PayPal: The Good, The Bad and The Ugly

Many small businesses and entrepreneurs want to take credit cards online, but are put off by the time and capital investment required by a Merchant account, a gateway processor, secure server space, and a security certificate…all tools you need to succeed with e-commerce.

For many of these people I suggest “dipping their toe in the e-commerce ocean” by starting with PayPal. However, there are both good and bad aspects to this popular online payment system.

The Good

It's damn easy to get started with PayPal. If you have a bank account you can set up your business account at PayPal in a matter of minutes. You can quickly generate buttons that allow your visitors to “buy now” or “add to cart.”

You don't need a Merchant Account. You don't need a gateway processor. You don't need secure server space. You don't need a security certificate. PayPal handles all of these issues for you.

You don't have any start up fees. You don't have any monthly fees. How does PayPal make any money you ask? They take 2.9% (less in some cases) of each sale plus $0.30 per transaction. That's not much more than your bank is taking now, plus you have no monthly fees.

But don't your customers have to be PayPal members to pay? Not any more. When PayPal first started visitors needed to become members, but PayPal now allows anyone with a Visa, Mastercard, Amex or Discover card to pay through their system without becoming a member.

PayPal is probably the simplest way to get going with e-commerce on your website.

The Bad

PayPal is cheesy. OK, that's just an opinion, but it's an opinion held by many people. I could give you statistics, but I'd just be making them up. The bottom line is that I talk about e-commerce to a lot of people because of my job and several have shied away from PayPal because they believe it will give their site an air of amateurism.

PayPal's shopping cart solution is a joke. Why PayPal doesn't improve their shopping cart experience is beyond me, but if you need a shopping cart I'd recommend looking elsewhere. By shopping cart I'm talking about the ability for site visitors to drop something into their cart and keep shopping before making a purchase. The PayPal shopping cart opens a new window and hides your site; not exactly the seamless experience you're going for. PayPal works best for “Buy Now” opportunities.

The Ugly

Working with PayPal isn't like working with your credit card company; you don't have the same rights or protections. PayPal may decide that you have a fraudulent account or payment and suspend your account without warning, in effect shutting down your online store until they decide to reopen it. Although these instances are statistically rare, you should be aware of them.

If you like reading horror stories, is a place to start.

In Conclusion

So, if two of the categories above are “The Bad” and “The Ugly,” why do I still recommend PayPal to site owners? Because for many people the flexibility and simplicity PayPal offers is too good not to consider. Although it may not be right for everyone, it's an inexpensive, effective tool for many.

Although some people have had terrible experiences with PayPal, that's going to happen with any big company, whether you're Verizon, Time Warner, or Disney.

If you have some questions on e-commerce, please let us know.

–Rich Brooks
President, flyte new media