Monday, April 2, 2007

Understanding the new PayPal

PayPal: one of the most recognized brands in ecommerce. It used to be synonymous with the ability to exchange payments in a peer-to-peer world of PayPal users (there are over 50 million of them), where payment notifications are sent via e-mail.

You can still do e-mail payments with PayPal, but PayPal today is not a payment system: it's a suite of many different payment systems.
What are they? How do they differ from each other? Which ones should you use, if any? Let's take a look.

Website Payments Standard
Customers pay on the PayPal Web site. When you activate this payment option on your store (if supported), customers will temporarily leave the store, pay at the PayPal Website (with or without having a PayPal account), and come back to your Web site at the end of the transaction.

Website Payments Pro
This is a combination of two payment systems:
  • Direct payments: customers pay by credit card, without leaving your store, and without knowing that PayPal is involved at all (no PayPal branding on the payment page)
  • Express Checkout: in a nutshell, this is PayPal's answer to Google Checkout (actually, they came up with it first, so maybe Google copied them :-)
    It works very similarly to Google Checkout in terms of the user experience: it's an alternative checkout process. That is: no registering/logging in on your store, but rather off to PayPal where the same login information can be used for any store that supports Express Checkout.
Payflow Payment Gateway
PayPal bought the Payflow payment systems from Verisign in November of 2005. There are two options:
  • Payflow Pro: this is your standard payment gateway: there is a payment form on your Web site (if your shopping cart supports this payment system), customers don't leave your store, you need an Internet merchant account.
  • Payflow Link: customers leave your store and pay for the order on the Payflow Link payment page.
Are you confused? I was. For example, take Website Payments Pro's Direct Payments and Payflow Pro: they both allow credit card payments, on your Web site, without any PayPal branding. What's the difference?

I asked Matt Watts, business development manager at PayPal. Here are some of the things he said.

What are the main differences between Website Payments Pro and PayFlow Pro, in terms of features?

Website Payments Pro combines a gateway and merchant account into a single solution. Merchants intending to use this service open a PayPal business account, submit an application, and are vetted accordingly. The reporting functionality is limited with Website Payments Pro, so for any merchants who are transacting over about two-hundred orders monthly, they’d most likely want to use PayFlow Pro. PayFlow Pro is a gateway only and requires the merchant to find their own banking relationship for the Internet Merchant Account. PayFlow’s functionality is more advanced from a reporting standpoint, so reconciliation of transactions is much easier.

When would you advise a company to adopt WPP vs PayFlow Pro? What are the elements that should trigger a decision towards one solution versus the other?

If the merchant is new to the e-commerce landscape, they’re probably better off working with WPP for processing, simply because it’s an all-in-one solution that is inexpensive. However, for merchants who are established, process numerous orders daily and need more advanced reporting, then PayFlow Pro is the better solution.

[Massimo's note: getting an Internet Merchant Account for Payflow Pro is probably harder than getting approved for Paypal Website Payments Pro, especially if you have a brand new business].

Could a store have both PayPal Website Payments Pro and PayFlow Pro active ( e.g. to use PayPal Express)?

It would be possible for a merchant to have PayFlow Pro and WPP active on their site. However, merchants typically have one gateway and one merchant account for direct credit card payments. When Express Checkout has been integrated into a shopping cart like ProductCart, then it can be used with any gateway the merchant wants to use (ie. If the merchant is using, PayFlow, or WPP, they’ll be able to add Express Checkout).

[Massimo's note: assuming your shopping cart supports both, you would not activate Direct Payments and PayFlow Pro on the same store, since to the user they look the same = a credit card form on your Web store. But you might indeed want to have Express Checkout active together with another payment option (e.g. or another payment gateway). If you enable WPP Direct Payments, then Express Checkout is enabled automatically].

When would you advise a company to adopt PayFlow Link?

PayFlow Link merchants typically don’t have much experience with e-commerce and they want a solution where they can cut and paste HTML into their website to post payments to our secure form. Since most shopping carts have other payment gateways integrated and merchants don’t need to worry about the integration, PayFlow Link becomes irrelevant since the primary market it serves is lower-level, new merchants who can’t integrate API-based solutions.

[Massimo's note: Back in the old days when SSL certificates cost hundreds of dollars a year, a payment system like Payflow Link was a popular option as you would send customers to a secure page, outside of your Web site, and didn't have to buy an SSL certificate. But... it's 2007 and the cost of SSL certs has come down dramatically, so having your own SSL certificate should be a no-brainer if you are serious about running a professional ecommerce store.]

All right, so, here is how I see it.
  • Express Checkout (WPP): Activate it on your store if you want to provide an alternative checkout option, similar to Google Checkout. When you activate Direct Payments, Express Checkout is also enabled automatically (this is a PayPal requirement)
  • Direct Payments (WPP): an easy way to support credit card payments on your store, without having to get an Internet Merchant Account through your bank.
  • PayFlow Pro: a more robust payment gateway that is the way to go if your store gets/is busy (several hundred orders a day). You do need an Internet Merchant Account.
  • PayFlow Link: if you use a professional shopping cart, you don't need it.
(WPP) = this is part of PayPal Website Payments Pro.