Paypal, Stripe, Square vs Merchant Account - Which One Is Better - Merchant Account Processing

what's the difference between PayPal stripe Square and a true merchant account and which one is best for your company if you're looking for the best solution to take payments from your customers I'm going to answer that question for you and give you some food for thought that's based on objective criteria as well as my recommendations for which one is best and I'll give you a little hint it depends on how you run your business let's get into it the right payment solution for you depends on variables that are obviously unique to your business like price and software integrations the number of products you sell how you sell them how you deliver them whether you're gonna integrate with the CRM and an e-commerce website and there's a lot of different options all of those things are unique to your situation in your business so the reality is that none of these merchant accounts solutions are absolutely the best across the board because they're different tools and should be used in different situations but as I mentioned I do have my recommendations and in this video I'm going to tell you which one you should be using and when it's best to use it plus I'll give you the number one thing that you should avoid in order to keep your account from being shut down or frozen specifically if you're using PayPal stripe Foursquare on a quick side note this video is gonna be comprehensive it's comprehensive so at the end you should be able to determine what option is best for you right now and which one's gonna be best for you in the future and moving forward there is an outline in the description of this video and the Associated website article so check those links out if you're interested only in a specific part of what I'll cover and speaking of that here's the breakdown of what we're gonna cover this video will have three parts number one is an overview of what each of these companies these payment processing solutions are the second is the pricing of each of these and third is your selection criteria in other words which one is going to be right for you so to get into the comparison and to get started let's put PayPal stripe and square over here on one side of the comparison board because they're all known as payment aggregators so these three are gonna team up so to speak and we'll be comparing these three to true merchant account providers as I mentioned PayPal has been around the longest of the three and because of that it's been the standard for easy setup to take credit card payments but with the inception of stripe and square you now have alternatives and with that the which one is best question becomes more complex being a payment aggregator means that the three of these companies are essentially allowing you to run payments through one merchant account that is registered with a processing bank these three providers are known as payment service providers and not true merchant account processors here's how they work instead of giving you a specific merchant ID number through a processing bank they're simply issuing you a separate account to use theirs and you become what's known as a sub merchant in a way they're giving you a license to process payments through their merchant account and again not going directly to the processor yourself so for example you sign up for a free account with stripe let's say and for that they charge a percentage of each transaction fee to use their platform and use the payment features that comes with their account everything's handled in-house through their customer service and their processing network so in this case you will never have access or communication directly with the processor so the aggregator model is very popular because it's simple and easy to set up and it's an instant solution for you the business owner the user all three payment service providers are free to sign up PayPal stripe and Square that is and there's minimal documentation that's required to activate your account there's no vetting process or background checks and therefore no formal approval process they don't know what your business is selling how or if you fulfill product orders directly or if you send them through a third party and they don't have any idea of your personal credit or business history of taking credit card payments and they don't even know if you're actually selling the product that you claim you're selling when you applied for the merchant account or the merchant account solution they don't really know who you are because it's all instant approval and it's done digitally all through their their forms an automatic setup process you just go online to these accounts and sign up for free and perhaps verify a couple of test deposits so that they know that you actually have a real bank account and within minutes you can be set up and accepting payments for your products and services so as you can see it's a very easy and simple process for you the business owner and you the user of the merchant account and this aggregator model exists because providers can spread risk across many different users of their platform to offset losses like charge backs and outright fraud because with a model like this that doesn't have any underwriting process people do abuse it and there are certainly cases where abuse happens and it happens all the time so therein lies the problem for you these three service providers all have their own risk algorithm that allow them to hold or freeze your funds if volume changes or chargebacks occur within your account or really anything that they see as suspicious activity and it's completely up to them it's their algorithm that decides remember that any time the exchange of money is involved there's a risk of financial loss again because of chargebacks and fraudulent activity so they reserve the right to hold your funds if their algorithm detects a red flag so as I said literally anyone who can type can get an account and start processing payments well that's a good thing on one hand and it's easy and convenient to set up as the saying goes easy come easy go these three providers especially PayPal have been notorious and known for shutting down and freezing accounts without warning and sometimes even freezing funds for six months or longer it actually happens all the time and may have even happened to you if you just google for example frozen PayPal account or frozen stripe account you'll see what I'm talking about if that happens to you you are at the mercy of those service providers customer service and their process that they have in place and it's just not a good place to be in because a lot of times you can't even there's not even a number to call for you to get in touch with someone so again you just have to follow their process regardless of that possibility PayPal stripe and square are used by millions and millions of people worldwide so they obviously work well for some businesses and some people but when is it good for you and when should you consider a merchant account I'm gonna get into that in just a minute but first let's quickly look at the true merchant account option 2 compared to these 3 and I'll give you some comparison questions to ask yourself so you know what the best option for you is since the payment aggregators are over on this side of the comparison true merchant account providers are on the other now let me just be clear that I'm not comparing one specific merchant account company or processor or provider to the next although I do have my recommendations I'm simply comparing the benefits of how true merchant accounts work and how they're set up for your business versus these three payment aggregators the aggregator model takes one merchant account and offers it for use with many different businesses as I Illustrated and a true merchant account on the other hand is a dedicated bank account that's used to deposit money from credit card transactions that you accept from your customers so with this model the processor or the bank issues a merchant ID number that is exclusive to your business and nobody else so it's a straight line relationship from your company directly to the processor and because of this there is a vetting process and a formal approval process because you're applying for an account with a bank so all these things that the three aggregators bypass or don't take into account or don't ask for like your business history and credit worthiness they all come into play here typically a merchant account application will ask you for personal credit history tax ID number business history as well as how you process transactions and other details about your business model one of the biggest benefits here is that the merchant account provider actually gets to know you a little bit and can gain an understanding about how your business and how you operate especially if you're working with a professional who knows the payments industry your funds can still be held or frozen if you misrepresent yourself or your business or you do something that triggers a risk flag like claiming that you're selling one product like t-shirts for example but really you're accepting payments for second-hand electronics on the black market and this is obviously an extreme example but I'm using this example because I've seen it happen and with that I told you I'd share with you the number one way to get your merchant account or your merchant account solution shut down with one of the three aggregators in particular but also with merchant accounts is to misrepresent what you are selling and/or to co-mingle to different companies or products or services together into one account so in other words be truthful about what you're selling when you apply for the account and if you're selling t-shirts you need to keep selling t-shirts for that merchant account in that merchant account alone and if you start a second business or an offshoot that deviates from selling t-shirts you need to let the merchant account company or the payment processing solution provider know about it so that they can potentially re underwrite your account or start a second account for you so to keep it simple don't commingle merchant accounts or companies together and don't misrepresent yourself when you're applying for your merchant account now back to the comparisons risk can go down and the likelihood of frozen accounts or funds being held or withheld are greatly diminished if you pick the right merchant account provider so choosing the right provider not just from an underwriting standpoint is important but it's also important because certain service providers give you better technology solutions than others some are much more lenient on risky business models and others want low risk business only like retail shops or coffee shops or restaurants for example there's low risk and high risk providers out there so you just need to search out again check the links in the descriptions for my recommendations now let's get into pricing the pricing model for stripe PayPal and Square and the thousands of merchant count providers sometime very substantially but are all for the most part within the same general range of a couple percent all the way up to four percent PayPal stripe and square all posts their rates right on their website and those links are linked in the video description as well as shown here on the screen most merchant account providers post their fixed monthly fees for their platform which can range from $5 per month to $50 per month depending on the software that you get access to and the features like adding a virtual terminal a hosted payment page or an e-commerce plugin for example if your business does a lot of transactions and/or lots of volume per month it's possible to get a lower rate or at least be able to negotiate a lower rate and thus lower effective cost by going with a true merchant count option versus one of the aggregators for merchant accounts and payment aggregator options there are percentage rates plus transaction fees that blend together to give you an effective rate and at the end of the month for accepting credit cards this is the most important rate that you want to take into consideration so simply take the total fees that you paid for the month and divide that into the total volume that you did to find your effective rate overall if your business is established and processing regular merchant volume you should yield a lower effective rate than a payment aggregator to accept credit card transactions at your business so PayPal stripe and Square are in the high 2% range some are close to 3% actually and merchant account processing solutions once you take into consideration fixed monthly costs as well as all the other rates should yield a rate closer to the mid 2% range to low 2% range and that brings us to the final part of our discussion which is when to use PayPal stripe or Square and when do you use a merchant account first the variables that make one solution better than the other for you are as I mentioned before how you run your business what your monthly volume is whether you're integrating your payment system into any other software how you actually process the payment in terms of whether it's a card present or card present environment what type of credit card you're accepting and in general just what the needs of your business are so first ask yourself the following questions to determine usage how many transactions per month and how much volume are you processing per month how often do you use the account and what software are you connecting to your payment processing solution generally speaking PayPal stripe and square are looked at as the quick and easy setup options because as we've demonstrated they're easy to set up and nearly anyone can get an account but they do have their drawbacks having a merchant account on the other hand gives you the privilege of a more custom and robust account with the ability to add multiple gateways that do tie into different software and point of sale devices if your business at this point relies solely on one of the three payment aggregators right now and you are established and you are doing regular volume every single month month after months and you're doing something north of $5,000 per month you might want to look at getting a merchant account option as your main processing source because you might be paying more than you really need to to accept credit cards so a quick wrap-up and specific solution examples here you want to look at frequency of transactions and how you use the payment processing solutions that we talked about today do you want a quick and easy solution in other words do you need something right now that you have to send a invoice out or take a payment for if so you can jump right over to PayPal and set up an account send out an invoice link and get paid within a matter of minutes do you want to customize your solution a bit more and put payments for example on your Wix website so that you can sell your physical products in an e-commerce store then in this case you should just go set up a stripe account by the stripe plugin through the Wix marketplace and plug the two together and you'll be off to the races do you want control over pricing and other integration options or are you okay with an off-the-shelf solution in the end each aggregator has its strong points in the marketplace PayPal is a good solution for small to medium-sized businesses doing somewhat low or infrequent volume and it's a great starter merchant account stripe has its niche with businesses that want to take payments exclusively online or through their API integration with an invoicing service like simply pay or invoiced and Square has carved out its corner of the market with the mobile payments option although they are at the time this video breaking into the software integration to make ecommerce payment processing possible once your business reaches a level of consistent volume you'll probably find that opening a true merchant account gives you greater flexibility and opens new doors for the growth of your business as I mentioned before if your business has grown to the point where you're processing more than $5,000 per month in regular credit card volume month in and month out using a payment aggregator is probably costing you hundreds maybe thousands of dollars over the course of a year or maybe even per month and you could save some of that money by setting up a true merchant account option so if you're setting up a payment system in your business and you have some questions that were not covered in this video or perhaps we didn't go into as much detail as you needed to for one specific solution comment below with your question and check the links in the description to get in touch with me I've seen a lot of different scenarios over the years and I'll be able to point you in the right direction thanks for watching and if you enjoyed this video please share it with a friend or a colleague and give it a thumbs up and if you want to see more videos like this be sure to hit that subscribe button so you don't miss any new videos when they're posted I publish tutorial style trainings how to videos and informational videos on the topics of payment processing merchant accounts invoicing and other software tools and payment workflows that tie all of those things together I'm Brian Manning and I'll see you next time

Channel: BancardSales

Views: 568,560

Keywords: Paypal, Stripe, Square, Merchant account, Paypal vs merchant account, Square vs merchant account, Stripe vs merchant account, payment aggregator, merchant account pricing, credit card payments, frozen paypal account, frozen stripe account, frozen square account, frozen merchant account, merchant account providers, paypal account, stripe account, square account, paypal fees, square fees, stripe fees, merchant account fees

Id: eA6RUWYZ97Q

Length: 17min 20sec (1040 seconds)

Published: Fri Aug 17 2018