it cost the average retailer for the privilege of taking payments via PayPal? For most SME companies with a “normal” on-line turnover, you are looking at a 20p transaction charge (yes for each and every transaction!) PLUS a 3.4% slice of the value of the transaction.

I have had a chat with a couple of PayPal customers in the last few days who have justly pointed out that PayPal do not charge any on-going rental or setup charges, but frankly at those rates, I would hope not! And although I believe the customer does not need to have a PayPal account to pay for goods or services in this way, how many punters will simply click somewhere else in order to find a site where they can enter their credit or debit card details in the normal, but slightly less convenient way?

SPS uses NetPay to supply billing and service

I did some fairly simple calculations.  Even if a business was paying £20 to rent a terminal (virtual or PDQ as shown above), and paid £60 in setup charges, just doing 100 transactions a month at an average transaction value of £10 would mean that the setup charges would be paid for in 3.5 months. And the retailer would SAVE £16.50 a month in on-going charges! That is at Secure Payments Solutions’ standard credit card processing rate of 1.5%, and also assumes that ALL transactions are CREDIT cards. DEBIT cards are even cheaper for the retailer to process, so payback would be quicker the more debit card payments that are taken.

And retailers, dont be fooled by the convenience thing either.  If your customers come back and buy your goods or services on a regular basis, or you take recurring payments for subscriptions, “tokenisation” still means that your customers’ card details can be stored safely and securely on a remote server, all completely compliant with PCI DSS regulations.

So I leave you with 2 questions…

  • Is PayPal really that convenient for customers?
  • And even if you believe that it is, is it worth paying such a huge premium for?

For secure, reliable, cost-effective on-line credit and debit card payment solutions contact SPS on 0333 222 7700 or email [email protected].