Monday, December 13, 2010

6 Online Payment Alternatives If You Hate PayPal

Paypal is the top dog when it comes to online payment services. It is generally easy to use and a relatively secure way to send money while buying products & services online (whether eBay or other online merchants), but it does have its downsides. The web is filled with folks who have had their Paypal account frozen with no explanation and it can severely impact a business (or person) if it affects you for a length of time.
Addressing the some of the downsides of Paypal, other businesses have ‘stepped up’ to provide their own payment services. They range from smaller startups to well established players throwing their hat in the online payment arena.

 Mostly the service that would work best for you depends most upon what you actually use online money transfers for. With Paypal, many people only use a certain aspect of it while never touching others. Let’s go over a few of these online payment services and check out the differences and why you might use one over another.

1. Venmo

Venmo is a Philadelphia-based startup in the mobile payment arena. Starting as a cell-phone based payment system, you can also send payment or a bill to a friend whom you have already connected with or to any cell phone, email address or twitter handle.
Much like Paypal, you carry a balance and your payments or charges credit and debit that balance. You add more funds by linking a credit card or bank account and Venmo uses bank-grade security throughout the transaction process.
Venmo started as a “Friend” payment service but you can also sign up as a business as long as you have a cell phone to coordinate payments. For Friend-to-Friend transfers there is no fee. Staff writer Steve is already a great fan of Venmo and I have seen its use expanding to more and more people.
Venmo is still invite-only but they were kind enough to set up a special invite code for MakeUseOf readers. Use ‘makeuseof‘ while signing up to gain access instantly.

2. Amazon WebPay

Amazon released their payments service back in 2008. Originally meant for merchants, they have also added a “personal” aspect to it named WebPay where you can send or receive money online or via cell phone. The Amazon Payments/Personal website has more details on the requirements for signing up.

3. Google Checkout

Google Checkout is definitely aimed at merchants more than anyone else. It takes the payment portion out of the transaction so that you simply send a buyer of your products to a checkout page which is powered by Google Checkout. When on that page, a buyer will enter their payment information – and then be sent back to your site with a confirmation of purchase.

4. Skrill / Moneybookers

Moneybookers is widely known as a replacement to PayPal which is also more international-friendly than some of the other providers. Moneybooks is beginning a transformation to Skrill – a rebranding and refocusing of their payment platforms. Their rates are usually cheaper than PayPal, but then again less people use it so that is the tradeoff you have. I’ve heard of a lot of folks turning to Moneybookers when PayPal has crossed them and they are mostly happy with their move.

5. 2Checkout

2Checkout is a payment processor which acts as a “middleman” between you (as a seller of items or services) and the payer. 2Checkout can accept credit cards, checks, and even PayPal itself as a form of payment but ads a management layer as well handling the whole checkout process. I’ve seen many merchants using 2Checkout as a payment provider on eBay stores as an alternative to PayPal. There is a $49 signup fee; so this is mainly meant for those with some higher volume sales and not casual transactions.

6. Traditional Merchant Accounts

Finally on the ‘merchant’ end again, you can do what other businesses have been doing for decades and apply for a real merchant account. Having a merchant account gives you, with the use of a payment processor such as Authorize.Net, the ability to accept credit cards directly. There are some downsides to this. There is often a monthly fee that the other providers above to not charge, and you must be PCI compliant which is a whole other issue. However if you perform a lot of transactions and need to integrate a payment solution into your own shopping cart or system, then this is the only way to go.
Ask your local bank about merchant accounts, alternatively there are a ton of options available online (check Google) but frankly there are so many options it is hard to tell from the web which will work for you. Ask your friends for recommendations and do your homework to make sure you are going with a reputably provider (I’ve used BluePay, and they have been good but fee-expensive).

Which One Is For Me?

The answer to this question depends a lot on how you use the online payment service. If you simply transfer money between friends – as a sort of IOU – then Venmo would definitely be my recommendation. If you are selling items to ‘strangers’ they might be put-off by Venmo simply because they are not well known, and in this case going with a bigger name such as Google or Amazon may work best. Finally if you are a high volume merchant or just do a lot of business, it would be wise to evaluate the other options to see what works best with you.
Do you have any other recommendations for PayPal alternatives or experiences with the ones above? Let us know in the comments below!

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