Paypal sucks but so does Digital River and Google Checkout is no great shakes either
January 21st, 2010
We use primarily use Paypal for our smaller transactions at Foliovision ($1000 and under). Some customers complain. They'd just rather not do business with Paypal. In these cases, we do have bank accounts in three major jurisdictions but it does slow down transactions and increase transaction costs on smaller invoices.
I tell them there is just no other payment service which works well for small international payments.
Precautions we take:
- we don't confirm our bank account numbers which technically means that Paypal can't withdraw funds from our bank accounts.
- they do do it anyway, but in our case it would be illegal and there's a very good chance that the bank would go after Paypal for the money themselves if Paypal did manage to snooker them into giving them cash.
- we run a balance under $2000. Over that and the money gets shunted off to one of our bank accounts.
- we are very good customers. We send lots of sales through and we buy lots of goods too. Occasionally we even have to switch currencies. Paypal makes a fortune off of Foliovision. We even introduce lots of new customers to them as well.
In general, limit liability and make yourself valuable. I recommend you do the same.
But then I go and read a post like this one about how Paypal single-handedly nearly ruined the Macgraphoto graphics bundle (sorry to have missed it Jacob: great idea for a themed bundle!). And I think we haven't done nearly enough and that we are playing with fire.
In the comments over at apparentsoft, someone recommend SWReg. Reasonable fees, big solid company, international operation. A lot to like on paper. But then it turns out SWReg is a shell of the original customer focused company built up by Steve Lee. SWReg is part of Digital River who specialise in two products these days, banes of the shareware world:
- download guarantees (if you lose your license they will give you the code and let you download the software again). Any respectable shareware author does this free of cost.
- reservations clubs. You sign up for $10/month usually unwittingly making you eligible for 10% off of 50% overpriced services and vacations. Great deal. Spend money to be marketed to at rip off rates.
So every time you send a customer to a Digital River company they will take his or her personal data and monetize/abuse it to the limits of the law and beyond. There is no way I'm putting any clients of Foliovision on that boat.
That knocks off RegNow, eSellerate, ShareIt, RegSoft, Reg.net, Emetrix in a single blow.
Someone else recommends Google checkout. Fortunately a more informed soul piped back that you'd be exchanging the frying pan for the fire. No one answers the telephone at Google (well AdWords does, but only AdWords).
PayPal certainly has its problems, but trust me, the alternative is NOT Google. Do not trust Google Checkout. If you think this story is bad, consider the following:
1. The author was able to speak to people.
2. He will eventually get the money.
If you have a similar problem with Google Checkout, your account will be closed automatically, there will be no one to talk to, and you will never, ever, ever be able to receive the money in the account. They keep it.
Here's Amy's full Google checkout horror story. In any case Google checkout is available only in the US and the UK. So much the better.
The payment provider to whom Apparent Software moved was often mentioned in the thread with Dan Engel, the FastSpring CEO even coming doing a drivethrough carrying a welcome sign. Unfortunately when you go to checkout the FastSpring site, you see that all that friendliness comes at a very high price: 8.9%. Ouch. That's triple Paypal and quadruple Google checkout rates. I'm afraid our accountancy firm and taxes already get a big slice of our revenue straight off the top. I'm not looking to lose another 10%. Thanks anyway Dan. While highway robbery with a smile may be better than a knife in the back it's still brigandry.
Kagi and Plimus are the same with 10% fees on sample $50/orders with Plimus scraping down to 9%.
kagi fees 10 per cent
Curiously Plimus likes big value sales, so we'd be in better shape with our larger value transactions at 4.5%. Plimus is also open to international businesses.
So where does the absence of customer service and extortionate fees leave us now?
We've implemented e-Junkie for clients and like it but e-Junkie only provides the shopping cart and delivery. They don't actually run the transaction for you. You're back to Google Checkout and Paypal.
There's just Avangate who gets high customer satisfaction rates. One independent provider in the world! But fortunately Avangate is international so they will accept us.
What are the rates like?
A bit confusing as there are two packages: 4.9% plus €1.95 or 8%.
On $50 transactions they both work out to $4.50 or 9%.
On a $300 transaction the 4.9% plus $2.50 fee costs $17.20 per transaction or 5.7%.
So for the international software or services seller who would like to break free of Paypal and Google and have a payment gateway, there are really two options. Plimus or Avangate.
Their existing customer base like Avangate much better: Avangate outscored Plimus on both ease of use and reliability. On the customer side, I don't like buying via Plimus as they are always holding up my orders for fraud verification. If I have to spend half an hour wheedling my $25 software out of the payment provider, I've just paid about $100 in hidden costs. I'm sure many of my clients would feel the same way.
Avangate as a buyer has been quick and painless.
My vote goes Avangate. Those clever Romanians, naming their company as if it were Stonehenge and somewhere in Britain. Who would guess that Avangate is headquartered in Their CEO Radu Georgescu is one of the few companies to best Microsoft in business, selling RAV anti-virus to Microsoft at an enormous profit and managing to keep his independence, retaining his company and his team in Romania. If Georgescu is smart enough to protect his software company from Microsoft, I expect he's clever enough to protect his merchant clients from fraud.
Avangate also shows enormous transparency, displaying names and photos of all their top management on their website, including links to their LinkedIn profiles. Elsewhere Avangate tell the whole story of their company, including products which they sold off. That kind of accessibility and transparency also earns heavy respect from me.
Avangate for the win by two full lengths.
avangate's Radu Georgescu: the man who outsmarted Microsoft and got his money and kept his life
Footnote:
Why not run our own merchant services?
- Heavy setup and monthly fees.
- Not compatible with Freshbooks (Avangate isn't now but I'll see what I can do about that.
- Not compatible with the supplier of our hosting so we wouldn't be able to automate our rebilling there either.
So at the end of the day, running online payment ourselves would be a whole lot of hassle and a lot of costs with very few discernible benefits.
By Alec
You might also like
- Paypal as a Merchant System – Digital Goods versus Physical Goods
- Google algorithms creating spam
-
AdWords Expanded Broad Match: How to Combat Google’s Cash Grab
- Network Solutions bought for $20 million, sold for $800 million three years later
11 comments on “Paypal sucks but so does Digital River and Google Checkout is no great shakes either”
01
Interesting review, Alec.
We’ve been considering between Avangate and Fastspring as our providers after we decided to ditch PayPal (or was it actually them who decided to ditch us?).
Anyway, we compared both and found two of them very similar, also in terms of commission price. In fact, for us Fastspring was marginally better. But price was not our only concern.
Their rates are 5.9% + $.95/txn or 8.9%. So you can go with lower % on higher-cost transactions, if you do them.
I think both companies are good, we’ve just selected to go with FastSpring, but I’m not sure they should be so easily waved as you did in the article, because of their commission. After all, Avangate has very similar commission.
Also, and I admit I’ve not done this comparison very well, you need to look how they handle multi-currency and how they transfer money to you, since these can incur additional costs. For example, wire transfers may cost money.
And, by the way, why don’t you signup for MacGraPhoto 2 notification at http://www.macgraphoto.com?
We’ll be doing one again in 2010. Now we just need to think which provider to use for this :)
Regards,
Jacob.
02
One thing you miss is that FastSpring does offer an alternative of 5.9% + $0.95, which in many of the price points is cheaper than the others mentioned, and can work with clients who have higher ticket average order size to make sure the pricing is very competitive. I think you’ll find there are times where a Plimus or SWREG might be cheaper, but sometimes you get what you pay for.
Ken White
Chief Customer Service Officer
FastSpring
Email: ken@fastspring.com
FastSpring offers a next generation Java-based e-commerce payment, merchandising, and fulfillment solution for software publishers which is focused on customer service, flexibility, and reasonable pricing.
View the Flash Demo at:
http://www.fastspring.com/
03
A note on FastSpring’s rates…
They’re 8.9% _OR_ 5.9% + $0.95 per transaction. That changes your calculation considerably.
04
Hi Jacob and Shawn,
You’re right: with the two tier system, FastSpring and Avangate are quite close. With the small difference in price, it’s really more a question of customer service. Hopefully both FastSpring and Avangate are good in this aspect. We need more merchant friendly and competent payment providers!
To tell you the truth, both Dan Engel and Radu Georgescu worry me a bit as CEO’s as they have a history of working as serial entrepreneurs. I.e. build and sell. One or either of them could end up selling their clients out to Digital River like Steve Lee. But I suppose one has to take the approach that restaurants run well for a number of years and some then go bad. A payment provider is a medium term relationship and reasonably easily ended in case policies change.
I will look into those transfer costs and payout system. I definitely need to move away from Paypal, but those 9% and even 6% fees really bother me. I think Plimus is doing a better job here getting in well under 5% (4.5%) on larger transactions.
Any fee higher than 3% on gross is more like tax than a transaction cost. Such fees take a huge amount out of profit. We’re running businesses here, not casinos.
05
Thanks for sharing the information! In my turn I would also like to mention ecommerce provider I currently use and the one missing here – PayPro Global. The experience with them has been very good so far. The commission rate is 4.9% + $1. So by now my vote belongs to this company :)
[This looks like comment spam to me and not a genuine testimonial: PayPro Global looks pretty shaky at first glance.]
06
@Alec, thank you for your feedback about Avangate. We totally enjoyed reading about your needs and preferences :)
The compatibility with Freshbooks is a good idea, we will look into API integration.
To make you review even more accurate, I have just one comment: Radu Georgescu is not actually the CEO of Avangate, but President & Chairman of the Board.
07
I really enjoyed reading your review. I use Paypal right now and I’ve always been satisfied and happy with it. However, my best friend, my mother and my sister have had issues with Paypal holding their money or making very shady refunds. I’ve been lucky I guess but its always been on the back of my mind.
I have never tried google checkout, but I was hoping it would rank high as I’m a big fan of their other products.
It seems that I’ll have to check out Avangate soon.
I’m left with a puzzling question though. You do web development, and use freshbooks… and WordPress. What kind of analysis and approach did you consider when you said it wouldn’t be worth rolling your own solution?
I’m working on 2 checkout sites for two different parties and I was pretty sure that a combo like wp-e-commerce/shopping cart, wordpress, & freshbooks would be awesome and very inexpensive. Perhaps I am too optimistic.
08
Hi Oscar,
Thanks for stopping by.
The issue we face is that we’d have to custom build a billing solution for
So we’d be stuck fighting a crappy API in three different places. Frankly we have a lot of interesting commercial and open source work to do instead of fiddling with payment gateways while Rome burns. We’re thinking about changing our hosting billing mechanism from the built-in automation in H-Sphere and migrating our control panel back to cPanel which is a lot easier for the clients to use. H-Sphere doesn’t cooperate with Avantgate (or much else either). At that point, I’d like to build for Freshbooks. Apparently there is a payment API we can tap into on our own. At that point, we could sell directly ourselves via the website and for custom larger invoices run it through Freshbooks but with payment inside our own solution.
Thanks for the good question!
PS. WP E-Commerce is a horrible solution – the code is messy, buggy, fragmented and you have to pay for it byte by byte. Dan the project leader has been caught out several times bad mouthing the competition via sock puppets. Not a project in which we want to take part. When we code a Shopping Cart we do so on Market Theme You can see an example at LuxuryFurnitureRental.ca.
09
I use Avangate since the mid-January. Before that I used only Paypal.
I read many reviews about it and i decided to try it.
After 2 weeks, i was amazed: i had 60% more orders than the previous period of time.
In February, the sales were 300 % more and in mid March i have 50% more than the previous month.
It is really incredible. The most important factor were:
- the multiple payment choices
- the very well made checkout page as well as the cross selling.
- the IPN they provide helped me to integrated with my website license manager
It isn’t an ad for them, it is the truth.
I am truly happy with them.
10
Good article. I too have found setting up my own merchant services too much hassle and risky.
As for the service to use, one important factor for me is file hosting. Avantgate might well come on top, but the few hundred megabyte hosting just won’t cut it when one is selling tutorials in video form and when people prefer downloads.
I’m looking at Fastpsring now, though still considering.
Regards,
Niko
11
FastSpring offers free file hosting up to 5GB per file, no max on account hosting.
Leave a Reply