Merchant account providers have to be the Mafiosos of the e-commerce world.
They shake small businesses down as much as possible, use antiquated technology that delivers crappy performance, and basically laugh at you if you threaten to go with another provider. They can do that because there are only so many providers out there, and they all operate the same way. To put it simply, you’re out of luck. (I wanted to include a more forceful word, but this is a family-friendly publication.)
Where is the Department of Justice when you need it? Oh yeah, using all those taxes we pay it each year fighting a battle with a certain operating system provider that will be resolved sometime within the next two centuries just about the time when it won’t make a bit of difference.
I’m afraid we’ve been left to form our group of “untouchables,” my fellow small-business owners, in solving this problem. And I think we might have gotten our first “member” with the recent announcement of PayPal’s Business Account Program.
PayPal is a service that allows customers to pay for goods and services simply by sending an email. This is how it works: Participants register a bank account and/or credit card with PayPal. Then, as a registered user, a participant can “pay” other members by sending an email notification through the PayPal system to the person or company that is due the payment. All that ever passes between the two parties involved is the amount being paid and what it is for. The actual passing of credit card and bank account information is done securely within PayPal’s system.
PayPal makes its money in two ways: 1) the float (interest earned as the funds are held in the PayPal corporate account before they are paid out), and 2) a 2.5 percent transaction fee for payments destined for business accounts.
The business accounts feature was added a few weeks ago. Prior to that, the membership comprised individuals who mostly used the service to pay for auction transactions.
PayPal solves a heck of a lot of e-commerce problems we face as small-business people:
- Security is no longer our problem. We never see the card numbers, only the transactions.
- There are no fees that border on usury.
- There are fewer cases of fraud because customers have to register, making it harder to hide who they are from the merchants.
- There’s a built-in “one-click buying” (called Web Accept) that allows the customer to buy a product in just one step. (Let’s hope Amazon.com doesn’t sue PayPal for patent infringement.)
- It is a cleanly designed, modern system built with some genuine thought about how to process e-commerce transactions.
OK, here are the downsides:
- There are approximately 1.5 million members. But the membership roles are growing with an aggressive affiliate program and the ability for members to sign up nonmembers on the fly by paying them through the system.
- There’s no shopping-cart integration (yet). If a customer buys 10 things, it is 10 separate transactions instead of 1 transaction containing 10 things.
But despite these limitations, PayPal represents the way merchant accounts in the age of e-commerce should work. And let’s be realistic. The limitations will disappear eventually as long as the service gets the support it needs to survive from the online business community.
I’m rolling out a beta test on Booklocker.com over the next week, offering PayPal as an option through which to buy our best-selling e-books.
I’ll let you know how it goes. If you can, do the same.
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