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PayPal Review

Category Breakdown
Sales & Marketing rated A plus
Costs & Contract rated B
Complaints & Service rated C
BBB Rating rated C

Overall Rating

"B" Credit Card Processor Rating


Overview

PayPal Logo

PayPal Logo

This PayPal (paypal.com) review is intended primarily for small business owners who accept credit card payments on a regular basis and for those starting new businesses that will need to accept credit cards. Due to this focus, the content of this review will cover the factors that are most important to merchants who are interested in using PayPal for the purpose of accepting credit card payments from their customers.

PayPal is a wholly owned subsidiary of eBay—although it is expected to be split off into its own company by mid-2015—and is heavily used for payments between buyers and sellers of eBay auctions. The service is one of the most accessible electronic payment methods in the industry because it allows anyone with an email address to sign up to send and receive payments from other individuals. Additionally, PayPal has a “merchant services” division that allows businesses of all sizes to accept credit card payments, much like a normal merchant account.

PayPal is unlike traditional credit card processors because merchants cannot use PayPal with typical credit card processing equipment. Instead, PayPal offers several other services including shopping cart integration, “buy now” buttons, and donation buttons that are primarily targeted towards merchants with an online presence. The company also offers a virtual terminal with an optional credit card reader that plugs into the USB port of most computers. The virtual terminal allows merchants to enter credit card data themselves to use PayPal much like a traditional merchant account. Additionally, PayPal has introduced a mobile payment app and card reader dubbed “PayPal Here” that allow anyone with a compatible smartphone to accept credit card payments.

One important difference between PayPal and a merchant account supplied by a credit card processor is that merchants must request the transfer of funds from their PayPal accounts to their checking accounts. Typically, most merchant account providers transfer the money as a “batch” automatically with 48 hours of the close of a business day. PayPal also offers payments by check and a debit card that can be used for purchases or withdrawing money from an ATM.

Related: Compare Fees and Save Money

Sales & Marketing | A+

Key Points – Sales & Marketing
Uses independent resellers? No
Promotes deceptive rate quotes? No
Discloses all important terms? Yes

PayPal scores well in this section because the company does not use independent sales agents or misleading sales tactics. PayPal primarily markets itself online and through eBay, and in many ways has become a household name. The company’s policies and pricing are transparent and easily understandable for anyone who takes the time to read them.

PayPal Marketing Example

Costs & Contract Terms | B

Key Points – Costs & Contract Terms
Swiped rate: 2.7%
Keyed-in rate: Variable
Termination fee: None
Monthly minimum fee: Variable

In this section, only PayPal fees and contract terms associated with PayPal’s business account for accepting credit card payments are being considered. We will not be covering personal accounts in this review, nor will we be assessing PayPal’s value as an eBay payment method.

Basic Merchant Setup (aka: PayPal Payments Standard)

This account does not allow merchants to enter credit card data themselves online but does allow for customers to pay by credit card through a merchant’s website. However, if a merchant has set up a PayPal Here account, s/he can accept a credit card directly through the mobile app. For merchants wishing for an easy way to accept online payments, PayPal offers this basic setup with a few advantages over traditional merchant accounts.

First, there is no setup cost, no monthly fee, no time commitment, no PCI Compliance fee, and no cancellation fee. PayPal Payments Standard allows merchants to easily accept payments through their websites using “buy now,” “add to cart,” and “donate” buttons and recurring payments from other PayPal users (to accept recurring payments from non-PayPal customers, there is a $19.99 per month fee). This account is also compatible with most popular shopping carts. One of the disadvantages is that the customer must leave the merchant’s website and be redirected to PayPal to complete the transaction, which can reduce conversion rates and confuse customers. With no monthly fees, PayPal credit card acceptance does come at a higher than average processing rate. As of this review, PayPal is reporting the following rate structure for basic U.S. accounts transacting in U.S. dollars (international rates may differ):

PayPal Pricing

PayPal Pricing

*Note that PayPal charges different rate tiers based on sales volume whereas traditional merchant accounts charge different tiers based on the customers’ card types.

Advanced Merchant Setup (aka: PayPal Payments Advanced)

The next account up from the standard account allows merchants to keep the entire checkout process on their own site. Like PayPal Payments Standard, merchants cannot enter credit card data themselves, but they do get all the same features as the basic setup and can control the user experience throughout the entire online sales process. The PayPal rate tiers are the same as PayPal Payments Standard, but there is a $5 monthly fee. PayPal also offers additional services for data handling, PCI compliance, and customer support, but these come at extra costs.

Professional Setup (aka: PayPal Payments Pro)

PayPal Payments Pro comes with all of the same features as PayPal Payment Standard and PayPal Payment Advanced but with two extra features. The first is primarily of interest to high volume e-commerce retailers and web developers who want full control over the checkout process because it allows for custom design and self hosting of the checkout pages.

With the second extra feature of the Pro account, PayPal offers a virtual terminal for merchants that need to enter credit card data themselves for face-to-face transactions and/or mail orders and telephone orders. Merchants who wish to use this service will need to go through an extra application process even if they already have a PayPal account. Apparently, it takes about 48 hours to find out if you have been approved for a virtual terminal account. Generally speaking, the cost for this service is fairly high in comparison to other virtual terminals and merchant account providers. In addition to a $30 per month fee, US merchants will pay the follow processing fees:

PayPal Virtual Terminal Rates

PayPal Virtual Terminal Rates

*The crosses next to the fees indicate that merchants must be approved for those rates.

PayPal also has a “micropayment” fee of 5% + $0.05 for transactions under $10. Even though merchants can use an optional credit card reader that plugs into nearly any computer, the processing rates appear to be the same for swiped and keyed transactions. PayPal’s swipe rates are unusual because nearly all other merchant account providers offer lower processing fees for swiping a credit card through a reader.

Complaints & Service | C

Key Points – Complaints & Service
Total complaints: Thousands
Live customer support? Yes
Most common complaint: Fund holds

The grade for this section is difficult to assign because of PayPal’s unique position in the credit card processing industry. Unlike traditional merchant accounts, virtually anyone can sign up for a PayPal account, and PayPal has over 100 million users. As one could imagine, PayPal has thousands of complaints. The two most common that appear to come from actual merchants are complaints of sudden freezing of accounts that disable the merchant’s ability to accept further transactions and withdraw money, and poor experiences with customer service.

Merchants that complain of experiencing holds often report difficulty in getting explanations of why the hold was established and state that the money was held for long periods of time. Holds are a common practice in the credit card processing industry and are often used on merchants that are deemed as “high risk,” or have experienced numerous chargebacks or fraudulent transactions. Many merchants do not transfer their PayPal funds on a daily basis, so days’ or weeks’ worth of sales can get locked up during an account freeze. However, holds and account freezes are never a problem for most merchants, even though there are quite a few reported cases online.

As for complaints about customer support, PayPal offers several options for resolving problems, including a phone helpline. The basic support line is open to all account types and appears to suffer from periodic long wait times and poor service. Merchants can get higher levels of customer support by paying either $159 per month for “13X7 Enhanced” support, or $495 per month for” 24X7 Premium” support.

PayPal earns a “C“ in this section because it does a good job of providing many customer service options and has a small proportion of complaints in comparison to its user base, but the company still has room for improvement by working to reduce the amount of complaints being filed online.

Related: Best Credit Card Processors for Service

BBB Report | C*

Key Points – BBB Report
Product/service: 3,256
Billing/collection: 1,559
Advertising/sales: 558
Guarantee/warranty: 146
Delivery: 95
Other: 27

As of this review, PayPal is accredited with the Better Business Bureau (BBB) and maintains an “A+” rating despite having 5,641 complaints filed in the last 36 months. Of the complaints, 3,256 are related to problems with the service, 1,559 with billing and collection, 558 with advertising and sales issues, and 268 with other issues. PayPal has also received three informal reviews, with one being positive and two being negative. The BBB justifies the high rating with the length of time PayPal has been in business, the complaint volume versus PayPal’s size, the company’s response to complaints, the rate of resolution of those complaints, and that the BBB has sufficient background information on PayPal.

Based on PayPal’s complaint count, resolution ratio, and size, we are adjusting this section’s rating to a “C” for the purposes of this review. You can learn more about why we adjust BBB ratings in our rating criteria.

* Denotes CPO-adjusted BBB score

Bottom Line

PayPal Review
Rated 3.4 out of 5 Stars
Reviewed by Phillip Parker
Reviewed on 2015-01-01

PayPal is a huge company and in some circles has a bad reputation. In spite of this, the company remains one of the best options for easily accepting electronic payments and continues to gain popularity. PayPal is comparable in cost to many traditional merchant account setups, but is much more expensive than merchant accounts under the Interchange Pass-through pricing model. Although PayPal has a lot of complaints, most of them are due to the fact that even the most inexperienced and naïve business owners can set up an account in a matter of minutes. Overall, PayPal is a solid choice for accepting credit card payments and can be offered as an additional payment option alongside a normal merchant account and payment gateway setup.

This review was originally published on 8/4/11 and was last updated on 1/1/15.

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Dwolla Review

Category Breakdown
Sales & Marketing rated A plus
Costs & Contract rated A plus
Complaints & Service rated A plus
BBB Rating rated A minus

Overall Rating

A+ Credit Card Processor Rating


Overview

Dwolla Logo

Dwolla Logo

Dwolla (dwolla.com) is a Des Moines, Iowa-based startup that is on a mission to radically change the electronic payments industry. The company was founded in 2008 on the premise of bypassing credit card Interchange fees (aka: swipe fees) and providing a low-cost payment service to businesses and consumers. Dwolla has created a proprietary payment network similar to that of VISA and MasterCard, and Dwolla’s network does not charge a percentage fee for the transaction like a traditional merchant account does (costs will be covered below). Instead, the company eliminates credit card use altogether by linking consumers’ Dwolla accounts with their checking accounts. The service may sound similar to PayPal, and in some ways it is, but Dwolla is approaching the concept from a very different angle.

Although Dwolla’s payment concept is not exactly a new one, its marketing and business strategy is completely unique. With help from a few banking and financial institution investors, Dwolla has created a payment network that eliminates all of the common fees that merchants incur from accepting card payments. Additionally, the company’s network eliminates the common transfer delays and fraud that plagues similar networks such as the ACH network that most banks utilize. Essentially, Dwolla is a global system for instant cash transfers.

Dwolla can be used for payments between individuals, businesses, or both, but the focus of this review will be the consumer-to-merchant acceptance side. Merchants can accept payments the same way individuals can pay each other, or they can use features that are better suited for their needs. These include website integration and plug-ins for shopping carts as well as tools that can be used to accept payments at the merchant’s location. The company has made major headway in the payments market and has reported that it is processing $30 to $50 million in transactions every month.

Dwolla Video Introduction

Sales & Marketing | A+

Key Points – Sales & Marketing
Uses independent resellers? No
Promotes deceptive rate quotes? No
Discloses all important terms? Yes

Dwolla primarily markets itself via its website and uses no deceptive advertising or marketing tactics that are apparent to this reviewer. There are also no complaints regarding the company’s sales tactics to be found on this or other consumer protection websites, indicating that there are no issues with hidden fees or rate increases.

Dwolla Marketing Example

Costs & Contract | A+

Key Points – Costs & Contract Terms
All transactions: $0 or $0.25
Termination fee: None
PCI compliance fee: None
Equipment lease: None

Dwolla probably has the most attractive pricing of any electronic payment service on the market. The company charges no fees for transactions under $10 and only 25 cents per transaction for any amount over $10. There are no additional fees whatsoever (including no PCI Compliance fees) and no service agreement or cancellation fees. Dwolla’s pricing makes it especially cost effective for merchants who deal in low dollar sales as well as merchants that typically have high dollar sales.

Complaints and Service | A+

Key Points – Complaints & Service
Total complaints: 20
Live customer support? No
Most common complaint: Transfer time

Dwolla has only about 20 complaints filed in the usual online forums, including Ripoff Report and the comments section of this review; however, the content of these complaints appears to describe isolated incidents and simple merchant misunderstandings surrounding the $3.00 monthly fee for Dwolla Instant (an opt-in service that offers up to $500 in instantly transferrable cash). This $3.00 fee is clearly disclosed on the Dwolla website and will not be considered deceptive for the purposes of this review. The company provides email support and help articles published on its website.

BBB Report | A-*

Key Points – BBB Report
Product/service: 9
Billing/collection: 2
Advertising/sales: 2
Guarantee/warranty: 0
Delivery: 0

As of this review, the Better Business Bureau (BBB) is showing Dwolla as not “BBB Accredited” and is awarding the company an “A“ rating based on 13 complaints filed in the last 36 months. Of the complaints, nine are due to problems with service, two are related to billing and collection, and two have to do with advertising or sales issues. All but two of the complaints were resolved to the customers’ satisfaction. In light of these figures, we have slightly adjusted the BBB’s grade to an “A-.”

* Denotes CPO-adjusted BBB score

Bottom Line

Dwolla Review
Rated 4.8 out of 5 Stars
Reviewed by Phillip Parker
Reviewed on 2014-12-05

Dwolla is making waves in the credit card processing industry. The company offers a low-cost, low-risk payment alternative for merchants. The only drawback to the service is that both the merchant and customer need to have Dwolla accounts. Therefore, the service is best used as a supplement to a traditional credit card processing service. The service is especially useful for business-to-business payments and rent payments.

This review was originally published on 2/8/12 and was last updated on 12/5/14.

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