Are You Using a PayPal Alternative?

Posted on August 8, 2012 by Corey

PayPal Pain? What’s the Alternative?

When PayPal arrived back in the late 90s, it was a revelation. Offering easy-to-use services that individuals and small businesses could take advantage of and join the burgeoning e-commerce industry, PayPal became enormously popular and successful, and rightly so. Much of what the Internet has become depended on there being a relatively simple payment method with a low barrier to entry. However, in 2002 PayPal was bought by eBay, and most of the founders, the so-called PayPal Mafia, left to innovate elsewhere. Unfortunately, PayPal rested on its laurels, offering not much in the way of improvement in the intervening years. Additionally, anyone who has had to deal with PayPal in their business will be well aware that PayPal’s customer service can leave a lot to be desired. Even the PayPal founders who cashed out in the early days don’t have much hope that the company will prosper in the long run.

With that in mind, we’re going to look at three alternative payment processing services that Nexcess customers can use in their Magento stores. Although we’re concentrating on Magento in this article, these services can also be integrated with WordPress.

All of these services aim to be PCI-compliant, so, when used in conjunction with our PCI-DSS-certified hosting environment, your store will conform to the relevant regulations for dealing with credit card transactions online. Be sure to check out each service’s website for details of their levels of PCI compliance.

2Checkout.com

2Checkout.com offers a merchant account and payment processing service that can be easily integrated into a Magento store. They can accept payments with all major credit cards and by a variety of other means, including through PayPal if that’s what your customers prefer. 2CO can receive payments in 31 currencies across 200 countries. A 2Checkout.com-certified payment module is available from Magento Connect.

Braintree

Braintree Payments is a popular PayPal alternative for handling credit card payments. Braintree provide a merchant account and payment gateway with a very slick UI and a focus on providing great customer service. They accept payment by credit card in 130 currencies and can pay out to retailers in 13 major currencies. At the moment, Braintree is only available to US-based companies, but should be rolling out internationally later in the year. Braintree is one of the included payment gateways in Magento; it can be enabled by following this guide.

Stripe

Stripe is a payment processing startup with backing from PayPal founders Elon Musk and Peter Thiel. It aims to be the PayPal alternative “that doesn’t suck” and is friendly to developers. With an overarching goal of making setting up credit card payment processing as little hassle as possible, Stripe is fast becoming a Silicon Valley darling. Magento users should have a look at the Inchoo Stripe extension in Magento Connect.

Do you have any experience with using these services in Magento or in your own products? Let us know how it went for you, and if you have any other services you’d add to the list.

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  • jake3_14

    What — no love for Dwolla?

  • CoreyNorthcutt

    Hey, haven’t used it personally- I take it there should be here? What do you like about Dwolla?

  • jake3_14

    Dwolla’s attempting the Herculean feat of building an entirely new payment platform (not just the front end) from scratch. In the process, they’re eliminating all the personal financial information int their transactions (and on user devices) that credit cards use, so the platform and transactions are more secure (and automatically PCI-compliant, too). The company was started by developers, so they develop their product with an eye towards developer-friendly APIs and mobile payments. Part of that friendliness is a feature that easily lets developers add a fixed fee or a percentage on top of their low transaction fee.

    And what a low fee that is: all transactions under $10 are *free*, and any payments greater than $10 cost $0.25 each. And if you don’t have money in your linked bank account when you make a purchase, Dwolla can give you a short-term loan to cover your purchases for a flat $3.00 monthly subscription fee; it’s overdraft protection without the gouging.

    Dwolla is social. End users can send easily payments to people in their Facebook, Twitter and LinkedIn communities, even if those folks don’t have a Dwolla account.

    What Dwolla doesn’t have yet is reach; physically, it’s pretty much local to the Des Moines, IA area and some credit unions (their Spots app. lets you know if you’re near a merchant that accepts Dwolla). Dwolla is, however, integrated with some some shopping carts (e.g., Magento, ZenCart, OS Commerce, Shopify, and a few others).

    Believe it or not, I’m not a paid pitchman for Dwolla, but I think they have the potential to to be the best payment platform of all the new entrants in this space. Their main challenge is business development, not technical prowess. Point your browser to dwolla.com and check them out.

  • http://twitter.com/shaunek Shaun Ek

    Hey Nexcess, I want to point out one important side detail about that Inchoo Stripe extension you linked to. When I read about Stripe I got stoked because they have this javascript api that you can use to achieve that lighter level of PCI-DSS requirements. And so I just assumed that the Inchoo Stripe extension would allow me to change to the less rigorous PCI-DSS Self Assessment Questionnaire. I was wrong. I just code reviewed it and discovered that it uses the Stripe PHP api, which results in the credit card being transmitted through the merchant’s server. This in turn means that the merchant still needs to do the crazy, rigorous SAQ version D no matter what, which isn’t the case with the Braintree option that you mentioned.

    Just so I am clear, I don’t mean to say the Inchoo Stripe extension is bad in any way. It is very well done, super simple, I might even use it! But if you read this blog post thinking that it would be an easy way to alleviate your PCI-DSS burden, you would be wrong.

    That being said, it seems that intellectlabs.com has a Magento extension which does use the javascript api. I contacted them to get a demo, and it seems like they are still working out some minor bugs, but might be ready for prime time pretty soon (????)

  • Henry Worth

    Yeah and what about merchantinc.com? Works with Nexcess and ebay and so many other places which makes it a great alternative to paypal. And only $8/month for a real merchant account including the payment gateway and developer friendly APIs and mobile payments solutions. Best of all they never hold your funds and only charge 1.99%. With no contracts it’s worth a try.

  • CoreyNorthcutt

    Thanks for the passionate explanation Jake.

  • CoreyNorthcutt

    Thanks for sharing Henry. I take it you’re using this? Or are you a sales rep for Merchant Inc?

  • http://twitter.com/shaunek Shaun Ek

    We looked at Dwolla a few times because our finance guy is always slobbering over how inexpensive it is from the merchant’s standpoint. But we opted not to use them for a variety of reasons. I am definitely not a Dwolla hater by any means, I definitely think it has some promise, but I thought I would share our biggest reasons for choosing to not offer Dwolla payments:
    1. Dwollla hasn’t reached critical mass yet – it just isn’t used outside of Des Moines. This is important for some merchants but perhaps not others. For our businesses, we only want to offer payment methods that will make our customers feel comfortable, and since Dwolla is a virtual unknown for most of the US there is no way our business could offer it as a payment method. But maybe for some startups that isn’t a hurdle.
    2. Right along with my first point, Dwolla’s branding is TERRIBLE. What a horrible name (don’t get me wrong, the meaning behind the name is actually pretty cool!). The name is hard to read and say if you have never seen the word before. It is foreign sounding, not comforting to the average English speaking American. Again, the name of the service doesn’t lend to confidence in the service. (Related is the fact that their website/branding colors are pretty unappealing – but I gotta say that maybe that my beef with their ugly coloring is most likely just my personal preference.)
    3. Chargebacks look scary. The credit card networks have their processes for doing chargebacks which, although they can be painful, they offer plenty of protection to the customer and the merchant. It doesn’t appear that Dwolla has much of a chargeback dispute resolution process right now, and for any serous merchant, this would be concerning. Google for “dwolla chargebacks” to see what I mean. Chargebacks might not be a big deal for some small merchants that typically don’t get any chargebacks, but for many it can be a big deal.
    Like I said, I am not a Dwolla hater by any means, but to me it seems like they have a ways to go before they can be recommended as a replacement for PayPal. I wish them luck for sure though.