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Comment by nissimk | Hacker News Reader

I don't understand why I need anything more than Paypal? Everybody else seems to just charge more and I don't see what you get for that. Isn't credit card processing online a commodity and using the least expensive solution the way to go?

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At low volume, PayPal Payments Pro is as good as anything I've found, and it is cheaper than almost every other merchant services provider (especially by the time you factor in the gateway fees). But, it's definitely not cheap. I ache every time I see how much of our revenue is going to PayPal, even if it's better than the prior provider we were using. Our prior merchant services provider had cranked up rates gradually from the time we signed up, and always found reasons to charge us the highest tier of pricing (higher risk transactions got the higher rate, and it seemed like 90% of our orders qualified as "high risk" according to their metrics, even though at the time we were only dealing with about one chargeback per month). When we signed up a few years ago it was dramatically cheaper than PayPal, but by the time we switched it was almost a couple of points more expensive.

But PayPal is also not particularly great. The UI is agonizingly slow (I can only imagine how painful it would be to use if we were doing thousands or millions of transactions per month instead of hundreds). Their response time on payment processing is also slow...slow enough to confuse our shop sometimes.

The good things about PayPal are its better fraud management tools (which you have to pay extra for), its pervasive support in shopping carts (though Payments Pro is a little more rare), and its really comprehensive online interface. I used to have to send faxes for everything with the old processor, which was just ridiculous. I can do anything online with PayPal.

I also love that PayPal does everything. I hated never even knowing who to call when we had problems with the old service. There were three web interfaces for three different companies (Authorize.net, merchant services bank, and some sort of reporting service that I never could figure out) that did god knows what, and we were being billed by all of them. All of them had different points of contact and different procedures for dealing with issues (and issues pretty much never got dealt with), and I never, in years of dealing with them, figured out who was responsible for what. PayPal is the gateway, the merchant services provider, and everything else. When I'm confused about something, or need to issue a refund or whatever, I login to one place and all the data is there.

I also haven't been able to figure out how to use recurring payments at PayPal. But, that's probably a failing on my part. I'm kinda dumb sometimes, when accounting and money and such comes up.

But, I definitely don't think PayPal is the last word in payment processing. If there were something better, faster, or cheaper, I'd happily switch (any one of those three things would do it, assuming it's equal on the others).

It's a really hard market to tackle, since so much of it is regulatory compliance (both private and government regulations) and interacting with really old-fashioned industries (banks modernized about 30 years ago, and seemingly decided that was a one-time expense that they never needed to do again).

The issue that you describe where your prior merchant account provider billed you a downgrade rate for 90% of your transactions isn't really because they were "high-risk" (they weren't, you have no downgrades). It's an example of "marking up the downgrades" which is a strategy that unscrupulous merchant account providers use to increase their profit. http://transfs.com/blog/marking-up-downgrades/

What they really mean is that the interchange rate that your transaction qualified for is worse than the rate that they set to be your default or "qualified" rate. http://transfs.com/blog/what-is-interchange-again/

These billing tiers are a problem because there is no standard on what is "qualified" and what is "unqualified", it varies between processors and between customers within the same processor. http://transfs.com/blog/tiered-pricing-for-merchant-accounts...

There is a way to solve those billing tier ambiguities (which never are in the favor of the businessowner) - its called interchange plus pricing. Insist upon it, every processor can do it, for any size business.

Basically interchange is the wholesale rate that visa/mc charge the processor. In an interchange-plus pricing scheme the processor pass those charges on to you and explicitly disclose the markup you are paying above that wholesale rate. It's the best way to ensure no funny business is going on with your rates - http://transfs.com/blog/why-you-should-want-interchange-plus...

Only accept interchange plus or a no-downgrade flat percentage (like Paypal offers) - it will save you money and aggravation.

This is another of the problems with the payments industry. A serious lack of transparency pervades it. I never knew what was going on with our payments and fees and such. They just kept getting higher every couple of months. They hide behind wall-of-text terms of service (pages and pages of it), and ridiculous application processes wherein you don't know what your rates will be until after you jump through all the crazy hoops and send a bunch of faxes back and forth for several weeks.

Obviously, I've got a lot of hostility about the payments industry. Switching to PayPal (which took less than 24 hours to setup, and took just a few minutes of my time for filling out the application) was a breath of fresh air over Authorize.net, where I had to deal with a mentally retarded reseller (I'm not being facetious; retardation is the only explanation for some of the questions she asked and her grasp of the English language, despite being a native speaker) for three weeks to get things working.

We've had a merchant account for several years, the last few on an interchange-plus plan. Last weekend, we sat down and calculated the average interchange-only discount rate, i.e., before the "plus" of the merchant account provider, for the last four months. We found the average interchange rate, including the interchange transaction fees, was about 2.05%.

Given that PayPal only charges 2.2% + $0.30 per transaction for businesses with > $10K in sales, it seems to me that it is increasingly difficult for any merchant services provider to compete with PayPal in the online space, given the high basic interchange rate.

The added benefits of not having to deal with the cost and complexity of PCI compliance and a separate credit card gateway has made us decide to switch to PayPal.

I'm gradually leaning toward your way of thinking.

For a long time, I had the perception, which, I believe, was the correct one, that PayPal == Amateur in the minds of your potential customers.

I believe that this is no longer the case. Well, it is the case, but it no longer matters. I still think "small time", when I see a PayPal button, but now I also think "trusted" and "easy refund". These tend to make the "small time" thought less of an issue.

I also think that it's gradually losing it's "small time", "amateur" connotations among savvy web users. For non-savvy web users, which in reality, is the larger population, it never mattered anyway, and I agonized over all of this for nothing.

I went through the same thought process. The way I see it, if you're a big enough name to be reputable, then you should definitely handle payment yourself, but if you're still trying to get traction and a reputation, leveraging PayPay's reasonably trusted record is a good way to go.

For quite awhile both wordpress.com and stumblupon both were using paypal as their payment method for buying credits.

The least expensive solution is not always the best. I formerly used Paypal exclusively, now I lose out on some work because I refuse to use it. They can lock your account at any time for any reason. It's nearly impossible to get support and it doesn't matter. Paypal is easy to game in that a buyer can use a credit card, and initiate a charge-back. Paypal sides with a charge-back 100% of the time that you can't prove shipment which of course is impossible with digital goods. I've had my account locked down for 6 months in the past for attempting to use some of my funds to buy actual physical gold as an investment. No fraud anywhere, but they decided that's money laundering. I am happy to see a new start-up come through and try and change something because Paypal is broken.

Perhaps it's just a question of scale, and maybe I'm trying to solve problems that don't really exist. I'm hesitent to use paypal because when I _DO_ move to something more legit (ala Braintree or Authorize.net), I have to re-bill all of my customers and they have to put in their CC info again. This doesn't seem ideal to me.

We moved from Authorize.net to PayPal Web Payments Pro. Much happier now.

Braintree was outrageously expensive when I looked at it, so I didn't even consider it.

Our (Braintree) fees are competitive. We have a higher monthly minimum than some, if that's what you're referencing, but otherwise if a merchant is processing a few thousand dollars a month our fees are right in line. We are different than others in the industry. We engage in a meaningful way with our customers. We educate them on the risks, nuances and best practices. We try to properly assess risk upfront instead of surprising afterwards. We proactively help them lower fees. We assist with PCI Compliance and credit card data security. We don't hold stored credit card data hostage. We don't hide fees and then deny that we hid them in the first place. We answer our phones and respond to email very quickly. Our goal always been for our customers to conclude that we're the best payments provider they've ever worked with and many of our customers maintain that opinion which we're always very pleased to hear.

Braintree does even out on fees once the merchant hits a few thousand dollars a month in transactions. After grueling research, I wanted to use Braintree for a number of reasons, many of which you've pointed out. But the thing I am bootstrapping may take 6-24 months to get to the point where the Braintree minimums aren't putting me in the red. My calculations showed I might have had $3,000 to $5,000 in fees stacked up with Braintree before my volume caught up. A Braintree salesman did try to work with me and agree to reduce _some_ of the fees for the first 3 months, but the numbers still didn't work out Its a startup, I have no idea when Google will decide I'm worthy of being indexed. I have no idea how many experiments I have to run before I hit a sweet spot. So I begrudgingly went with PayPal Standard. Now, I have a few subscribers and I'm going to upgrade to PayPal Pro since that's only $29 a month fee, which is better than most. I have to roll the dice and hope I get the service I need from PayPal if it comes to it.

I'm not there yet but came to the same conclusion. There's a need startups have that only PayPal seems to fill (unfortunately).

I see FastSpring responded in this thread that recurring billing is coming, so maybe that will become a viable option:

http://news.ycombinator.com/item?id=1413905

I can see why Braintree would have no interest in businesses that are destined to maintain smallness, but they're missing out on getting into bed with some young companies whose payment volume will eventually pop. And leaving the door open for a more nurturing payment portal to grab young companies (and presumably keep them).

So it might be wise to for Braintree to loosen up the fees a bit for promising young companies - an incubator program for payments of sorts. At least for the YC/HN community :)

Though, honestly, looking at their pricing, Braintree ins't crazy expensive even for a company that gets $0 sales out of the gate... $99 initial setup, $35 monthly, $10 for cc storage, $75 as a zero sales "penalty". Setup delay seems to be an issue here as well, but that just seems like Braintree doing its diligence.

http://www.braintreepaymentsolutions.com/pricing

Still, for a startup, with potentially 3-6 months of low sales, its nearly $750 wasted. Many of us would allocate the funds somewhere other than "minimum fees" and "low sales penalties"

If we fail then we stop using Braintree, authorize or paypal (then use them again on the next startup). But if we succeed, we will continue to be a customer (and recommend them to our friends on HN) for a long, long time.

Seems like a slam-dunk to me.

Your fees look much lower than last I looked (I also seem to recall I had to contact someone at Braintree to get rates last time I was shopping...I don't think it was prominent on the website as it is now). Anyway, I take it back, Braintree does appear to be competitive with PayPal Payments Pro and others.

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