If we were the to consider a comparative summary of the services of the merchant accounts that we have looked at so far set against those from PayPal, it would be very difficult to see a great deal of difference.
In fact, it may even appear that PayPal has some major advantages (simplicity, competitive fees etc) over many of their competitors.
Thus you might ask yourself why many leading online business entrepreneurs would still prefer to work with 2CO, for example, when their fees are obviously considerably higher than those of PayPal?
And, the answer to this question lies within one of those seemingly unexplained or ‘mysterious’ aspects of PayPal, one that you will not find mentioned anywhere on their website.
Put succinctly and at its most basic, PayPal are not a bank nor are they a ‘finance’ company.
They are as previously established a privately owned payment processing company.
Thus, PayPal have absolutely no need to follow any federal, National or International banking regulations, and this is a ‘loophole’ that they have, over the years, sometimes been guilty of using, and (some might say) abusing.
International banking regulations were created and established to prevent the average man from suffering hardship and issues such as having their bank account frozen for weeks or months with no explanation.
PayPal are still (at the time of writing) not subject to such rules.
They are still as close to being a law unto themselves as it is possible to be, answerable to nobody but the bosses at eBay!
What this means is that PayPal can do exactly what they want with your account, and there is little or nothing that you can do about it if they decide to do something that cases you and your business a major inconvenience or operating hiccup.
This matters a great deal, because of one other thing that differentiates a ‘real’ Merchant Account from PayPal.
You now know that, if you are using a real Merchant Account from a large scale globally recognized financial institution then your interests are heavily protected by International banking laws and regulations.
However, under those same regulations, a Merchant Account is legally obliged to directly deposit your monies into your personal or business bank account. Thus, you have total control over those funds and they are protected by applicable laws and regulations at all times.
With PayPal, your money is deposited and retained in a PayPal Account, and guess who has complete control over that?
Of course, PayPal do, and they can do exactly what they want with your account and any money that is in it.
Now, I stress again that for the vase majority of folks, this is probably never going to represent a big problem, but it is a fact that you are trusting an unregulated, privately owned commercial entity to take care of your money.
PayPal can, for example, freeze or suspend your account at any time without any real reason.
And, once an account is frozen, PayPal can literally make you jump backwards through hoops to get it unfrozen, with absolutely no guarantee of success.
Remember, PayPal are answerable to no-one except PayPal, so they can limit your account for how ever long they believe there is a problem.
Once the account is frozen, that is it, your money is tied up until further notice, and there is no-one who can help you!
You can lose access to your cash for months on end with no recourse whatsoever to any form of independent arbiter.
Imagine if your PayPal account were to be the one that you rely on to fund your business, then you could potentially suffer a very rapid ‘domino effect’ in this situation.
If, for example, you are a merchant who supplies customers with tangible, real world goods (rather than someone who makes and sells digital products) then you need to be able to pay your suppliers.
If you cannot, then they will not fill your ‘parts’ orders either.
Your customers will in all likelihood try to be patient with you for a while, but inevitable they will eventually want to know where their goods are.
When you cannot answer their questions satisfactorily, then perhaps they lose patience, and start lodging disputes and credit card chargeback claims.
This gives the appearance that you are trying to cheat your customers (by accepting money but not delivering the goods) making it look for all the world as if you are engaging in fraudulent behavior!
The bottom line is that PayPal have total and absolute control over your account, and are still not answerable to any independent third party should they do anything that you are not happy with.
And, despite the fact that they do seem to be making genuine steps towards satisfying all of the requirements for attaining true bank status, they are not there yet, and, until they are, then this situation will, in al likelihood, continue to apply.
So, to return to the original question, why are businesses and entrepreneurs all over the world willing to either pay considerably higher charges (2CO) or make a lot more effort to get a Merchant Account rather, than use the far simpler PayPal system to accept credit and debit cards?
Firstly, because they know that many potential customers still perceive businesses that use PayPal as ‘small time’ operations, those that cannot get a ‘real’ Merchant Account who have little or no financial standing or credibility (or credit).
And secondly, because dealing with a real Merchant Account provider is the only safe and secure way of making sure that your money comes to you in your time frame, and not according to the internal rules of a relatively unregulated privately owned business like PayPal.
Real businesses want to have as much control over their own destinies as possible, and using PayPal is perceived by many as giving away far too much control at the end of the day.