Wednesday, April 18, 2012

A Follow Up to My PayPal Rant

Following up on my rant about Paypal, I actually did change some of my behaviour. In that post, I complained about recent experiences with the service, and vowed to find alternatives. Now, normally I would just bitch and moan, get that out of my system, and return to business as usual, but to be fair to you (my loyal readers) I wanted to share how the experiment is going.

Long story short: It’s not going as well as I’d hoped, but early results are promising.

The biggest hurdle of course is something largely out of my control, trying to change my client’s behavior. As I mentioned in my rant, Paypal has the momentum, the mind share, and even though the service has its share of warts, people are used to it. It's the devil we know...

Over the last fiscal quarter, I’ve aggressively pushed Dwolla as my primary web payment system, and for face to face transactions I’ve been using Square to process credit cards.

Dwolla has been a great find, as they refuse to take credit cards, solely managing bank routing transactions. As a result, their fees are ridiculously low. Fees are only 25 cents for any transaction over $10. That’s it. Doesn’t matter if you’re moving $15 or $1500.
They’ve recently improved their Android app, and have also started a new “Instant” payment program which is essentially a credit buffer to help circumvent bank processing time (usually about 3 business days to process transactions).

Now there are times where I still need to run a credit card, and for that I’ve moved to Square. They were the first company to start equipping Android and iOS smartphones with card scanner add-ons. Attach the reader, and you can swipe the card, process the payment, and have your customer sign the transaction. Fees are slightly better than PayPal’s at 2.75%, and the service accepts all four major cards. Honestly, the novelty of the service has impressed several of my consulting clients, and it’s made me look “cutting edge”.

Since it’s a credit card transaction, I honestly don’t need any of PayPal’s extra baggage to complete the purchase. I just need a simple POS solution.

PayPal has of course already ripped off the idea, and is rolling out their own version of the mobile transaction service (complete with add on scanner for phones), but I’ll be sticking with Square for the lower fees.

So where does that leave us?
I’ve processed dozens of transactions since writing my original rant, and the tally so far:
Paypal - 60%
Dwolla - 25%
Square - 15%

A couple of my clients totally understood how I was losing a significant chunk of each transaction through Paypal (especially when sending an invoice), and were totally willing to join me on Dwolla. The novelty of Square is just too cool not to use, but I really don’t handle that many direct credit card transactions. Paypal is still taking the lion’s share of my business, but in four months, I’ve cut them back by 40%.

My goal is to get them down to 25% by the end of the year.


  1. I've recently de-paypal-ed my business, and I gotta say, it's been a great experience. I was receiving almost 100% of my payments through paypal, and now I'm nearly at zero. Turns out, my clients don't care about paypal, they just want to pay me with a card. (I personally moved from Freshbooks/paypal to Quickbooks Online/Intuit Payment Network) and my clients basically don't care what happens as long as my invoices come with links that let them pay by credit card.

    The biggest problem is that some clients use AMEX, and that's no longer an option for them. But, they use AMEX, so they're used to getting rejected.

    Overall? My experience is ALL WIN.

    1. LOL! Poor AMEX...

      It's not even that my clients "care" about Paypal, they're just used to it. When given an option to not use it, many are all ready willing to go with me on using a different service.