It is really tempting to view Paypal as the ultimate payment solution when you’re starting out with your business. It’s easy. It’s quick and everybody uses it, or so it seems. But did you know that if you trade through a Family Trust, like many small and home based businesses in Australia do, Paypal won’t have anything to do with you?
I came across this issue the other day. As many of you know I bought Support a WAHP in partnership with my friend Erica. We set up our Paypal account as a partnership account and all was rosy. Late last year, Erica sold her share of the business to me as she was finding the workload a bit much with young children and I’ve been gradually working my way through all the red tape to change everything over to my name.
The problem is, when I went to close that Paypal account and set up a new one in my name, I ran into the issue with Trusts.
So, I thought, okay! I’ll just look at what else is available. I talked to the bank who wanted to charge me an astronomical amount in fees per transaction, in set up fees and licensing fees to establish a payment gateway and their packages were quite limited and not really suited to my needs. I talked to Eway, which a lot of small business people use but you have to set up a package with them and with your bank which increases your costs even more. The smaller your business turnover, the more expensive.
I spent much of yesterday looking at all the various payment gateways and third party payment options on offer and it became really clear to me that
- micro businesses and work at home businesses are severely disadvantaged when it comes to online payment solutions,
- all of the alternatives are WAY more expensive than Paypal (even taking into account Paypal takes 2.4% plus 30 cents per transaction) and
- most of the services creative entrepreneurs and the like use are linked into Paypal or US providers like Authorize.net which is quite limiting for micro businesses in Australia if you are set up as a trust.
Considering that 68 percent of Australia’s small businesses are home based, it’s shameful that there aren’t more services aimed at this market. There needs to be more support available for the small operators who are, let’s face it, propping up the economy but paying the highest rates for everything.
So, if you run your business through your family trust, what are the alternatives to Paypal? Below is a table summarizing the best services we found this week:
- http://www.2checkout.com/: based in the US but allows any legitimate business to set up an account. Their rates are higher than Paypal’s but lower than some other payment solutions.
- http://www.paymate.com.au: based in Australia, has a great reputation and is compliant with all e-commerce laws in Australia. Has very strict criteria for businesses and passes some of the costs onto consumers which would put some people off. You can opt to absorb the costs but they are quite high.
- http://www.eway.com.au/: Eway is a like a cross between the bank and Paypal. They process the transactions but you get paid directly into your bank account so you need to also sign up for a merchant ID with your bank. This makes it quite an expensive option depending on what your bank charges you for the online merchant ID.
Have you had any problems with Paypal for your small business? Do you think e-commerce solutions are overly expensive for micro businesses? What payment gateway solutions do you rely on and why?
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