Pay Pal, What's the Big Deal?
	You have a website or are planning to have one developed for your business. You’ve decided that you want to sell your products online and need to accept credit card payments. The first suggestion you will likely hear from web designers, other e-commerce businesses, and regular online purchasers is PayPal!

You have a website or are planning to have one developed for your business. You’ve decided that you want to sell your products online and need to accept credit card payments. The first suggestion you will likely hear from web designers, other e-commerce businesses, and regular online purchasers is PayPal!

Founded in 1998, PayPal quickly became the global industry leader in online payment solutions with over 71 million account members (just one million shy of people who hold American Express cards) in 56 countries around the world. In October 2002, the popular online auction company, eBay, Inc., acquired PayPal and together they enable buyers and sellers on eBay, online retailers, online businesses, as well as, traditional offline businesses to securely, easily and quickly send and receive payments online via an email address. PayPal deals in transactions totaling over $48 million per day with more than 53,000 people signing up for new access every day. PayPal's service builds on the existing financial infrastructure of bank accounts and credit cards and utilizes the world's most advanced proprietary fraud prevention systems to create a safe, global, real-time payment solution.¹

So what’s the big deal? In the past, you had to be a well established business in order to qualify, accept and afford the ability to process credit card payments for your business. This caused smaller businesses to miss out on valuable sales from a large market because they could only accept cash or checks. This also meant dealing with bad checks and the related fees, along with, having to wait days for their money to appear in their checking account. To top it off, adding credit card processing to a website required a significant investment due to the extensive web design knowledge required to incorporate the gateway onto your site, the efforts to monitor fraud and maintain a secure Web site and the additional fees for an online merchant account which is a separate account from your credit card terminal account.

Typically, fees for bank merchant accounts can be quite high, with initial setup charges that can run several hundred dollars, plus ongoing monthly service fees of as much as $100 a month. Additionally, banks can take 4% to 5% of each transaction. In contrast, acting as a middleman between credit card companies and merchants, PayPal charges 2.9% for transaction volumes of less than $3,000 per month, plus 30 cents a transaction. There are no setup costs, and the transaction fees decrease for monthly sales of more than $3,000.²

PayPal has developed a formula that is easy for individuals and businesses to compete with the large corporations by providing a cost effective, simple, and most importantly, secure solution to online credit card processing. Small businesses and individuals no longer have to miss out on the growing popularity of e-commerce. "When entrepreneurs move online, they establish themselves on a level playing field with larger competitors," Entrepreneur magazine editorial director Rieva Lesonsky says in her guide to doing business online on PayPal's Web site. "On the Internet, even the smallest online retailer can be as attractive and as functional as the largest big box store -- without the need to have a physical presence on every street corner."

Even companies at the other end of the spectrum find PayPal valuable. Large retailers offer PayPal in addition to credit cards payment because some customers prefer not to use their credit cards online. Yes, PayPal is not just about credit card processing. Once you have an account verified you can pay for transactions directly from your PayPal funds or from a checking account that you associated with your PayPal account.

No really, what’s the big deal!? Not convinced yet, next month I will discuss the various features that PayPal offers to merchants. Tools from Email Invoicing, Subscriptions and Recurring Payments, a Shipping Center (USPS & UPS) and now the Virtual Terminal (phone, fax and mail order payments) will be highlighted.

To see PayPal in action, visit the Duluth Merchants Association website, www.duluthmerchants.com. You can now pay your membership dues online with the click of a PayPal button! You are also able to make other payments like the Stars & Stripes 5K Run/Walk and Spring Benefit registrations. You can even make tax deductible donations towards these events.

¹ PayPal, an eBay company: www.PayPal.com
² Crain's New York Business “Cutting the cost of e-commerce” December 6, 2004