PayPal - Is It Worth It

[Mantra]

Yes PayPal is worth it. We also take payments using Realex / Global Payments, but PayPal Express Checkout is accounting for 65-70% of checkouts. Yes, it's more expensive for us, but the customers like it. Customers also like the protection PayPal offers. PayPal nearly always finds in favour of the customer if there is a dispute. That's a PITA for sellers but means people feel more secure using PayPal.

Thank you Mark
I was considering setting up PayPal with a view to capturing more sales conversions. PayPal fees are excessive and more than double those we pay for conventional credit/debit cards through SellerDeck Payments. I did some sums and if 70% of our sales were accounted for using Paypal Express Checkout then we would need to realise 4% more sales to cover the increase in fees to stay level with an increased administrative burden.
The way that conventional Merchant Services account for fees with a single statement summary each month seems far simpler method of accounting than an automatic fee deduction on transaction that appears to be the PayPal method. Accounting for VAT looks as if that too could be rather messy.
Martin

[Mike Hughes]

PayPal fees are excessive and more than double those we pay for conventional credit/debit cards through SellerDeck Payments.

Even after including the fees for your merchant account?

Accounting for VAT looks as if that too could be rather messy.

I'm not sure I understand this. As I understand it, Paypal fees are exempt from VAT so I'm not sure why you think it could be messy.

Mike

[mje]

Even after including the fees for your merchant account?



I'm not sure I understand this. As I understand it, Paypal fees are exempt from VAT so I'm not sure why you think it could be messy.

Mike

PayPal is a pain because they take their fee out of each transaction, skewing up the amount received for said transaction - because of course they take a commision on the VAT element, but provide no paperwork- accounting is so much easier when you get a monthly invoice paid by Direct Debit 14 days later as we do with WorldPay

Anyway when this thread started I added PP Express back to my site reluctantly, but was curious having read peoples reasoning to add it. Since 1st November our site has had 19 sales - 12 choosing PayPal and the other 7 "sellerdeck payments"

No idea how many of those 12 wouldn't of completed the sale with out the PP option .. nice to get the sales of course, but no phone number with the order is annoying as courier asks for one, likewise no "account" an option using PP check out.

[Mantra]

Even after including the fees for your merchant account?

We pay a fixed amount each month to Payment Service Provider irrespective of number of transactions. Fees for Visa/Mastercard debit/credit card transactions last month amounted to 1.81% of the total value. We enabled Paypal (V14) just to test it out in October 2015 and received an order almost immediately after uploading. The PayPal fee for this transaction worked out at 4.7% of the total value so we subsequently removed the PayPal option which we felt was given too much prominence over other payment methods on check out.

I'm not sure I understand this. As I understand it, Paypal fees are exempt from VAT so I'm not sure why you think it could be messy.

Our VAT is calculated on the selling price of the product. Card transaction fees are exempt from VAT and accounted for as a business expense. I may be wrong but where I think this could get messy is if separate entries have to be made for multiple PayPal transactions.

Martin

[guccij]

I think this could get messy is if separate entries have to be made for multiple PayPal transactions.

We add ours up each month and enter them as one amount x 12.

[guccij]

no phone number with the order is annoying as courier asks for one

You can change a setting in your PayPal account to require a phone number. PayPal suggests this puts people off making the purchase. It doesn't, in our experience.

You do have to check that the details Sellerdeck receives are the same as those in the PayPal payment notification sometimes though. If the SD details look odd, cross check. PayPal users tend to be less capable of providing correct delivery details, we find. And their inability to use capital letters is legendary. Thankfully we use Mole End's OSOP software which takes the misery out of formatting addresses.

[Mike Hughes]

When accounting for paypal charges I just run their monthly summary report which includes payments in, payments out, refunds, fees, etc.

I then just enter the fees as a monthlybusiness expense along with the rest of my payment processing charges. It's no more complicated than any other payment processing charges.

The report is also good for keeping an eye on all your paypal transactions, particularly if you ever use paypal for purchases.

[Mantra]

When accounting for paypal charges I just run their monthly summary report which includes payments in, payments out, refunds, fees, etc.

I then just enter the fees as a monthlybusiness expense along with the rest of my payment processing charges. It's no more complicated than any other payment processing charges.

The report is also good for keeping an eye on all your paypal transactions, particularly if you ever use paypal for purchases.

Mike
Thank you for your response.
I appreciate that there will be an easy fix to account for the PayPal fees using reports available.
There are some aspects of other responses that are not encouraging including increased tendency for chargebacks among PayPal users that are always a pain and literacy in getting delivery addresses correct.
We have many transactions each week increasing over autumn/winter months and I really need to assess the impact introducing PayPal as an option will have if 60 to 70% of customers favour this option over other Payment Services.
The 4.7% transaction fee charged for PayPal on a single order when I first tried implementing it may not be representative, so what would be a typical rate to expect for PayPal Express processing up to 50 transactions per week?

Martin
Mantra Audio

[guccij]

what would be a typical rate to expect for PayPal Express processing up to 50 transactions per week?

See https://www.paypal.com/uk/webapps/mpp/paypal-fees

[Mike Hughes]

Paypal fees depend on how much business you're doing a month. Once you're doing over £1,500 a month you need to apply to be put on merchant pricing.

The current per transaction fee rates based on monthly totals are:

<£1,500 = 20p + 3.4%

>£1,500 = 20p + 2.9%

>£6,000 = 20p + 2.4%

>£15,000 = 20p + 1.9%

A £15 order on the most expensive rate would work out at 4.7%.

But if you're doing £2,000 a month at an ASP of £30 then it's more like 3.5%

Mike

[zgap111]

I've always had a problem with this table from Paypal...

We have a monthly "Amount Received", varies from £30k to £40k

My calculations show consistently (per month):
Paypal fees
= 2.1% (20p deducted) / 3.1% (20p included)

We thought it should be 1.9% + 20p... it's never.

I assume in getting to 1.9% (above £15k), we are also charged for the lower tiers 2.4% + 2.9% and 3.4% ?

For card receipts, I find that about 50% transactions are paid using debit cards
so our card % fee is lower than expected.

Looking at months we had £35k of receipts:
£35k on cards ~£450 fee
£35k on Paypal ~£1130 fee

[Mantra]

Paypal fees depend on how much business you're doing a month. Once you're doing over £1,500 a month you need to apply to be put on merchant pricing.

The current per transaction fee rates based on monthly totals are:

<£1,500 = 20p + 3.4%

>£1,500 = 20p + 2.9%

>£6,000 = 20p + 2.4%

>£15,000 = 20p + 1.9%

A £15 order on the most expensive rate would work out at 4.7%.

But if you're doing £2,000 a month at an ASP of £30 then it's more like 3.5%

Mike

Thanks Mike & Jules & Tak

Thats it the 4.7% I calculated was for a £15 order.

If this is used as a benchmark then >£6000= 20p + 2.4% = 3.7% which just over double the average fee for normal card payment services (excluding fixed monthly fee).
Our average order value last month was £20 which would bring the above fee down to 3.4%.
Apart from refunds and chargebacks, the PayPal table also states that additional charges apply for currency conversions and cross border payments that are settled on customer credit/debit card accounts using direct credit/debit card payment methods.

The figures provided are now clear and the feedback given is very informative.

Martin
Mantra Audio