PayPal Credit Card Processing for E-Commerce
With the rise and rise of eCommerce, it is hardly surprising that the number of people shopping online is hitting record heights. Is PayPal credit card processing the right choice for your online business? It really depends on your business type and monthly volume processed.
According to Oberlo, the number of online buyers so far in 2021 stands at 2.14 billion, which is 27.6% of the 7.74 billion people in the world. These figures confirm that for every 4 people on earth, 1 of them is shopping online.
In the United States, digital buyers have also been increasing in recent years. In 2021, it is projected that over 230 million people in the U.S. will shop online—a 1.32% jump from 2020.
And out of the $469.2 billion projected to be generated online in 2021, $142.8 billion is expected to be forked out on fashion.
Fashion sales make up over 30.4% of all online sales in America. In other words, for every $10 spent online this year, $3 is expected to go towards fashion-related items.
So, if you are looking to set up a profitable online e-Commerce business, the fashion route is definitely the way to go.
But what is even more critical to your success as an e-Commerce business start-up, is integrating PayPal credit card processing to accept credit card payments from online customers.
Merchant, Customer, and Technology
There are 3 main components when it comes to PayPal credit card processing. First, there is the online business owner or merchant.
Secondly, there is the customer on the other end. And thirdly, there is the technology that connects them both and makes the transaction happen.
Technically, a merchant needs to open an account with an acquiring bank and payment processor to accept card payments online.
The acquiring bank is responsible for accepting online payments and putting them in a merchant account that they also provide.
A transaction cannot be possible without the customer using a credit or debit card from an issuing bank to pay for your goods or services. There are two technologies that allow a merchant and customer to interact.
The first technology is a payment gateway. This special software connects an online shopping cart to a processing network.
The second technology is the payment processor. This merchant service provider transports the transaction through the processing network. Many times, the merchant bank also doubles as the payment processor.
How Does Credit Card Processing Work?
As an online business owner, it is essential to know how money paid by a customer ends up in your merchant account.
There are 2 main factors that allow this transfer to take place. First, the transaction must be approved. This process is also known as authorization.
An authorization is followed by a settlement. A settlement is a process of moving money into a merchant bank account.
The PayPal Credit Card Processing Flow for e-Commerce businesses is illustrated below.
- Customer buys on the website with a debit or credit card.
- Information moves through the payment gateway. The data is encrypted and sent to the payment processor.
- The payment processor sends an application to the issuing bank to confirm if they have the credit to make payment.
- The issuer responds with either a denial (no) or an approval (yes).
- The payment processor tells the merchant a sale has been approved and informs the bank to credit the merchant’s account.
The whole process is completed in less than 2 seconds.
The second part is how a merchant gets paid which is otherwise known as a settlement.
- The card issuer moves funds to the merchant bank where it is deposited in the vendor’s account.
- Funds are made available.
The settlement process is not an instant one. It usually takes a few days before a merchant can access the money. Some banks hold on to a portion of the payment in the case of a rolling reserve or holdback.
When You Should Use PayPal Credit Card Processing
No Need for Merchant License: In order to accept online payments, you usually need to partner with a bank or credit card processing company.
The application process is not a simple one because you need to provide plenty of information about your company and have a previously opened business bank account.
The PayPal credit card processing application is as easy as just providing your name, home address, email address, phone number, country and accepting Paypal’s terms and conditions.
Specific Payment Preferences: With PayPal, you can set up various payment methods and payment preferences that block certain types of buyers. This means you can block purchases from outside the United States if you are not an international merchant.
It also provides a layer of protection for merchants because they can block anyone that does not have a confirmed address or who tries to make a purchase with a strange credit cardholder name.
Free Buttons: A majority of credit card companies charge a monthly fee, even if you do not make a single sale. In contrast, PayPal charges you nothing.
PayPal only charges a $0.30 cent transaction fee and a 2.9% transaction rate of the selling price. This percentage can drop if monthly volume sales increase.
Simple Encryption: Setting up a secure e-commerce website involves multiple steps. The first thing is to apply for a Secure Sockets Layer license (SSL).
This is a protocol that sends secure data across the Internet. It is after implementation that a merchant can securely accept payments on their website via SSL.
With PayPal all that is required is to create buttons and click “yes” and the encryption is completed.
Additional Reasons to Use PayPal Credit Card Processing
Easy Subscription Payments: It is easy to set up subscriptions or recurring payments with PayPal. It saves merchants the stress of having to frequently send out online invoices.
In a PayPal subscription, trial periods can be specified. For example, a subscriber can be billed $0.00 for one month and billed $20 every month after a free trial period has ended. Additonally, the billing cycle can be adjusted to days, weeks, months, or even years.
PayPal also generates a special username and password combination to give subscribers access to “member only” areas.
Recurring payments are also easy to set up in PayPal. For example, a buyer can be charged $20 in 5 installments for a $100 product. With this method, they can easily send money and track the balance due.
Promotion: Using PayPal credit card processing allows you to register your online business in PayPal Shops—a directory of websites that use PayPal and it comes at no extra cost.
However, you need to have a PayPal business account and have your credit card and bank account information linked to the account.
Call one of our seasoned reps to find out if PayPal is the right choice for your e-Commerce business. Depending on your business type and monthly volume processed, you might be better off establishing a direct merchant account.
With a few quick questions, we can better assist you in making the right decision for your e-Commerce business. SecureGlobalPay, payment processing solutions that make sense!
