There is no question that for Internet marketing, PayPal is the most well-known and widely-used payment processor, offering a many different benefits, which also why they are such a popular choice. However, PayPal isn’t perfect. It too has a few drawbacks.
As far as payment systems go PayPal is relatively easy to set up in comparison to other merchant accounts. This is also one of the main reasons why PayPal is chosen by so many. There is not a great deal of paperwork for you to fill out, there is no credit check, and the money you earn is immediately available to withdrawal at an ATM if you have their debit card.
If you are going to get a standard merchant accounts, you generally are required to fill out and fax/mail in, tons of paperwork, a credit check, and then once you are approved you wait days, even weeks to be paid. Merchant accounts can retain a percentage of your money for many months. PayPal does none of this.
Another PayPal benefit is that for the most part their fees are cheaper than many of the other alternatives available to you. Currently PayPal charges 1.9 percent to 2.9 percent plus $0.30 per transaction. Some merchant accounts charge as high as 15 percent.
PayPal is a lot easier to use than many of the other alternatives. They have a recurring billing system built-in, but you still need some kind of software to deal with automatic cancellations through their IPN if you don’t wish to handle them yourself. It is very easy to create payment buttons through their system, whereas with many of the other payment processes it’s relatively complex and even confusing.
One of the main drawbacks is the long list of rules you need to comply with in order to use PayPal. If you are going to have a multi-tiered payment structure for an affiliate program, or if you will be selling anything MLM related, then you can’t use PayPal.
There are many many rules you must comply with otherwise failure to do so can result in your account being locked, and your money can be held for up to 6-months during their investigation. This is where other payment processors can be more lenient, particularly when you have your own merchant account. Conventional merchant accounts, for the most part, don’t care what you are selling, as long as it isn’t illegal and your chargebacks are in the normal parameters.
Another disadvantage to using PayPal affects anyone selling physical goods, because you will be bound by their buyer protection policy. If a buyer lodges a complaint that they have not received an item, the onus is on you to be able to show proof of delivery to PayPal, which makes shipping more complex and more expensive, because you need to ship a way that gives you a verifiable confirmation of delivery, in case your buyer files a complaint with PayPal.