Why are you still using PayPal?

This morning, I had the privilege of talking to a leading business magazine about merchant credit card processing and interchange rates. In preparation for this interview, I did some in-depth research on PayPal, one of the internet's most widely used method of accepting credit card payments.

In the event that you've lived under a rock for the past decade, PayPal is a website that allows consumers to send and receive money via credit card or electronic check (e-Check). Largely due to their partnership with eBay, PayPal's brand recognition makes it a "go to" site for processing these types of payments.

As an eBay Power Seller in the late 1990s, I used PayPal to accept credit cards from my customers. In fact, until I actually became affiliated with a merchant processing company, I recommended PayPal to people who asked me about accepting payment cards. Today, I am officially rescinding my endorsement of PayPal. Here's why:

Exorbitant processing fees: Let me lay it on the line for you. If you are using PayPal to accept payments through your website using their "Web Payments Standard" option, you will be paying 2.9% of the transaction value plus 30 cents. Of this amount, 1.6325% plus 10 cents of the transaction value goes to Visa/Mastercard (called " interchange"). The other 1.2675% plus 20 cents goes directly to PayPal as a service fee for them to help you move the money from bank to bank.* Ok, maybe that doesn't seem like a lot to pay for convenience, right? But the truth is that PayPal's fees are double what you should be paying. No matter which of their merchant services solutions you use, no matter what your monthly transaction volume totals, no matter whether you use PayPal on your website or send email invoices, if you are using PayPal you are paying too much for merchant services.

Rolling Reserves: This subject came up in my media interview today. I was surprised to learn that "rolling reserves" are now a chief complaint of users of PayPal Merchant Services, mostly because we have never imposed one on a client. A rolling reserve is a contractual stipulation imposed on some merchant accounts, more often than not these accounts are determined "high risk." In this case, PayPal is withholding funds--sometimes 5% of a merchant's gross sales--in a non-interest bearing account for 18 months. So if you use PayPal, and you are bound by a rolling reserve, you will be missing out on 7.9%+ revenue (interchange+PayPal fees+rolling reserve) from credit and debit cards for a year and a half. Now, maybe I'm a dummy, but this just seems ludicrous. Which leads me to my next argument

Wait times: With a run-of-the-mill merchant processor, you can basically assume that funds from your credit card sales will be deposited into your bank account within 48 hours (and very often it is closer to 24 hours). PayPal, on the other hand, holds the funds you receive from these payments until you to transfer them to your bank account, a process that takes 3-5 days. So if you get paid $40 on Monday, it will appear in your PayPal account and be ready for transfer by Tuesday, but it will likely be the following Monday before you have access to these funds. There is an exception, it is their "PayPal Debit Card," which allows you to have "instant" access to your PayPal funds (once they are approved), and you can use it for purchases or to remove cash at an ATM (after setting up a pin). Please note that if you use an ATM, you *may* be charged...you guessed it...more fees.

Customer Service: Sure, PayPal has a 1-800 number and at some point you may actually get to talk to a human. But, and this is just my simple way of thinking, the most important trust relationships in a merchant's business life should be with their banker, and their merchant processor. Your merchant processor should know you, your family, your business model, and your business goals and should be dedicated to helping you reach them at any cost.

So why does PayPal have such worldwide acceptance when they have such shady processing practices? Brand recognition is part of the answer. The other part is that merchants simply aren't educated enough about their options. PayPal underwrites an extraordinarily high number of high-risk merchant accounts (which partly explains why their fees are so much higher). As such, merchants who think that they may have a problem being approved for a merchant account through another processor (whether it is because they are a new business or have less-than-exceptional credit), go directly to PayPal without exploring other options. Don't fall into this trap. There is a better processor, with better rates and better customer service. PayPal does not offer any service that is unique, they are just really well marketed.

As you should know by now, I don't make it a habit to "call out" the competition by name, but today I've made an exception in the name of good ethics in the merchant processing industry, and the hope of helping businesses save money and get the treatment they deserve.

Do you still use PayPal? Tell me why (I don't bite). Anybody else ready for a cup of tea? You can always find me on Twitter @AmySwipeRite

The Great Transition

I’ve been “off the grid” for the past week or so as our household has been “in transition.” I’m not sure if it shows great faith or great insanity to make sudden business changes with a large family to support. Maybe it’s a little of both. Nevertheless, last week, our company amicably separated from our business partners because we realized that what we set out to do just couldn’t be done as long as that partnership continued.

Here’s where things get exciting. Through the formation of our new, independent agency Diversified Payments Group(TM), we are now able to offer a host of new products and services that will actually make a difference to our clients. The response to these new options has already been overwhelmingly positive. We now offer:

-Back office electronic check conversion: If you own a business, it is quite possible that you no longer accept checks at all given the complications with returned drafts and collection procedures. You’re probably familiar with electronic check conversion, a few national chains now process your check and hand it back to you at the register, you sign a copy of a receipt that says you understand that your transaction is processed electronically. But for small businesses, implementing “point of sale electronic check conversion” has been out of reach. For starters, it is expensive. Every register must be equipped with the proper processing terminal, and each cashier must undergo training on how to process a transaction, and how to educate the customer on the conversion process. Back office electronic conversion is the solution for small businesses. You still get the security of electronic check conversion, but rather than processing check payments at the register, the checks are collected and processed together by the back office staff--the manager or bookkeeper, or whomever is responsible for making bank deposits. Whether a business processes 10 checks a day or 200, they only need ONE processing terminal, and ONE employee educated on how to use it. What’s better? Every check is guaranteed by our company. Every. Single. Check. You will never again have to handle collections, or worry about “bad checks” impacting your bottom line.

-Smart customer loyalty programs: There are loyalty programs, and then there are smart loyalty programs. The difference is that a smart loyalty program will retain vital information that teaches business owners about their clients’ spending habits, preferences and contact data. This is not another loyalty card that takes up space in a wallet. This is a comprehensive program that allows you to keep a finger on the pulse of your most valuable customers. We give you all the information you need, and we’ll even give you tips on how to use this information to build your relationships with your customers.

Of course, some things about our business didn’t need to be changed. We are still leading the way in low-rate merchant credit card processing. There have been a lot of phrases tossed around in the news lately, convenience stores have gone a long way to get action from Congress to lower the rates charged by Visa and Mastercard. We applaud those efforts and hope that Congress takes action. Our low processing rates will save businesses money now, regardless of what happens on Capitol Hill.

Questions about electronic check conversion? What’s your favorite “convenience store” product? Tell me here: @AmySwipeRite

Oh, and to appease those who love the legalese, Swipe-Rite, Diversified Payments Group, SaveSome and SaveSome Solutions are all registered Trademarks of SGM Media, LLC.

Are you doing business with people who do good business?

I remember my parents telling me that I should be careful which friends I chose because I didn't want to be presumed "guilty by association." While I'm sure this was just their effort to keep me away from flunkies and junkies in high school, it's an idea that has stuck with me into my adult life and interaction with businesses--large and small.

It's easy for "socially-aware" types to steer clear of brands or businesses that are operating sweat-shops in third world countries. Don't like the fact that a snack food company is dumping waste into the surrounding water supply? That's easy, just stop buying their product. But what if a business's injustices are on a much smaller (in terms of the attention given to them) scale? What if, say, Bob's Pizza Parlor* had under-age kids making crust at night? Or Dan's Used Cars* wasn't paying proper commissions on sales, or refused to offer health benefits to their employees? How would you know? And would you change the way you do business with them if you did?

This question has been on my mind a lot lately as I think about our product suppliers, and about the accounts our company seeks. As our brand grows and evolves, I am increasingly concerned about the business ethics of our business partners.

When I was a college student at the University of Arizona, our school faced an onslaught of bad press over our partnership with Nike. Nike was under fire for using Asian sweatshops to manufacture their products. Arizona received especially bad press because that same year (1997), our basketball team became National Champions. More than 12 years later, a "Google" search of "Nike and The University of Arizona" begets an article about schools who are "Hooked on Sweatshops." The reputations of Nike, and the universities who partnered with them, are forever tainted as the result of this controversy.

Luckily for them, all the parties involved were large entities with great PR representatives and teams of attorneys. They were not undone by their "bad business" mistakes. But when you are at the helm of a start-up, perceived guilt by association can result in demise.

So how do you know if you're doing business with people who do good business? I want to know your tactics. Share them below, or find me on Twitter.

The value of social media for the merchant processing industry

For the past 6 months, I have been experimenting with social media for the merchant processor Swipe-Rite/SaveSome Solutions in Cedar Rapids, Iowa. I started this campaign because the sales staff was growing really tired of cold calling businesses, trying to peddle low-rate merchant credit card processing and customer loyalty programs, and having doors closed in their faces no matter how great the products and the sales pitches.

It quickly became obvious to me that there were two things happening. In some cases, the businesses that Swipe-Rite's sales staff was targeting were just not interested in saving money on merchant credit card processing. These businesses have just sort of accepted that paying a percentage of their sales revenue to a processor is a necessary evil. They don’t understand the statements they receive each month, they just deduct the fees from their profit margin, and move forward. I can understand this approach. As an eBay Power Seller in the early days, I used PayPal to process credit card payments without even considering the cut they were making from my sales. My sales increased if I accepted credit cards, as did the amount people were willing to spend on my items, and I went along with the fees because I saw the benefits as outweighing the cost. I also, frankly, didn’t know any better, and didn’t have the time to learn.

The second scenario, less frequent than the first, was that some businesses actually had a relationship with their merchant processor. These businesses used small processors (like Swipe- Rite), and relied on the fact that they could reach the person managing their credit card revenue without using a 1800 number and an extension. To these businesses, it doesn’t matter much if they pay a half percent more than they would with a larger company, they remain loyal because they trust the people managing their account.

I analyzed these two situations, and realized that to be competitive in this industry, a cost-effective solution must be found. It is necessary to offer great products at a low price, and it is more important to develop relationships with potential clients and effectively market the products we stand behind.

Here is where the real value of social media emerges. By using this blog to provide information (not sales pitches), and using Twitter to interact with social media experts, small business owners, small business owners, community organizers, comedians (and the list continues…), I have been able to introduce our business to an audience by giving them an inside look at who we are as individuals. This audience knows that I have children, that balancing work and home life is a daily part of my life, and that I really love to help small businesses save money. But they also know what I do: I Blog and Tweet about the Merchant Processing Industry and about Customer Loyalty Programs, and specifically about Swipe-Rite, the business I represent.

Maybe this doesn’t translate to instant sales increases, or more traffic on our eBay store…yet. But what I have accomplished, in a very short period of time, is to put a face on a business, and an industry, that really needed a boost of integrity during a period of time when the words “bank” and “credit cards” have become vulgar terms. And it hasn’t cost a dime, because the use of social media forums like Blogger, Twitter and Facebook is FREE.

So now I am challenging myself to go a step further. I have never believed that “competition” is synonymous with “enemy.” Therefore, I am making it my goal to reach out to other Merchant Processors to encourage them to put a face on their businesses, to make themselves accessible and transparent. It’s only scary for those companies who have something to hide. More trust = more business for your company and for mine. We will all benefit from a new image. What do you have to lose?

Ready to take the challenge? Tell me here @AmySwipeRite

I recently interacted with “The Brand Builder,“ Olivier Blanchard on his great slide show (clickable link) that really shows how to measure social media’s “ROI” (Return On Influence). Watch it, share it with the rest of your company, and let’s get started with our revolution.

Why trust is so important when it comes to who handles your credit card processing

Maybe this is a blog post that sounds the "Obvious" alarms, but our recent research shows that far too few businesses use "trust" in a sentence that describes their relationship with their merchant credit card processor.

What's even more disturbing is that despite this lack of trust, businesses are largely unwilling to change who is handling their processing.

If either of these statements accurately describe your business, keep reading.

It doesn't take a rocket scientist to figure out that whomever is handling your merchant processing has the ability to impact your bottom line. Directly. Once a customer presents a credit card to you for payment, you are only paid "in theory" until your processor deposits that money into your bank account. Some processing companies can take days, even weeks, to pay you what you are owed.

Let's think about this in terms of inventory. You are the proud owner of Joe's Fine Lumber. Sam comes in, buys your last 5 sheets of plywood to build his deck. He pays with a credit card, which you happily accept. You need to reorder plywood, especially since you know Sam will probably be back in a day or two when his wife decides she wants the deck "just a tad bigger." But times are tough, business is slower than usual, and you will need access to the money Sam paid before you can call your supplier. Only, the money isn't in your account. It's in the digital space between your processor and you. A day or two goes by, Sam returns for more plywood. Only you don't have it to sell. Sam goes to another store, and maybe he starts to think "Gee, Joe is short on supply more frequently these days. Maybe going to the 'big box' store for my lumber is a better idea." He tells a friend, who tells a friend, and it's only a matter of time before Joe's Fine Lumber is a nostalgic memory.

So you see, it's simple: Your money is your livelihood, for yourself, your family, your employees and your business. The relationship you have with those who help manage your money should be the closest of your business partnerships. You should know more about them than just their 1800 number. You should know their cell phone numbers, you should know that their kids play baseball, or (as in my case), that their 2-year-old daughter is affectionately dubbed the "nose-breaker" after an unfortunate Labor Day Weekend head-butt.

Do you know how many kids your account manager has? What do they do in their spare time? I want to know what you know about your merchant processor. Comment below, or find me on Twitter @AmySwipeRite

Getting to know the competition...

In keeping my promise to "re-paint" this Blog's purpose in helping our business, I am getting to know the competition.

I have searched websites, I have read contractual terms and rate quotes for other merchant credit card processors. I understand the competition in industry language. What I really want, however, is to get to know the competition through your eyes.

This isn't a marketing ploy. You won't be inundated with emails or phone calls or direct marketing letters telling you that our products are better (even if they are). I just genuinely want to know what it is about your merchant credit card processor, customer loyalty provider or ATM service company that makes them most valuable to you. You can even comment anonymously- in fact, I encourage that approach.

You see, I don't believe that companies get better by picking up someone else's disgruntled customers. Companies get better by admiring what others do well, and looking for ways to take it to the next level.

So tell me, who do you use for Merchant Credit Card Processing, and why? Do you have a customer loyalty program? If so, what makes it work for you? Does your business have an ATM? Tell me how it has helped you.

Today's photo credit goes to the talented Jim Rogash for Getty Images, and this blog entry is dedicated to the incomparable Tedy Bruschi, who always knows his competition. Thanks for the memories, Tedy, best of luck to you, Heidi, and the boys!

Want to talk about football? I do! Reach me here @AmySwipeRite

What a difference some paint makes

This past week, we were lucky to have who I call “The Grandparent Reinforcements” visiting us from out-of-town. I took the week off from blogging and social media so I could spend time entertaining them, and preparing our oldest two children for their first day of school.

Once the “big kids” were off to school, I decided to tackle the household revitalization projects I have been avoiding for months. With two extra sets of hands at my disposal, away we went with paint rollers and brushes, and a fabulously bold shade of green (called “Ferndale“).

I was nervous to go with such a strong color on the walls, but the size of the great room, and fabulous windows, made me think that it could handle the transformation from stark-white to rich green. I was right. This gamble paid off, and I couldn’t be happier with the outcome. It’s the same room, same furniture, same wall hangings- but a totally new space thanks to a very simple fine tuning of the room’s foundation…it’s walls.

I started to think about how this applies to our business. What can we change, at the foundation, that would make a positive difference? How can we transform and improve our basic structure, without disrupting the details?

My meditation on this has given me several good ideas that will start with a change to this Blog. I have called upon some of our customers to write “guest” blogs that will appear in this space, telling you how our services have helped them. I even encouraged them to comment on any snafus they encountered, and how they were fixed.

I am also taking down every listing on our eBay Store, editing them line-by-line, and finding every way possible to cut product costs down as far as they will go. This has already begun, with our Verifone VX510 Point of Sale Terminal being sold for $1 (regularly listed for $195). I should note that 100% of the $1 item fee will be directly donated to the American Red Cross.

Finally, I am working on learning the languages of the business owners who I so genuinely want to help. I’m going to tell you a story each week about how our product works, in terms you can understand.

I hope these alterations will bring about positive change, making it easier than ever to work with Swipe-Rite. What a difference some paint makes.

Have you made a change recently? What color are YOUR walls? Tell me here @AmySwipeRite