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Payment Options: Using PayPal: Part 1

With all of the hullabaloo over the recent VISA / MC changes, many smaller pay sites are looking for alternative revenue streams, just as more established players seek to broaden their processing options while increasing their stability and long-term viability. One option worth considering for a variety of reasons is PayPal. Let’s take a closer look:

As part of my series on the ongoing changes in the payment processing arena, I will be looking at a wide variety of current alternatives to using ‘The Big Three’ for the conversion of surfers into customers; and while I personally believe that for the majority of pay sites, using the likes of Epoch, ibill, or CC Bill still remains ‘the best’ option – it is clear that "one size does not fit all…"

At the outset of this series on Payment Options, let me also state that some (if not all) of the options we will discuss will eventually be affected to some degree by the same market forces and regulatory changes that we are currently witnessing: after all, the abuses of fraudulent Webmasters, as well as the vagaries of the world banking system (and myriad other factors well beyond our control), will all conspire to quickly eliminate the word "stability" from much of our discussion of this topic. The bottom line is that the many problems facing the world of online transaction processing do not solely affect a small handful of major players, but the industry as a whole, and all e-merchants – regardless of their size – must be flexible, and prepared to act swiftly in the face of these evolving developments. In other words, what works today, may not tomorrow: so be prepared!

What A Pal
I chose PayPal to begin this series as they have been a familiar, if not common, face upon the landscape of adult Website ‘join’ pages. Usually seen on smaller ‘amateur’ sites, I have more frequently encountered this option during my explorations at eBay – which has now acquired PayPal. And it was a breakfast e-mail from eBay concerning PayPal that pushed me in this direction. It stated in part:

"It's official! eBay's acquisition of PayPal is complete. We are now working together with a common goal: to help buyers and sellers trade online. […] Over the next few weeks, you'll begin to notice what we call our "integration process." […] In the coming months, more changes will be made -- to make trading on eBay faster, safer and more convenient for the eBay community."

While this message spurred me to type "paypal.com" into my browser’s address bar, it also gave me concern over what (if any) policy changes regarding the types of products or services that the ‘new’ PayPal would be allowed to handle, as eBay has already limited the scope and availability of adult materials offered for sale on their own auction service. As I stated earlier, having flexibility in your business planning and operations will be the only way to achieve future success…

Signing up for a PayPal account was a breeze. I selected the Business Account option (while ‘Personal’ and ‘Premier’ level accounts are also available, the ‘Business Account’ is what we will concern ourselves with), and after filling out a short online form and reviewing the system’s Terms and Conditions (T&C), I was now scanning my Inbox for the e-mail confirmation link, which was needed to activate my account. The process was quite painless, taking less than 15 minutes to complete; although the account verification process (in which PayPal will make two deposits to my checking account to verify that I have access to it) will take a few days to complete. While I have only had my account for the past 5 minutes, a cursory overview of the administrative offerings and billing options is proving to be quite interesting.

Getting Down to Details
While I have only had my account for the past 5 minutes, a cursory overview of the administrative offerings and billing options is proving to be quite interesting. Some of their service’s features should make it seriously appealing to smaller (particularly single-model ‘real’ amateur) site operators, as there are several flexible options for funds dispersal, including an ATM / Debit Card option as well as their own Money Market fund.

For companies used to paying a relatively high transaction discount rate (such as the 15% that ibill received from my wife’s personal pay site), the low discount rate that PayPal charges (which now currently ranges from 0.7% + 30¢ to 2.9% + 30¢) will be a welcome relief, and although they might lack the sophisticated password management and customer service options that several of the other processors offer, the truly dramatic difference in cost may mean the difference between profitability and failure for a number of smaller operations.

At this point, I have barely scratched the surface of the benefits (and potential drawbacks) of using PayPal for processing recurring site membership fees. There are myriad unique options to their service, and I am quite certain that there will be a place for them in my various operations. Stay tuned for more! ~ Stephen

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