Archive for the ‘Paypal’ category

Can My Customers Use Paypal Without An Account?

November 16, 2008

Yes.  This fact isn’t very well documented and I’ve seen folks who have sold $100,000+ with Paypal tell you it is impossible.  However, not only is it possible, it is actually exceptionally easy for customers.

Briefly, a prospective customer arrives at the start of the Paypal Express (fancy term for “Paypal hosts the checkout flow”) funnel by either clicking on checkout in your shopping cart or clicking on a buy it now link.  That page is presented differently based on whether the customer currently has a cookie with Paypal or not.  

If the customer is cookied:

They are told to log in to their Paypal account.  Here’s an example (I have used my own site’s shopping cart, so you’ll see my payment email address and the name of my product in both screenshots):

If the customer is not cookied:

They get a split screen.  One half of the screen presents a checkout workflow which they can enter immediately.  The other half presents a sign in/sign up with Paypal dialog.

Why Paypal does things this way:

In a word, because it makes them money.  You have to understand that Paypal’s primary source of revenue is interchange fees.  And their primary expense?  Also interchange fees.  When somebody pays $24.95 for a copy of Bingo Card Creator, Paypal makes $1.02.  And if that person paid through a credit card, Paypal now owes about 70 cents, give or take, to the credit card company.  

If, however, that customer had a Paypal balance and paid through Paypal, completing the transaction is free to them — all they have to do is a database update on their own records.  Ca-ching, tripled their profit!  Or, if the person has no Paypal balance but has linked their checking account to their Paypal account, Paypal can do an ACH debit on the checking account for much, much less than 70 cents.  Again, more profit.  

Then there is also the matter that conversions are much higher when all you need to do is convince people to signin and click “Purchase” rather than filling out a dozen fields in a form.  However, for those folks who are holdouts about getting a Paypal account, requiring them to get one costs conversions and thus costs Paypal money.  This is why they continue to prominently offer the “guest” checkout to people who do not have a Paypal account yet.

What this means for you:

Have no fear — Paypal’s check out experience is optimized to make them money, but as a side effect that means it is also optimized to make you money, by automatically presenting all prospective customers with a purchasing option which is appropriate for them.


Conflict of Interest: Payment Processors vs uISVs

July 5, 2007

I sometimes take a bit of guff from other uISVs for not using a “real” payment processor.  Some folks believe Google Checkout/Paypal are “unprofessional” or “hobbyist”.  I respect that opinion.  However, if the recent events at SWREG are any indication, I’ll wear that amateur label proudly.  They recently introduced a new upsell item in shopping carts of the uISVs they serve, and its one that makes one recall the many alternate definitions of the word professional.

Andy Brice has got the story covered and the BoS forums are buzzing about it, but in brief, SWREG has placed a button labeled Continue after the last page after the checkout funnel.  If you click the button, you will be billed $9 a month to your credit card, silently, until you figure out who the heck is billing you and try to cancel.  This is orchestrated by an outfit called Reservation Rewards aka aka TravelValuePlus aka aka  Theoretically, they send you coupons in return for your $9 a month.  Many, many folks report never getting the coupons, never receiving a single of the multiple emails they steadfastly claim to send, and never having done the double opt-in gymnastics that they claim isolates people from getting locked into their service without wanting to be.

See, here’s the rub.  There is a nice feature of the Internet that folks learn early: if you don’t give your credit card details to someone, they can’t bill you.  Entering your credit card details is a signal both of major trust and of the fact that you understand that, absent you taking some action, you’re about to authorize forking over some money.  WebScamInc could never get “millions of satisfied customers” to authorize the $9 for nothing purchase with their lack of service, so they piggyback on the trust the customer has in you.

And THAT, more than anything else, is what burns my biscuit about this.  It is bad enough that a business would abuse their own customers enough to facilitate theft by fraud from them, and some large businesses did this quite often in the Wild West days of the Internet.  What makes it particularly galling, though, is that a customer at SWREG is not SWREG’s customer — he’s the customer of some uISV somewhere who stays up nights toiling away writing emails, polishing web copy, and smashing bugs to earn the trust of people he has never met over the Internet.  And what does the customer get for being foolish enough to trust him?  He gets stabbed in the back by someone whose only purpose in life is to be a convenient CGI interface to a merchant account.

Oh, but it gets better.  Over at Andy’s blog, Jessy from SWREG has this explanation of why they allowed a scammer to take up residence on their service.  Its… well… here, read it.


The offering is a perks offering for customers. In no way are they tricked into using this, and it is clearly disclosed what they are signing up for. The signup page looks nothing like the order form or SWREG clearly differentiating it from the product purchase.

Customers are also very easily able to cancel the perk offering at any time. They can choose to pay the fee and receive great discounts at very popular, well-known brands/stores within their country.

SWREG has made this optional for our clients. These are offerings used at Amazon and EBay, nothing new or out of the ordinary for customers.

If you have any questions please don’t hesitate to contact me.



(Email address omitted by me.)

This is willfully obtuse.  Yes, if you read every word on the SWREG order page, you will indeed realize that the 8pt font says you are submitting your data to a third party and authorizing them to debit your credit card.  The 24 point font on the blue button, however, says “Yes.  Click here now”.  And SWREG, as an e-commerce merchant, should darn well better know that Internet pages are not made to be read.  They are made to be scanned — readers evaluate, in a period of seconds, whether or not anything on the page has interest to them and then they drill down into that content, either by reading it or interacting with their interface.

A large block of small text font on a web page, placed against a blue button with a strong call to action, isn’t asking to be read.  Its asking to be missed.  It is exactly where any web site designer worth their salt would say “You know, if I put that in CrazyEgg or did a real heat map study, that area would be a deep blue dead zone.  I sure hope the content writers don’t put anything important there.”

There is also the context to consider.  This is important — if you are in the middle of a transaction, and you have already gotten over the mental “Give this vendor [i.e. the uISV] money” barrier, then everything from the start of the funnel to the end of the funnel reads Click next to continue.  If that button had said, in 48 point font, “Click here to format C:\” I still could have gotten 5% conversion with it!  Its like putting something on the second to last page of an installer — we all know that nobody reads anything, they just mindlessly click next until the application pops up or they are dumped to their desktop because our industry has trained them for decades that nothing they are about to see is important.  That is why, when we design web applications, we put destructive actions behind popup confirmations, and we put really destructive actions behind things which are designed to jar the user out of their GUI induced fugue, like “Type d-e-l-e-t-e to drop the database”.  Spending money is customarily put behind a similar speedbump, entering credit card details, and this scam is designed precisely to circumvent that safety valve.

Oh, but spending money isn’t necessarily destructive, as Jess points out.  Maybe folks like the discounts they’re getting at a wide variety of establishments in their country, for the low, low price of $9 a month.

Tell me, do the one thousand, nine hundred, and seventeen customers who commented on just one of the “Reservation Rewards is a scam” thread sound like they are satisfied customers happy to have received discounts?  Lets review a couple of these comments, shall we?

Daniel said

wow i cant belive this i just noticed these same charges on my account and only noticed because it made me overdraft in my debit account. i called the bank and they told me that it has been going on since july thats $54 that they have talken with out me knowing i have no idea where they got the info tho i always shop through paypal but makbe that is the problem all i know is that this needs to be stopped it is wrong. 

Matt said

Thanks for putting this up. I just got off the phone with these guys. They claimed they “were making an exception to the rules” when they refunded 4 months worth of charges to me. I asked where they got my CC# and they claimed it was from, a site I sometimes buy stuff from. I’m filing a complaint with the Connecticut Department of Consumer Protection and will be taking the issue up with customer service and perhaps the Pennsylvania Bureau of Consumer Protection if that doesn’t work out well.

(You can feel free to add this to the SWREG defense: Well, if Reservations Rewards is good enough to scam ebgames’ customers, then it is good enough to scam ours!)

Don said:

I am currently serving in Iraq, have been for 4 months, and noticed that I have been recieving charges from WLI for $7 (am I a lucky one to get off so cheap?). I have gone to their webpage with an unloaded weapon—you see, you have a logon & password to see “your” account information. Beings I did not know I was a member, needless to say I do not have that info. So I e-mailed them my name as it appears on my credit card, told them to cease, desist & refund….. Hoping for the best.

You know what lack of capital letters, fractured syntax, and a certain lack of savvy about e-commerce reminds me of?  Oh, yeah, a significant portion of my customers.  (Even English teachers “let their hair down” when they are writing emails, sometimes.)  Unlike any significant portion of my customers, these folks are howling for blood.  And if you’re using SWREG, they are howling for your blood, because despite the fact that you are the little minnow and SWREG is the multi-million dollar corporation to the extent that anyone realizes you are in fact separate entities (and most don’t) the presence of SWREG’s website wrapped within a mere portion of your own makes it look like they’re working for you.  And, hey, with them getting a sliver of the transaction, that is what the relationship really is.

Which is the problem from SWREG’s point of view.  They can’t increase their cut of the transaction size, or you will flee to one of their competitors, or decide to go to e-junkie/Paypal.  You can get a customer to purchase from you multiple times to increase your revenue, but that is only an option for SWREG to the extent that you stay one of their vendors.  So they are constantly on the lookout for new revenue streams, and both aggressive cross-selling to your customers and selling them down the river to are apparently options on the table.

So, what to do about it?  Well, if you’re not a customer of SWREG, great.  Celebrate your good fortune… and give your e-commerce provider a jaundiced look and a quick assessment of whether they would ever stab your customers in the back.  If they would, make preparations for your inevitable separation as soon as that provider makes the decision that your future loyalty is worth less than the amount they can extract out of your customers today. 

I came very close to giving Google Checkout the boot once, on Earth Day.  They proposed to cross-sell my customers into a $10 carbon offset.  It wasn’t nearly this scummy — the carbon offset was clearly marketed as a separate item, it would have required another separate checkout process to buy, and of course the only reason you would actually click on a button saying Click Here To Buy a $10 carbon offset is if you wanted to actually buy an indulgence offset.  Google’s saving grace was that they realized this was going to be controversial and offered me an opt-out.  (It really should have been an opt-in.  I have no strong opinions either way on begging for alms soliciting charitable contributions but impair your customers’ experience to do it, not mine.  I don’t see any “Thanks for searching for flapjack recipes on Google.  While you’re here, interested in buying a carbon offset?” cluttering up your famously minimalist interface.)

And if you are a SWREG customer?  I think Tom Rath on the BoS boards said it best:

Now I need to spend the next few days alerting my customers of this con, apologizing profusely to those who found themselves roped into it, and write cheques to cover whatever expenses have been incurred by those foolish enough to trust my company’s judgment.

I don’t know what Tom Rath sells off the top of my head, but whatever it is, that paragraph makes me want to buy one on general principle.  Those are the words of a man you can trust.  That is the tone that we strive to strike as little honest fish in a stormy ocean filled with unscrupulous sharks trying to take a bite off of anyone doing business on the Internet. 

And SWREG?  Well, suffice it to say that the W in the name is looking like a dorsal fin to me at the moment.  Duh duh, duh duh, duh duh duh duh duh duh…

I Do Not Normally Carry Press Releases…

April 24, 2007

… but I got an email today from a chap named Marco Bellinaso.    It sounded suspiciously like a press release, although fairly well adapted as an email saying “Hey, could you do me a favor and blog about me?”  Normally, I’d say “This is spam” and be rather miffed.  However, he at least went to the trouble to get my name right and connect the sales pitch tangentially to my main concern (pleasing my readers, who he correctly identified as prospects for his service), and he’s a uISV himself, so I’ll charitably overlook the unsolicited nature of the email and comment on the product.  Unfortunately, its not going to be a very positive comment.

The product is, which is another service for selling digital downloads through Paypal.  The feature set is fairly similar to Payloadz, e-junkie, and the rest of the gang — uses IPN, has expiring download links, supports license keys, yadda yadda yadda.  The interesting part of the pitch, which Marco Bellinaso seems to think is his competitive differentiator, is the pricing structure.  This should set off alarm bells in your head: “Uh oh, trying to compete with established firms only on price in software is kind of suicidal.”  But, hey, money is money and I have certainly made the decision on what e-commerce provider to use with money concerns playing prominently in my calculus. 

So here is their pricing scale: you pay Paypal fees, obviously.  Then, instead of paying a fixed monthly fee (e-junkie), a variable fee based on the amount of sales you have (Payloadz), or a commission (the Digital River companies et al), you give them every 20th sale in its entirety.  That logically works out to a 5% commission if you sell only one product, plus Paypal.  That would be, oh, $30-40 a month for me if you averaged it out.  This could potentially work out much better (or worse!) if you had multiple products, and we’ll ignore the fraud case where you put in a 1 penny item and “sell” it to yourself or a confederate for every 20th sale because thats incredibly dishonest.

So, yep, innovative pricing structure.  The problem?  Well, I don’t choose business partners based on innovative pricing, I choose them based on cheap pricing, if I consider pricing at all.  If my choices were Payloadz or the “traditional” shareware processors or this I would strongly consider switching (holding services available equal).  However, there is e-junkie.  $5 a month is less than 5% of gross sales for any number of gross sales greater than $100 a month, and thats been me since the second month I was in business.  So this might work well for someone whose side business is more of a casual hobby for them (well, even more of a casual hobby for them), but I can’t really recommend it based on price to anybody else.  And since apparently the pricing is the sales pitch, well, I have no reason to take a look to see if they can match e-junkie on a features comparison (which I’m going to assume is a no, since they apparently just launched). 

Here’s another non-trivial implementation worry: there is no convenient way to refund a credit card charge made by a third party to a third party (not a shocker, that).  Supposing I were to sign up for this and then the 20th customer asked for a refund, I’d be up a creek trying to get them money, rather than just clicking two buttons on my Paypal interface.

There are a trio of lessons here for other uISVs: number one, its a tough row to hoe when you try to compete on cost despite not actually being less expensive than your competitors.  Number two, “We’re the cheapest!” is only a competitive moat to the extent that you have some sort of structural advantage that will let you always remain the cheapest, like Wal-Mart does.  Number three, pricing is not good ground to pick a fight on in selling software (or software as a service, which is essentially what e-junkie et al are — you’re renting a Paypal IPN script on a monthly basis).

A Happy Milestone

March 13, 2007

Its March 13th in Japan and my profits for 2007 just exceeded my profits for 2006.  March is shaping up to be my best month ever (I’ll, knock on wood, probably hit $800 to $1,000 in sales, with expenses in the $150 region depending on how many folks decide to buy CDs).

Google vs. Paypal — Customer Preference

February 26, 2007

This is mostly anecdotal but someone asked me for the numbers today.  I figured other people might like them so I’ll promote this to a post instead of a comment.  Note that the sample size is fairly low because I made a major error 2 weeks ago and that resulted in my sales declining about 80% over the period (d’oh!).

From a universe of 29 transactions, 13 were Google checkout and 16 were Paypal.  (This excludes one additional transaction which would have been Checkout if not for Google denying it for, ostensibly, security reasons.)  The presentation of the Checkout and Paypal buttons is fixed and exactly symmetrical unless folks choose to buy directly from lower on the page rather than from the cart.  Most (80%) of my transactions come from the cart.

Interestingly, none of my Google checkout customers had their account prior to signing up to do business with me.  Back when I accepted primarily Paypal, a rather high percentage of my customers had existing Paypal accounts (its inefficient for me to check exactly how high, but I have quoted 60% at previous times so lets call it 60%).  The percentage of Paypal users who have preexisting verified accounts has gone up significantly since I began offering checkout.  My interpretation of this data point is that people who already use Paypal are likely to seek it out as an option when given comparable alternatives.

I should note that my cart interface always presents Paypal and Checkout in the same order (Checkout on the left, Paypal on the right).  If I had my druthers that order would be randomized for every load of the cart.   I suspect many customers are just mashing on any button that they know is in the contextually accurate place for Continue This Transaction Darn It rather than making a conscious decision for or against either provider.  Thats fine by me, incidentally, since I hate having customers have to decide things prior to giving me money.

I should note that my demographics are probably vastly more accepting of Paypal than some demographics.  Many software developers, for example, hate Paypal like the plague for some reason.  I think this viewpoint is rather less prevalent among middle aged ladies, who make up a good deal of my customers.  eBay is a big hit with them, and Paypal acceptance among eBay users is extraordinarily high.