We are often asked about the wisdom of smaller merchant having a “traditional” merchant processing account instead of just going with Paypal. Let’s address that issue.
First of all, we have long proposed that there is no reason for Paypal not to be a PART of the payment arsenal of any small merchant. But it is shortsighted and foolish to have Paypal as the ONLY payment option offered. Why? Because there are some basic fundamental differences between Paypal and a traditional merchant account that need to be considered.
With a traditional Merchant Account, your funds are directly deposited into your business bank account, which you control and which is also protected by Federal Banking Regulations.
With PayPal, your money is deposited into a PayPal Account, which PayPal Fully Controls. Since PayPal is NOT a bank, they do not need to follow federal banking regulations. These regulations are designed to help the “Average Joe” avoid issues like having their bank account frozen for weeks or months with no explanation.
“Who would trust their money with a bank that could do that?”
Sadly, Paypal routinely freezes its customers’ accounts for almost anything and without warning. Once an account is frozen, the funds are often held by PayPal for months on end with Absolutely No Recourse for the merchant. This ‘shoot first and ask questions later’ attitude by Paypal is a consequence of the fact that, unlike a real merchant account, Paypal has no underwriting criteria to speak of–basically anybody with a pulse is able to open a Paypal account. Many of these people are extreme chargeback risks that a traditional merchant provider wouldn’t touch with a ten foot pole, so it serves Paypal’s interests to be ultra-conservative and aggressive in their security policies.
A domino effect occurs when a PayPal account is frozen, leaving the merchant with No Means To Fill Orders. Those orders are then disputed by customers, creating more chargebacks and the illusion of fraudulent activity on the part of the merchant.
On top of these financial concerns, there is also the very real issue of business image and credibility. Make no mistake, when shopping on the web, if consumers don’t take the vendor seriously and have full confidence the seller will be around after the sale if there is a problem, they will be most hesitent to click the Buy Now button. The fact is that a true merchant account infers legitimacy, trust, confidence–in short, that the seller is a serious business. Paypal on the other hand screams “mom & pop” fly-by-night operation. Not that there is anything wrong with being a small-time business, mind you. But let’s be honest: Getting the buyer to click on the Buy Now button is what it’s all about.
The Bottom Line? If you are a small time one-time operator, Papal is fine. If you have any aspirations whatsoever of being taken seriously and making a go of it in the business world, you need a Real Merchant Account. For a free quotation on a ‘real’ merchant account, click here.
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