Paypal Raises Fees & Alienates Merchants
Several years ago, many service providers such as Yahoo and Hotmail learned the hard way that when a user comes into a free service, getting them to move to a paid service is much harder than expected. While Yahoo had initially expected a conversion rate as high as 5%, less than 0.05% of users eventually converted over to paid accounts through Yahoo Email, 1/100th of the expected performance rate.
While many of Paypal’s moves in the merchant services industry are brilliant, simple, dynamic, and easy to use, once in a while, Paypal makes a bad move. Over the past several years, Paypal has made many attempts at combating its growing fraud problems, and frustration continued to build as to the lack of protection that Paypal offers. While one would think that Paypal would find a solution that would fit the needs of all users, instead Paypal decides to release an “Advanced Fraud Management” tool in February that will run merchants $20 a month plus 5 cents per transaction.
Are you kidding me, people? Tens of thousands of people have had their Paypal accounts hacked, hundreds of thousands have experienced unjust chargebacks, and too many people to even mention have had their accounts locked without just cause. What’s Paypal’s response? Well, let’s charge people $20 a month plus tack on 20% to the transaction processing fee itself.
I’ve seen Paypal make several mistakes over the past few years as it pertains to risk management tools and this, mind you, is bar far the worst. Not only will it alienate hundreds of thousands of sellers but reports say that it will be nothing more than a glorified version of their existing screening tools providing no more than data that should otherwise be readily available. It’s shocking to me why more and more businesses are finding ways to sell vaporware based on something that was already there, just repackaged, and pushed out the door, in a failed attempt to look like they know what they are doing.
Want my advice, guys? (Of course you do!) Drop the pennies that you will earn from this ordeal and offer it free of charge in another move against Google Checkout. If you don’t, Google will just come out with better tools and, as you can imagine, a big part of it will be its search capabilities and Google’s got you beat. Google Checkout will offer these tools free of charge, and Paypal will be forced to give in a year later, having lost tens of thousands of merchants in the process.
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As long as Merchant Services do not get hurt by the actions of criminals and only pass the buck on ...
First of all, this is a great forum...so thanks.
I would have been betting on someone from the financial services industry ...
Only time will tell. but for my take, I found it fascinating how merchant account providers are continuing to find ...
Good post. You make some great points that most people do not fully understand.
"Ultimately, with the banks fitting the bill ...
Merchant Warehouse is an ISO (Independent Sales Office). Paypal is not even in the same realm. Paypal is like western ...
You have to make at list $2 mil a year!!! that's what they told me so this thing you wrote ...
Google is trying to be a jack of all trades, their only success is their search and their advertising program. ...
Comment by Sock Yee on 4 January 2008:
I just hope that Paypal would consider lowering the fees. Having extra amount sure puts a burden on every person including myself hoping to earn that extra cash from the internet. So far, we’re seen Google Checkout on the launch pad but I believe they still have a long way to go. I hope soon enough they will become more established and then we have a choice to select either Paypal or Google Checkout. At the moment, nothing much we can do about it but to continue using Paypal.
Comment by Hank on 4 January 2008:
Paypal is known for having the highest fees on the e-currencies market, but it is understandable as they are very safe, anyway, the increase was not that big, so no big deal, in my opinion.
Comment by Jim on 5 January 2008:
You have to be kidding me! Paypal sucks, it already takes 30 cents plus 2% from each transaction. I think I might just stop using them because this is ridiculous.
Comment by Mikey on 7 January 2008:
Is this confirmed? I never heard about this. Well, if this is true then I guess we don’t have many options in our hands for now as it’s their company and they can make changes whenever they want.
Comment by hero on 7 January 2008:
i was having the same problem? they just took to much and i am trying to downgrade my account but they won’t respond? they keep on saying they got many emails and try again. That is not honest business.
Comment by HeeLiX on 13 January 2008:
I agree that Paypal is problematic, and the fees are kind of goofy if you have a Premier or Business account, but if you stick with the basic account, you won’t be charged fees.
They also charge fees on payments of like 10 cents, it charges a percent of that, kind of funny.
But you have to admit Paypal is the fastest and most widely known.
Comment by untikoplus on 26 January 2008:
I agree PayPal fees are high, but I guess they worth, after all I haven’t experienced any problem with PayPal, no extra charges, no limited account status, no money deducted, etc.
What type of account will PayPal raise fees, Business, Premier, Personal accounts? And is this confirmed? I have read many rumours about this.
Comment by Nicholas on 1 February 2008:
How weird, the fees are so high yet many people are still using this payment processor? Most likely is because it is much safer, that’s what I think.
Comment by Damia on 6 February 2008:
They need more money to maintain their service. For me the higer fee they charge is a small matter if they can make the service better than competitors
Comment by swap on 24 February 2008:
I dont think this is a good move by paypal, if they keep on increasing the fees people will start finding other alternatives that costs less. Who will lose bussines then?