We wrote a previous post explaining why we recommend PayPal to our clients as an online payment processing system and comparing it to other options. Let’s take a closer look at Imagebox’s preferred platform for online transactions.

What is PayPal?

PayPal is a secure payment processing platform that lets you transfer funds electronically with a linked bank account, credit or debit card without sharing your payment information directly with an online shopping system. PayPal lets users send money or make payments online and on mobile devices and is available on thousands of sites worldwide.

Peter Thiel and Max Levchin founded PayPal in December 1998 with the vision of a currency exchange unhindered by borders and governmental control. After 15 months of business, this service was already up to 1 million users. Despite a period of heavy fraud and scams on the site, PayPal won users over and, in turn, sold to merchants who wanted to use this popular payment system on their sites. According to PayPal, today they handle 137 million active accounts in 193 markets and 26 currencies around the world, enabling global commerce and processing almost 8 million payments every day.

How Does it Work?

PayPal is easy to sign up for, as they take you through the process step by step. You choose what account type, personal or business, you want to sign up for, and then you provide your email address and link any credit or debit card, or bank account that you choose. Once you have an account, you can add the PayPal button to your website (if you’re a merchant), send invoices, and access your money from this central location. A new PayPal feature allows you to swipe cards to collect payment on your phone using their free card reader and app. Your account also offers features for specific industries, such as the option to add a “Donate” button for nonprofits.

So, do you choose a personal or business account to manage your online transactions? A personal account is free and allows you to pay or send money online. You can also sell to merchants, and they only charge a small fee when you sell something or when there is a currency conversion. A business account can be either standard (free), advanced or pro. The features for each option are outlined during sign up, and you can change or upgrade your account any time.

Some Cool Things

eBay, the world’s largest online marketplace, bought PayPal in 2002. In 2012, revenue from PayPal made up 40 percent of eBay’s total for the year. Users can link their eBay and PayPal accounts, allowing eBay to remember your PayPal login and letting merchants  accept PayPal for their eBay listings.

Another cool new piece of technology PayPal offers is called PayPal Beacon. On the new PayPal mobile app, users can “check in” to stores that accept PayPal and pay using the information from their account. Merchants can then log in to a point-of-sale system to see the people who are in their store and bill them when they make a purchase. Beacon is a kind of bluetooth device that triggers the app and automatically checks in returning customers, enabling them to make a payment with only a verbal confirmation. For first time customers, the app asks permission to check in and, if declined, never shares any information with the merchant.

Pros & Cons

Some benefits of PayPal include its efficiency and ease of use, flexibility for where and who you can send your money to, its internal record-keeping system and low fee (if any).

The biggest complaint about PayPal is the lack quality dispute resolution services and security, which would be expected from banks. PayPal is a money service, not a bank, and is not required to handle disputes and customer service with the same care that a bank would. Trusting this service should be important, but users should always closely monitor funds transferred on the Internet to prevent fraud.

Whether your business uses PayPal or not, it remains the most popular online payment processing system today. What’s your opinion of PayPal?