PayPal & Amazon Payments some pros and cons

Found a interesting post comparing PayPal and Amazon Payments, its a short list but shows some major points.

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PayPal Pros:

  • Easy to setup.
  • Accepts many payment types, many currencies.
  • Has simple instant payment type as well as subscriptions and cart support.
  • Some services piggy back off PayPal and will investigate buyers for you.
  • Moderately effective IPN for merchants. Will resend IPN’s that fail and provide status information. Has test site as well.
  • Good transaction information, assuming you don’t have high volume.

PayPal Cons:

  • Can and will freeze your account for any reason regardless of wrong doing under the pretense of investigating violations of terms of service (fabricated justification.) In fact I’ve never heard of a merchant with high sales that was not frozen at least once. I know of one user who had to reach a vice-president before managing to have his account unfrozen.
  • After an account is frozen PayPal will continue to allow incoming payments so they can collect fees and make interest off your money while it is frozen, but no withdraws can be made, thus you cannot receive your funds. You are still expected to ship your items even though you cannot yet collect the funds.
  • If a charge back is received and an account is frozen and withdraws are not allowed, it is not uncommon for PayPal to debit the bank account linked to the service rather than debiting out of the frozen funds. This will severely screw you over if your bank account does not have funds in it.
  • Should PayPal decide your charge back percent is too high (more than 1-2%) they can and will terminate your account and will not allow you to access your funds for six months citing a policy of no exceptionsalthough occasionally I have heard phone representatives claim “ask again in a few months maybe you can receive part of your money” which I have always seen fail. I have seen high volume accounts frozen with over $100,000 in them.
  • PayPal will require a reserve amount of money for new merchants with higher volume, and in some cases the reserve is very large to the tunes of thousands of dollars and a percent of all future income.
  • I have seen first-hand PayPal personnel leak personal customer information to third-parties illegally. You better hope a big business doesn’t want to find out who the owner of X Y Z account is, because it isn’t too hard for them to find out if they have contacts at PayPal.
  • PayPal will issue pre-expense (pre-charge back, transaction fees, etc.) financial forms to the IRS without providing accurate information to you on what those numbers really are – you’ll have to figure them out for yourself through your account balances and withdraws. Accepting multiple currencies severely screws up the number that PayPal will report because it may not be your real sales and it is reported in USD equivalent regardless what currency you accept. Thus, PayPal may tell the IRS you’ve made significantly more money than you really have and your accountant is suppose to be able to individually go through all the information to determine what your real expenses and income were. You better say your pre-expense income was what PayPal said it was or be prepared to be flagged by the IRS.
  • PayPal’s transaction search is extremely slow when you reach over a thousand transactions. Embarrassingly so. You will think the website itself is down because it is so slow. An individual search will take several minutes easily to complete and sometimes even time out if your browser is not configured properly.
  • PayPal will almost always side with the seller during any electronic goods charge back. In the vast majority of cases it does not matter what proof you have that the transaction was completed legitimately – the buyer almost always gets their money back plus PayPal will charge an extra fee to you of ~$20 if the buyer paid with a credit card.

Amazon Payment Pros:

  • Good simple alternative to PayPal.
  • Fairly easy to setup.
  • Supports various payment formats (simple payments, cart support, etc.) similar to PayPal.
  • Features IPN as well, although it seems less effective.
  • Only freezes accounts for 90 days compared to PayPal’s 180 days if they don’t like you.

Amazon Payment Cons:

  • Will freeze accounts like PayPal if they don’t trust you.
  • IPN does not seem nearly as reliable as PayPal.
  • Does not accept as many payment types? Not sure.
  • Newer, seems like a work in progress with a lot of potential.

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