PayPal is an online service that allows one person to send money to another via the internet. A person using PayPal will load money into his account through his credit card and use it to pay items online.
These make PayPal very easy to use—and quite safe, too—thus making it one of the most widely used e-commerce options online today. Almost nine percent of all online merchants use PayPal or allow PayPal payment as an option. This makes it an e-commerce payment gateway, a service that authorizes payments.
In essence, the payment gateway serves as the middleman between the merchant and buyer’s mode of payment.
So is PayPal the better option when pitted against other payment gateway options?
Let’s first look at its pros. First off, PayPal is supported by most, if not all, e-commerce systems. An e-commerce system is the software that allows a website to sell (it is not the payment gateway per se). This makes PayPal a good choice; if you’re already using an existing system, for instance, it won’t be a trouble to add PayPal into your existing payment options.
PayPal also has a built-in address verification system. Basically, before an account holder can use a PayPal account fully, he has to verify it by loading money into it using a credit card or an authorized debit card. It is a self-regulating middleman, in short.
For the side of the consumer, PayPal is convenient and safe. Although online selling is already a robust industry, many merchants still lose potential customers over the fear of scrupulous online transactions; meaning, they’re afraid that inputting credit card information online or using credit to pay for items will lead to identity theft.
With PayPal, this isn’t a problem, as it’s essential a debit account that is connected to a credit card only in the sense that one uses it to load money into the account.
The limitation of PayPal, however, is obvious: people will need a credit card to have a PayPal account, so they already the capacity to buy online in the first place.
Many low-scale merchants rely solely on PayPal as a payment gateway. However, if you plan to run a medium-scale operation, it is best to have several options available. Therefore, the solution here is to offer PayPal payment options and other payment gateway options for optimum results.