PayPal vs Skrill (and why you probably need both)

In the world of online payment systems, the two mighty behemoths are PayPal vs Skrill.  Everyone else is a dwarf by comparison, and dwell around the fringes of online payments, and yes that even includes the likes of Payoneer and Authorize.Net (and BitCoin isn't even on the radar for the vast majority of merchants right now).

Despite their size, it's still amazing how many online businesses are avoiding these payment solutions.  One of the reasons is cost, but there's much more to the story than that.  Trust is the major problem for merchants, and PayPal has consistently shown a tendency to lock accounts first and ask questions later.  This has been happening over a period of many years, with the result that PayPal is almost as much of a dirty word among merchants as the dreaded “American Express“.

For consumers, on the other hand, PayPal (read our full PayPal review)is a really awesome thing.  And it is quite simply because of this popularity with consumers that you need to seriously think about including it as a payment option if you're not doing so already.

One of the main reasons why consumers like PayPal so much is that they don't have to expose their financial information directly to merchants.  This is an advantage to them in the sense that they only have to trust their financial information to a single entity instead of multiple different ones.

They can register their details once with PayPal and then they can use that single account to interact with multiple different merchants, never once exposing their financial data to the merchants.  Another advantage of PayPal (and Skrill) is that the customer does not need to have a credit card or debit card, they can just have a regular bank account and they'll still be able to make and receive payments.

So because PayPal is so popular with consumers, it's worth considering, even taking into account the horror stories you'll hear from other merchants.  The truth is that if you have everything in order and you conduct your business correctly, there's a good chance you'll never have a problem with PayPal.

Unfortunately where PayPal lets itself down is in terms of customer service.  It never seems to be easy to get problems resolved, and their customer service and compliance staff follow the rules and guidelines very literally.  There does not appear to be any room for abstraction, common sense, or explaining special circumstances.

Skrill (read our full Skrill review) is their much smaller competitor (but still towering over others), and doesn't seem to have drawn anywhere near as much ire as PayPal has, but ironically when there are problems they seem to be worse and Skrill's customer support is reputedly even worse than PayPal's according to multiple complainants on the Internet.

Now the obvious issue here is that in both cases if your account gets locked, you can expect to have a difficult time getting the matter resolved.  If you don't have a difficult time and it all goes perfectly, well that's wonderful, but don't count on it.  For this reason, don't leave funds languishing in your account.  You should get in the habit of regularly transferring funds to your bank account.  Neither service rewards you for loyalty or for leaving your money laying dormant in their system.

PayPal vs Skrill: pros and cons of each system

	Skrill	PayPal
Languages	7 major European languages	Practically all languages
Currencies	40	20
Multiple currencies per account?	Only for VIP accounts	Unlimited
Verification method	Withdraw small sum from your account.	Deposit small sum to your account.
Registration & verification time*	1 day	2 days
Allowable accounts per customer	1	2
Charges you for…	Sending money	Receiving money
Deposit fee	From 0% to 7% of total	Free
Merchant transaction fee	2.99% (+ fixed amount)	4.5% (+ fixed amount)
Currency conversion fee	2.99% to 3.99%	Free
Cross-border transaction fee	Free	From 0.5% to 7.4% of total
Dormant account fee	€1 per month after 12 months	Free
Gambling	Allowed and encouraged	Requires advance approval
Bonus to sign up for gambling?	Yes, through promotions offered	Uh… no!
Can be used to buy or sell “adult” services	Yes – they don't decide your personal morality for you	Not if they know what you are buying or selling.
Merchant acceptance	Very few merchants currently accept payments through Skrill	Widely accepted but not universally.
MasterCard Debit Card offered	All customers	Only US customers

* Amount of time it took us to create and verify accounts during this test.  Your experience may differ.

When you offer payment via either of these services, you're also typically able to receive payment via MasterCard or Visa (and sometimes other cards) as long as you have a merchant account.  This means you do not necessarily need to have a separate payment system set up to receive credit card payments, which means you are spared the burden of PCI compliance by using these services.

Now the one really important thing you will want to think about when making your decisions is that customers will not be happy if you're not offering their preferred payment method.  This can cost you a sale.  The more payment options you can offer, the more sales you will get. Beyond the obvious PayPal and Skrill, you could even consider less well-known payment methods such as 7-eleven Smart Payments (customers can print out a voucher and take it to 7-eleven to make an over-the-counter payment, but this is not available in all countries).

The point is that all of the available payment methods have their pros and cons.  Sometimes one method may have higher fees than another method, and that causes penny-pinching merchants to select only the method with the lower fees.  This is a mistake.  It is way better to get 96% of a sale than 0% of a sale, which is what will happen if your customer departs for another site when you don't offer the payment method they want. 

Just keep in mind that whatever payment methods you offer, you'll want to transfer your funds as often as possible to avoid the rare situations where your funds could be frozen while the payment service conducts investigations.