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Part Three: Online Selling

Is PayPal right for your business? Add to ...

In this four-part series, we'll examine where to sell your products or services online, how to set up a sales window, which e-money transfer services to use and how to build up your data history.

Part Three: Choosing a payment service

Not everyone who sells online is looking to sell the whole kit and kaboodle.

A writer, for instance, might be selling a single book. Or a theatre group might be selling an individual acting course. They may already have a simple website for publicity, but the addition of a "Buy now" button can help turn it into a money-making venture.

PayPal, a giant of the web-payment world, offers a range of products and services, but its most basic might be its mightiest.

For small business owners confronting a fragmented and byzantine e-commerce marketplace, PayPal offers ease-of-use and simplicity. It's an attractive company for those looking for quick setup, limited customization and minimal financial paperwork.

PayPal is what you might call an electronic wallet. Instead of asking for a credit card number for every purchase, PayPal lets customers create an account with them, which can then be used across every participating site. Darrell MacMullin, the general manager of PayPal Canada, says that the site boasts 4 million consumer accounts across the country, and processed $2-billion worth of sales last year in Canada alone.

Mr. MacMullin says its largest demographic includes business owners who "don't feel the need for a full e-commerce platform; I just need a really simple way for someone to purchase an item."

But in the same way that eBay is no longer strictly about auctions, PayPal is no longer just about a centralized payment structure; it also lets customers pay with their credit cards now, too.

Part of PayPal's appeal lies in providing a recognized payment brand to customers wary of giving their credit card information to an unfamiliar store. Because the credit processing occurs on their site - not the merchant's - the merchant is never in possession of customers' credit card numbers. The company also ensures their online store is PCI-compliant; that is, that it complies with the stringent standards for merchants that handle credit cards.

Strengths of PayPal payment service

First off, it's easy to set up out-of-the-box. If your business has a simple website with some static pages, PayPal makes it easy to add a "Buy now" button to process a simple payment. Adding a PayPal option to your website is a matter of dropping in some HTML (detailed online instructions are available). As well, its pricing scheme is simplified: PayPal charges 30 cents a transaction, plus a transaction fee that slides from 2.9 per cent to 1.9 per cent of the net cost.

Second, you don't need a merchant account with a bank to use PayPal. Other, more customizable online gateways require online vendors to set up e-commerce merchant accounts with their banks - independent of their existing merchant accounts - which can carry setup fees. Moreover, not all gateways work with all banks. With PayPal, however, money is transferred directly to your bank account.

Third, PayPal offers some noteworthy advanced features. It makes it easy to accept different currencies. In fact, vendors can price their goods individually in different currencies. As part of its product, PayPal also automates basic security and fraud-detection services. It also builds in a dispute-mediation process designed to work through disagreements between vendor and customer.

"A lot of the time it's accidental fraud," says MacMullin. "Billy grabs his dad's credit card and goes shopping one night."

Its biggest strengths double as weaknesses

Its wallet system can add an extra layer of complexity to the purchase process. For every customer reassured by the company's brand and security features, there's another who might crave simply plugging their credit cards into the site and making a purchase.

And simplicity has its limits, especially where customization is required.

"No two websites are alike," says Rob Duga, a vice-president at Pinnacle Communications Group, a Toronto web-development firm that specializes in e-commerce. "Ninety-nine times out of one hundred, they're going to be tweaked to meet the custom needs."

Mr. Duga recommends PayPal for customers who want straightforward, turnkey sales. But, he says, PayPal might not fit specific requirements - selling services, for instance, or arrangements like booking calendars or time-sensitive sales. "That's where PayPal becomes limited."

Sites which offer more customization

To tailor e-commerce sites for clients, Mr. Duga's developers will work with a customized version of osCommerce, a well-known piece of open-source shopping-cart software. Then, they will partner with a gateway service, like Ontario-based Moneris or BC-based Beanstream, that processes credit card information and transacts with banks.

And while small business can look to independent web developers to customize a solution for them, the payment gateways are also offering full-service e-commerce websites directly to businesses.

Les Whiting, a vice-president at Beanstream, says the firm has over 10,000 clients, which range from powering Future Shop's online store to providing shopping carts and secure payment options for small business.

Since they're specialists in online transactions and security, the gateways can offer extremely fine-grained control over your transactions; features like virtual point-of-sale terminals, so you can process a credit-card payment yourself. They also offer advanced security features like the ability to block transactions by IP address or country, to verify the shipping address against the credit card address, to even flag transactions coming from high-risk postal codes.

By partnering with banks, gateway firms can also set up small businesses with merchant accounts, offering an end-to-end service that's as comprehensive as PayPal's, but geared towards serious selling.

For more series, go to the Web Strategy section of Your Business.

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