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Andy Brice
Successful Software

Doug Nebeker ("Doug")

Jonathan Matthews
Creator of DeepTrawl, CloudTrawl, and LeapDoc

Nicholas Hebb
BreezeTree Software

Bob Walsh
host, Startup Success Podcast author of The Web Startup Success Guide and Micro-ISV: From Vision To Reality

Patrick McKenzie
Bingo Card Creator

What's wrong with PayPay?

Why do so many people use SWREG, kagi, regnow and the like, which charge 10%-20% commissions? I see very few ISVs use paypal (commission around 3%).
Saturday, September 25, 2004
Good question! I remember when we went through this analysis ourselves.

We use share-it ( http://www.shareit.com ) for the following reasons:

1) It integrates with our website look-n-feel. See http://www.elegancetech.com and click on Purchase to see what I mean.

2) Share-it will automatically ship serial numbers to customers that buy the product immediately after the transaction is approved. Customers like getting access to the full version ASAP.

3) It is cheap. They charge $2.95 plus 5%.

I am in no way affiliated with share-it other than being a customer.
Roger Jack Send private email
Saturday, September 25, 2004
That is a very good question, I am sorry I don't know the answer but we had a customer refusing to use Paypal and going through the hassle of sending a cheque instead!

IMO Paypal is a good solution/idea because it provides a consistent payment method across different vendors. Although I understand the point above that other solutions can be more integrated with your website, I am always suspicious of using what may look like a custom solution built by the site owner (how well tested and secure is it?). I know that shareit and all the other are well tested and secure but to many users they are unknown. Paypal has the potential of becoming a household name due to Ebay.

Jose Simas Send private email
Saturday, September 25, 2004
The biggest complaint I've heard with respect to Paypal is that their anti-fraud measures supposedly trigger on the slightest provocation, resulting in freezing of any monies in your account, and they have an usurious procedure for verifying your identity before they will unfreeze assets. Also their help desk is said to be non existent.

An example of the "trigger" is that if someone in the Pacific Rim tries to log in under your ID (which is your Paypal email address) with a wrong password, they will freeze the account. This is quite possible because all someone would need to this is your email addy.

The "right way" to use Paypal is to have a linked checking account and transfer the money out as soon as it comes in, and leave no funds in your Paypal account itself.
Bored Bystander Send private email
Saturday, September 25, 2004
I would hazard a guess that folks are using these other payment services because some of their customers refuse to use PayPal.  I've never used PayPal to buy (or sell) anything and part of the reason that I have not is because I've heard and read enough negative comments about PayPal that I am not willing to trust them with my money.  PayPal has a big image problem.
Saturday, September 25, 2004
Matt, would you mind elaborating on the image problem, please? Why don't you trust them?

I am quite interested as our main payment method is Paypal.

We have been using it for a few years and we have a linked bank account. We never had any problems with it.
Jose Simas Send private email
Saturday, September 25, 2004
Well, a number of folks in the blogosphere that linked to the video of Mr Berg's beheading in Iraq got their accounts frozen until they complied with PayPal's censorship.

Other problems with paypal can be found at paypalsucks.com.

Paypal is very very quick to freeze your account and can take months to unlock the money. Leaving you with no access to your own money, and your customers howling, if you hold up the shipment until the paypal issue clears.

Each state in the US has different laws and regulations defining "what is a bank" and at least one state, Louisiana, has banned them from business there because they fall afoul of the law in that state.

If it were not for their de facto monopoly of the business, I would say "pick someone else." But you will find it real hard to do so.

If you are compelled to use paypal for some business reason, you need to keep the account that they have access to separate from your other accounts, and to sweep deposits OUT of that account as they arrive. Simple risk management: if there is a complaint, they reverse the transaction (draining your bank account), but don't refund the complainant for several days to weeks.

When I buy stuff on e-bay, I send a money order. If the seller only takes paypal, I don't do business with them.
Saturday, September 25, 2004
Have you considered getting a credit card merchant account?
Cost is about $.50 + 2% per transaction.

Makes you look MUCH more professional than PayPay.

PayPal SCREAMS (to me, at least) "I am an amatuer business selling stuff on Ebay".

I've heard horror stories about people on BOTH sides of the paypal transaction.
Mr. Analogy {Shrinkwrap ISV owner} Send private email
Saturday, September 25, 2004
Peter, thanks for the link, it is really an eye openner and we are going to give it some thought.

Mr. Analogy, I guess those prices exist in the states but we are based in the UK. I wonder if anyone knows of a similar service here?
Jose Simas Send private email
Saturday, September 25, 2004
If you're in the UK, try worldpay.com. These have a low commision rate and you can integrate it into your site for a professional look. Setup costs are about £300, which is not too bad. I've heard only good things about them.
Saturday, September 25, 2004
I spent a lot of time yesterday setting up the instant payment notification from PayPal with my server. I got to where it would add the customer info to the database and send an email with download instructions. Seemed to me that I was doing a lot of work to set everything up. For a few percent more I can use someone who is setup to do this sort of thing. At plimus all I needed to do was fill out the order form and email templates. Everything else is taken care of. I guess I just didn't feel like the PayPal IPN system was going to go off without a hitch.

That's a nice site that compares a lot of features across processing sites. It leaves out the merchant type services like PayPal though.
nalenb Send private email
Saturday, September 25, 2004
I think another big drawback of PayPal, even notwithstanding their poor reputation, is that customers have to register with PayPal and there's all the attendant Terms of Service BS. It's another thing you have to "sign up for", just for the "privelige" of spending money.
Bored Bystander Send private email
Saturday, September 25, 2004
... er, SWREG doesn't charge that much. If they did, we wouldn't use their service!!!!!

Check out www.regshare.com for a compare table.
Saturday, September 25, 2004
I rather like paypal's IPN system that allows me to execute arbitrary code on notification of a payment.  However, I have also heard enough accounts-frozen horror stories that I'm careful to move funds out of their reach on a regular basis.
Jonathan Ellis
Saturday, September 25, 2004
If you are using a regular credit card, you don't need to sign up with PayPal anymore. You just click a button that says you don't want to sign up and then you enter all the regular purchase info. About as pain free as other sites are now.

I think most of the register services have some sort of IPN also. I found the one at Plimus a little simpler because you only get an IPN when the payment is confirmed, not all the different types PayPal sends.
nalenb Send private email
Saturday, September 25, 2004
So, this is a personal experience.  A friend had a paypal account open for about 3.5 years and had moved a total of about $40K through the account over its lifetime.

A customer complained about a $340 purchase and the whole account -- $4K and change -- was frozen for almost 9 weeks.  The customer service reps didn't give a f**k less and made it quite clear.  Meanwhile, people couldn't pay him, the better part of 5 thousand dollars was sitting in limbo, and he had to ship orders to cusomters who had already paid while hoping that paypal wouldn't arbitrarily refund the money.

Stay far, far away.

From a customer's perspective, the only reason I would ever use paypal is I don't trust you with my credit card number.  Do something to alleviate that fear.  For starters, promise to charge my credit card then destroy the number; the minor inconvenience of reentering CC info is far outweighed by the thought of god only knows what software updated god only knows when run by an admin who doesn't know what he or she is doing having my CC info sitting on the net.  How many absolute retards got bit by that MSSQL virus that infected servers who (1)could see the internet and (2) had a default root password?  Morons abound.

Earl Hathaway Send private email
Sunday, September 26, 2004
I think the good thing about PayPal alike services is that you can sell anything (not only software), your setup effort is next to null (create a few links or HTML forms) and there aren't any upfront fees.

I just found a list of similar services and I thought I'd share it:

Jose Simas Send private email
Sunday, September 26, 2004
"PayPal SCREAMS (to me, at least) "I am an amatuer business selling stuff on Ebay".

Nonsense - there's plenty of real businesses selling stuff on e-bay too. Of course, they're pretending that there's an auction involved but that's another story.

Isn't ebay just a B2C site now? Are there really actual people selling their junk there, as well as businesses pretending to have auctions?

Sunday, September 26, 2004
We use Share-It! for our software regstration at http://www.AutoUpdatePlus.com/Register.html. It's probably the best thing to use if you're targeting international business, rather than US business only. And (no affiliation here) their customer service is not too bad either.
Simon Send private email
Sunday, September 26, 2004
We use SWReg who offer PayPal as an option as well as credit cards etc. I find that the majority of perople use credit cards, perhaps a couple of percent go with PayPal. For me this indicates PayPal probably isn't that popular as a method of payment for the customer.

The real benefit to me of using a company like SWReg is that they are foccused on selling software, this means they take care of lots of little things that you would have to start worrying about with a more general service like PayPal.
Tony Edgecombe Send private email
Monday, September 27, 2004
I used PayPal and IPN during the first couple of months after shipping my 1.0 release. Sales went up noticeably when I implemented credit card processing and SSL on my own web site. I still offer both as I occasionally get people who want to pay via eCheck.

PayPal is pricier per transaction but is very easy to setup. One downside is that you don't get address information on your customers which can be useful for demographic analysis.

Doing your own credit card processing isn't hard, it just takes a little work to get your own merchant account setup, acquire an SSL certificate and do the coding. Luckily, I had already gone through the process of getting a code signing certificate so the SSL certificate was pretty painless. In my experience, using an hosting provider's shared certificate in this context is much to limiting.

You can check out our purchase page at:
Jim Lamb Send private email
Monday, September 27, 2004
Basically the problem with PayPal is that they act like a bank, but are not subject to banking regulations.

As you might imagine, regular banks have been screaming about this for years (unfair competition). The prediction has been that eventually PayPal will be regulated, but...

Users have been quite vocal about problems with the service as well, although it is my impression that the horror stories have been less horrific lately:

Regardless, PayPal is apparently fielding numerous lawsuits over the way they handle transactions.
Monday, September 27, 2004
This might be a dumb question, but I seem to constantly read complaints about paypal. Why hasnt the marketplace produced a challenger? Seems like the market is huge and Paypal has already shot themselves in the foot.

moses whitecotton Send private email
Monday, September 27, 2004
I would agree that if you are doing large transactions ($1k+ at a time) paypal is not for you.  If you do several small transactions a day (as we do) it is perfect.  It's free to move money into your bank account so there is no reason not to do it on a daily basis.  This reduces the "held funds" risk.

You can integrate it really well with their IPN feature, and nowadays the buying process is just as quick as if you had a merchant account.

We have found that it works really well if you have a subscription based service.  The recurring billing is handled by PayPal, and customers have told us that they like the fact that THEY can cancel the subscription with PayPal.  We used to use a merchant system and our own custom billing scripts, but I guess they now feel more in control.
Chris Send private email
Thursday, September 30, 2004

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