eBay Accepted Payments Policy Oct 2008: PayPal (2 Types) vs ProPay

Posted on October 20, 2008. Filed under: eBay, Paypal | Tags: , , , , , , |

According to eBay’s new Accepted Payments Policy, all eBay sellers will be required to offer at least one of the following payment methods beginning October 2008:

* PayPal
* ProPay
* Direct credit or debit card payment through an Internet Merchant Account

Most eBay sellers are familiar with Paypal but many eBay sellers may not be aware that there are actually two different types of Paypal accounts.

PayPal offers a “micropayments” PayPal account as well as a “regular” Paypal account.  A micropayments PayPal account, which has been used for years by many ebook sellers, gives a much better rate for small (micro) payments because the “per transaction fee” is significantly less than the per transaction fee for a regular PayPal account.  However, the percentage rate for a micropayments PayPal account is very high so that the same (higher) rate that will also be used whenever a seller also accepts a larger payment.   For a seller who receives payments of $12 or less exclusively, the micropayments PayPal account is a good deal.  Anything above $12 per transaction should be evaluated since most sellers would be better off with a “regular” PayPal account.

Paypal fees for:

(a) $1.00 Micropayment 10 cents versus Regular 33 cents

(b) $10.00 Micropayment 55 cents verus Regular 58 cents

(c) $50.00 Micropayment $2.55 versus Regular $1.80

Each Paypal account can ONLY be designated as either a “regular” Paypal account or a “micropayments” PayPal account so that only ONE rate applies to EVERY transaction within that PayPal account, no matter whether the amount received is micro or macro.  And once a PayPal account has been opened, it will ALWAYS be designated as EITHER a regular account or a micropayments account.

PayPal versus ProPay

There is not a significant transaction processing fee difference between a regular PayPal account and Propay for most eBay sellers.  However, ProPay is set up to function on eBay much as any merchant processor would and there are some very significant differences between PayPal and Merchant Processors, including ProPay.

1. Seller Coverage in cases of “Item not Received” or “Fraudulent use of account”

PayPal clearly provides an advantage for eBay sellers.  Paypal supplies the SHIP TO address to a seller and as long as a seller meets a few basic requirements, they are covered against an INR (Item Not Received) claim or a claim where the buyer states that they did not place the order.   If the seller uses delivery confirmation on an item less than $250 that was shipped to a gift address, the seller is covered.  Propay, on the other hand, does not provide any “automatic” coverage since they are a merchant processor.  If a buyer claims that a package where the payment was made through ProPay did not arrive, the seller will have to provide information which will oppose the buyer’s claim and, generally, the seller will only (possibly) win if they shipped with a signature required and only to the billing address (same thing as eBay’s confirmed address).  Delivery confirmation won’t be enough for a seller to show proof of delivery.

PayPal just recently began offering their Expanded Seller Protection and I must admit that the expanded protection is a very powerful incentive.  I remember a time when eBay Express existed and there was no expanded seller protection.  There were quite a few $200 – $500 orders I refunded because the recipient wanted to the item shipped to their work or to a gift address.  Very frustrating.

The way ProPay will technically work is that when an eBay buyer makes a purchase and then proceeds to the checkout for ProPay, the buyer’s eBay address on file will appear as the default shipping address.  However, the buyer can choose a different address where they want their item delivered.  The seller is informed as to whether the shipping address is confirmed or not so that a seller knows when they are taking a risk in shipping to an unconfirmed adddress for an eBay buyer who chooses to pay with ProPay.

2. Refunds

Again, PayPal is superior in this area.  When a seller needs to issue a refund, doing so through Paypal has zero costs for the seller.  For example, on a $100 order Paypal will take a $3 fee initially (fee estimated for purposes of this demonstration) and will end up giving the seller $97 .  If a full refund is issued to the buyer, the seller’s account is only reduced by $97.  For merchant processors, such as ProPay, a full refund to the customer would result in the seller still having to pay the $3 initial fee; there would be no “fee rebate”.

Paypal offers significant advantages to eBay sellers.  PayPal likely can afford to offer the benefits of the expanded seller protection program and fee rebates for returns, unlike merchant processors, because PayPal charges sellers the same transaction fees on non-credit card funded transactions.  However, PayPal does not have to pay transaction fees when buyers fund their PayPal payment with their checking account which means that PayPal can earn significantly higher margins than credit card merchant processors like ProPay.  If Paypal offers two distinct advantages over merchant accounts, including ProPay, then why might sellers consider using Propay?

1. Buyers do not have to establish any type of account with ProPay in order to use their services but buyers do have to establish a PayPal account if they want to use PayPal over an extended period of time.  Buyers input their credit card as few or as many times as they want through ProPay since they are simply making a payment to a seller, not establishing an account.  Some buyers do not want to give their banking information to Paypal in order to establish an account and ProPay is a great alternative for these buyers.  And many buyers have had an unfavorable experience with PayPal, either as a buyer or as a seller, and have made it a lifechoice not to use PayPal.  Offering ProPay could increase sales since these buyers now have an alternative to Paypal.

2. ProPay assigns sellers a merchant ID number and the associated sales processed through ProPay are recorded for that unique seller.  The recorded sales from a merchant account such as ProPay can be used as documentation to secure a business loan.

3. ProPay has advantages over other merchant processors in that it takes only $24 and a few minutes of time to get started with ProPay if you are a Silver Powerseller or above (other eBay sellers who are not Silver Powersellers can use ProPay but the terms are slightly different).  Propay does not charge many of the additional fees assessesed by other merchant processors.

eBay sellers only have to offer one electronic payment method.  However, some eBay sellers may find it beneficial to offer both ProPay and PayPal.  Each seller will have to make the determination as to what is best for their business. 

More information about Propay for eBay sellers can be found HERE

More information about PayPal MicroPayments can be found HERE

NOTE: It is important to note that PayPal’s Expanded Seller Protection Program ONLY applies to eBay-related purchases.  Sellers who accept PayPal payments for items sold outside of eBay do NOT receive coverage under the Expanded Seller Protection Program for those specific purchases.

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4 Responses to “eBay Accepted Payments Policy Oct 2008: PayPal (2 Types) vs ProPay”

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We used ProPay years ago when we first started selling online. Anxious to use it again for eBay. I hope they can roll out ProPay very soon! We have our own merchant account as well, but I have a feeling bugs will have to be worked out for the Internet Merchant Account.

This is really good information and should be very helpful for both buyers and sellers. Sellers should definitely do research for themselves to find out what account would be the best for them and their business. Thanks, I especially like the second half. 🙂

@Tekgems: We’re so glad you liked using ProPay. before and we’re sure you will love it on eBay as well. And you don’t have to wait long, ProPay will be integrated with eBay this week. Thanks for the shout out!

Brandon Crotts
Senior Account Manager
ProPay

Brandon, thanks for stopping by!

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