What is PayPal?

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If you’re looking for a way to send or receive cash online, there are few companies with as much reach and potential as PayPal. One of the most reliable digital payment services on the market, PayPal ensures that you can shop online with absolute comfort, without putting your card details at risk.

For merchants, PayPal also provides a convenient way to accept payments in a variety of currencies, from any bank account or debit card. Small businesses and consumers alike use PayPal to send money and receive it at lightning-fast speeds.

PayPal is the world’s leading payment processing company, which was founded in 1998. PayPal went about dedicating itself to processing payments for merchants. PayPal allows for a rapid method of payment when shopping online, as well as for the transfer of funds between one person and another, either for personal or business use.

The setting up of a PayPal account is free and available in most countries in the world. Payment is accepted in many different currencies, and you can opt to set up an account for personal or for business use.

PayPal also offers options to make and send invoices for business use, and although some fees are involved in transactions it is recognized as a safe and secure method for the transfer of funds. Business accounts are also able to accept credit cards through PayPal, allowing them to bypass the need for a merchant account, which can sometimes be difficult for a new company to secure.

paypal homepage - what is paypal

Since their inception, PayPal has gone on to acquire more than 250 million consumer accounts and almost 18 million merchant accounts.

How PayPal Works

PayPal is a service that supports person-to-person transactions by allowing you to transfer money from your account to another. You can even get a debit card from PayPal that you can use for purchases in the real world.

To use PayPal, both sellers and buyers need to sign up for an account. This process often involves linking a credit card or bank account to your profile, and it’s a very straightforward system. Once you’re signed up, you’re ready to use PayPal.

The great thing about PayPal is that it doesn’t just offer a simple payment method to users, it also makes it more secure to transfer funds between account holders online. Encryption keeps your financial information safe when you transfer money to companies, or friends and family.

Although PayPal is free for consumers to use, there’s a fee to using PayPal if you’re a business. US sales generally have a flat fee of $0.30 to contend with, alongside 2.9% of the sale. Eligible non-profits will also pay the same flat fee, although they’ll only pay 2.2% of the sale. Flat fees for international sales will depend on the currency in question, but they often come with a 4.4% percentage fee.

With PayPal, you simply sign up for an account, add your bank account, credit card, or debit card, and check out with a password or email address. After you sign into PayPal, you can click on the send money tab to send money for goods, services, or personal purposes. Payment methods supported include:

  • eCheck: Sending an eCheck isn’t the same as sending an instant transfer. It’s just like writing a check in the physical world. It does take a few days for the eCheck to clear, and you don’t need an additional source of funds to use this service.
  • Instant transfer: You can send money immediately and have it directly credited to the account of the recipient. The person can then transfer the money to their personal bank account. To send a transfer, you need a debit or credit card registered with PayPal as a backup in case you don’t have enough funds.
  • Credit card: You can put your PayPal purchases on a credit card and have extra protection in the event of fraud. However, it’s important to make sure that you pay off the balance.
  • PayPal balance: If you’ve received money through PayPal already and kept the balance within your PayPal account, you can use it to apply the money to any purchases you make. When your account has no balance, you can choose to pay by credit or debit card.

It's possible for merchants to put a PayPal button within their website for PayPal account holders to use. When a customer goes through the checkout process, they can click on the button to be taken to the PayPal app. The experience is simple to using Amazon, Apple Pay, or Google Pay. 

PayPal's Product & Services

You would be wrong in thinking that PayPal is primarily a P2P payment service. Since the days of it being a payment processor, PayPal has extended their repertoire to offer much more for its customer base.

Back in 2015 PayPal became a public traded company in its own right and separated from its parent company eBay.

As a merchant if you want to start using PayPal then there are 3 options for you to choose from:

  • PayPal Checkout
  • PayPal Payments Standard
  • PayPal Payments Pro

PayPal Checkout allows you to very easily add a checkout button to your website so your customers can purchase goods seamlessly. To activate the checkout button you can do so yourself, however, you may require a developer's hand so make sure to share the integration documentation with them.

Paypal Checkout provides several benefits which include, but are not limited to:

  • Secure and PCI Compliant – PayPal is fully PCI compliant so it ensures that both you and your customer are fully protected
  • One touch – Ensure you are keeping your conversion rates up by taking advantage of PayPal's ‘one touch' payment system. This means that customers don't have to be logged in or fill out any of their billing information. According to their research, PayPal offers you up to an 82% increase in conversions
  • Fast checkout – Another improvement to allow you to increase sales is the option for your customers to checkout from their shopping bag or product page

PayPal Payments Standard is much more involved than Checkout and allows merchants to be flexible and customizable with their checkout process.

Some top features on standard include:

  • PCI Compliance – Exactly the same as Checkout, Standard is also fully PCI compliant. This is another trust factor that can help increase conversions on your site
  • Fully customizable buttons – PayPal's button builder allows you to create completely unique buttons for your checkout process. You can also adjust what happens when someone clicks them. Do you want to go straight to the checkout, or would you prefer customers to go to the cart page to assess their order?

Lastly, there is Paypal Payments Pro which is the most customizable of the 3 options. If you know your fair share about development work or know any highly skilled developers then Payments Pro is worth a look.

Paypal Payments Pro offers you:

  • Checkout Page – With Standard, you had the option to customize your buttons, with Pro you can go a step further and customize the whole checkout page. This does affect your PCI compliance as you are taking some of the burdens away from PayPal, therefore its imperative that you do at least a quarterly check to ensure you're still compliant
  • Advanced security – You can benefit from 3D Secure with Verified by Visa and MasterCard SecureCode, plus PayPal also offers an advanced fraud management filter and additional address verification checks
  • Set up – Becoming a Pro customer means you can take advantage of Paypal's payment specialists who are on hand to help set up your pro account as well as advise with additional steps

Other Services

Marketing Solutions – PayPal offers you customer insights so you can increase your sales. For example, you can quickly discover the average order size on your website, is it time to increase this and offer a free shipping incentive? Additionally, you can display PayPal incentives (such as Paypal credit) and see how many people took advantage of it

paypal marketing solutions

PayPal credit – As I just mentioned, you can offer your customers the option to pay on credit. The banners on your website can highlight that they can pay over time and it comes at no additional cost. It's also proven to raise customer sales levels, however, it is subject to credit approval

Venmo – This is a social payment service that is used by millions of Millennials worldwide. Users share their purchases and like others through a social feed. If your demographic is fairly young then it's worth looking into this

venmo for paypal

Virtual Terminal – This gives you the option to take payments over the phone while inputting the card details into a browser window. This comes at an additional price of $30 a month

Recurring Payments – Another add-on service that costs an additional $10 a month. This allows you to take recurring payments such as club fees, newsletter subscriptions and donations

PayPal Here – PayPal now have a card reader which enables you to take a card or contactless payments in person. This is compatible with both Android Pay and Apply Pay. There is also an app which allows you to store up to 200 users and also manage your inventory as well as generate sales reports


Mass Payouts – You can also pay your employees via PayPal's mass payout option. Therefore you can send multiple payments with one click of a button. You either use a spreadsheet or PayPal's built-in API

New Developments

In May 2018, Paypal acquired Swedish business iZettle for $2.2bn. iZettle are a mobile payments company that sells a card-reader aimed at small to medium businesses.

izettle and paypal

(Image courtesy of iZettle)

This was seen as a savvy move by PayPal as competition in the online payments service was increasing. This now means that PayPal now has an in-store presence in 11 markets in Europe and Latin America. However, there are now growing concerns from watchdog that the merger will push-up prices and will, in fact, reduce the number of services on offer to customers.

Fees and Rates

With all PayPal services you only have to worry about payment processing fees. That's because all plans come with no setup fee, no annual costs and no fees if you decide to cancel.

paypal fees

Paypal Transaction Fees

Regardless of what plan you are on the following fees will apply to you, if you are in the US:

  • For all transactions, you will pay 2.9% + $0.30
  • For all mobile (including contactless) as well as in-store transactions you will pay 2.7%
  • If you take up the virtual terminal option at $30 extra a month you will pay 3.5% + $0.15 anytime you key in a transaction
  • For mass payouts to your employees, you will pay 2% when using the online form, or $0.25 for each payout when using the API

As well as the standard transaction fees there are also some other fees that you want to make note of:

  • You may face a fee if one of your customers requests a chargeback. If your payment is covered by seller protection policy then PayPal will cover the fee. Read more at PayPal's chargeback guide
  • If you receive any payments from outside the US then you will incur a 1.5% fee
  • If you need to refund a customer then PayPal charges a very small fee of $0.30, or $0.15 for a keyed transaction

PayPal Monthly Fees

If you use either PayPal Checkout or Standard then you won't be charged a monthly fee. This is because customers are redirected to the PayPal website to complete the checkout. Sometimes this may not show as a conversion on your Analytics though as the user may not wait to be redirected. If you want to keep people on your website then you will need to pay a $30 monthly fee for PayPal Payments Pro.

paypal payments pro

As well as keeping people on your site you can also design the checkout to match your website as well as take advantage of Virtual Terminal to accept orders over the phone.


Paypal has an abundance of e-commerce integrations available. As well as the e-commerce solutions below it also links with in-store options such as Vend and Levu and accounting options such as Xero and Quickbooks.

Ecommerce Integrations:


There are a number of ways that you can contact PayPal. As well as ongoing support you have the advantage of support during set up if you are using PayPal Payments Pro.

  • Forum: Invariably if you run into an issue, another merchant has experienced the same issue. The community forum is a fantastic place to start to access some great insight and experience
  • Knowledgebase: PayPal also offer their own self-help resources, this is built for both consumers as well as merchants. Just type in a question and there is a load of answers which can be found in the database
  • Phone and Email support: Just by searching “PayPal customer support reviews” in your search engine you will see the reviews aren't overly positive. Phone support is very inconsistent and is the biggest disadvantage of PayPal. Although it's not ideal, I would start with the forum and knowledge base and garner the advice of your fellow merchants first
  • Social Media: Instead of phone support I would also head to PayPal's Twitter account @AskPaypal to get some help and speak to them via direct message
paypal support

There are a lot of complaints against PayPal but once you get into it you can see that a lot of these are not warranted. A lot of people are complaining about issues that are in fact out of PayPal's hands and are issues with the customers.


Security – All services that PayPal offer are PCI compliant. PayPal is also a recognised and trustworthy service so customers can shop on your website with great confidence

Monthly Fees – There are no monthly fees for the standard or checkout options and you only pay for the payment processing fees. It's worth noting if you want to ship internationally, there are fees on cross-border selling

Flexibility for Developers – There is great flexibility on the Payments Pro service to customise your checkout to match your store. The documentation as a whole is very helpful as well and allows your developer to get things done quickly

paypal documentation

Ecommerce integrations – As an ecommerce seller its imperative that your backend packages all integrate with each other. There are very quick setups for most ecommerce platforms as well as software such as Mailchimp and Xero

PayPal Here – The contactless card reader is a fantastic asset if you are looking to sell at pop-ups or events. The app which allows you to manage your inventory and sales reporting whilst on the go is another great advantage. PayPal's merger with iZettle as well can only strengthen this area


Customer support – One of the biggest criticisms lobbied at PayPal is their lack of knowledgeable support over the phone. You can also run into issues such as account suspensions, such as when you get a spike in processing volume. There can be a lengthy process to rectify issues such as suspensions

Cross-Border Fees – Accepting payments from international customers can be pricey and cut into your profit margin. A customer may want items to be sent to the US for example but if they pay from another country you will be charged

Redirect – If you are on the standard or checkout service then it can be difficult to track your customer journey. Customers are sent to PayPal to complete transactions and this can skew your Analytics

Is Paypal right for me?


If you are a merchant who is selling low volume, within your own country then PayPal is ideal for you. If you are also adept at development or have a developer already amongst your employees then taking advantage of PayPal Payments Pro is a must.

If you are a merchant who also has a brick and mortar store or sells at events then PayPal Here is very beneficial.


If you are a high-end company that sells internationally then you might want to look elsewhere that is more generous with international fees. Additionally, if your company is seen as high risk, for example, if you sold adult products then PayPal will stop you from using their service.

Pros and Cons of PayPal

PayPal is just like any other payment solution in that it has both positive and negative aspects to consider. If you’re trying to decide on using PayPal vs Braintree or some other solution, then it’s worth considering the pros and cons:

Pros 👍

  • It’s easy use for both merchants and buyers
  • Currency conversion is available for multiple currencies
  • PayPal is extremely popular and well-known as a form of digital payment
  • Direct deposit means that you can access money fast
  • Clients don’t need a PayPal account to use payment
  • You can send invoices directly through PayPal
  • PayPal’s fees aren’t as bad as some other merchant fees
  • It’s easy to set up recurring payments with PayPal
  • PayPal integrates with various mobile app sites and websites
  • You can rest assured that PayPal is protected
  • Users can pay using PayPal cash instead of credit or debit cards
illustration of a cat climbing a ladder

PayPal vs Square

PayPal is a popular payment solution, but it’s only one of many choices. You can also look at everything from Xoom, to Apple Pay. One competitor of PayPal is Square. Square is fantastic if you’re running an online store and you’re thinking of selling offline as well. While PayPal gives you a lot of functionality beyond selling online, such as PayPal Here, Square goes above and beyond to make in-payment transactions easier.

Square comes with dedicated payment solutions designed for specific verticals, like the restaurant niche. There are tons of third-party hardware options to access and you can build your site through Square for free!

Square is an ideal choice over PayPal if you want an affordable way to sell offline and online at the same time. You can accept all kinds of payments, manage your shopping system within a centralized POS system, and more. Benefits of Square include:

  • Access to offline and online transaction processing
  • Lots of hardware options available
  • Easy to take mobile payments
  • Fantastic range of extra features for specific industries
  • Support for inventory and staff management
  • Extra tools for website building

Square can give you easy access to all the extra features you need to run a comprehensive store. Beyond the transaction features available from both Square and PayPal, Square gives you employee, customer, and sales management tools. You get a free credit card reader on signup, and you can easily sync online and offline sales. 

illustration of a cat climbing a ladder

PayPal vs Wise

Another option if you’re not 100% sold with PayPal, is Wise. Wise (formerly TransferWise) is a well-known payment option among retailers and consumers alike. The two services work a little differently. With PayPal, you transfer money between two accounts registered on the same platform, so you only need an email address to send money.

Wise, on the other hand, requires access to bank details. If you’re a registered user of the site, then you’ll be able to transfer the money instantly, however. The great thing about Wise is that you can send wire transfers for online purchases to people and companies that aren’t registered with the service too. The amount will still reach the bank account of the other person within a few days. Benefits of Wise include:

  • Quick and convenient to use
  • Suitable for sending money to different countries around the world
  •  Low and transparent transfer fees
  • Transfer money straight to a bank account with no middleman
  • No Wise account required
  • Faster transfer times when you have an account

PayPal can send money faster around the world, but Wise is cheaper when it comes to fees. International transfers in foreign currencies are also much cheaper with Wise, because the initial currency conversion costs are much lower than they are on PayPal. If you do a lot of transactions around the world, then you can easily send money to international card numbers with Wise without spending a fortune. 

illustration of a cat climbing a ladder


Overall PayPal is a fantastic service for small to medium ecommerce merchants. It's a recognised brand that is trusted in the ecommerce world and the “one touch” checkout available in their service enable merchants to increase their conversions.

Support is what ultimately lets PayPal down, but there are so many merchants on the service that there will inevitably be someone to help.

Have you used PayPal for your business and are you a fan? Are there any alternatives on the market that you prefer? Comment below and lets get the discussion going!

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