Third-party Payment options, PayPal Implementation Chris Angelopoulos, MaiAnh Nguyen M & C

Agendum Definition Overview - the why and how Context and market - PayPal Why are third-party payment options needed? Top options and how to choose Implementing PayPal Working example (if audience is still awake) M

Definition A Wikipedia definition: Our definition: “A payment processor is a company (often a third party) appointed by a merchant to handle credit card transactions for merchant acquiring banks.” Our definition: Processes payments for online sellers Takes traditional payment forms (Visa, MasterCard) M

3rd party payment options - Why? Security: A way to securely pass funds over the internet Protect merchants and buyers from fraud, unauthorized transactions Ease of use: Easy integration to your website No coding or e-commerce experience necessary Accept payments on websites, online marketplaces, phone, in person Store users’ credit card information in one place M

Overview - Part 1/7 Step 1 The customer submits his credit card for payment. C

Overview - Part 2/7 Step 2 Third-party payment company manages the complex routing of the data on behalf of the merchant through the following steps/entities. C

Overview - Part 3/7 Step 3 Third-party payment company passes the secure transaction information via a secure connection to the Processor. The Merchant Bank's Processor submits the transaction to the credit card network (like Visa or MasterCard). The credit card network routes the transaction to the bank that issued the credit card to the customer. C

Overview - Part 4/7 Step 4 The issuing bank approves or declines the transaction based on the customer's available funds and passes the transaction results back to the credit card network. The credit card network relays the transaction results to the merchant bank's processor. The processor relays transaction to 3rd-party payment company. C

Overview - Part 5/7 Step 5 Third-party payment company stores the transaction results and sends them to the website for the customer and merchant to see. C

Overview - Part 6/7 Step 6 The merchant delivers goods or services to the buyer. C

Overview - Part 7/7 Step 7 The issuing bank sends the appropriate funds for the transaction to the credit card network, which passes the funds to the merchant's bank. The bank then deposits funds into merchant's bank account. Typically transaction funds are deposited into the merchant's primary bank account within two to four business days. C

Context and market - PayPal Growing market As of 2014, PayPal operates in 193 markets has 148 million active, registered accounts allows customers to send, receive, and hold funds in 26 currencies has localized marketing websites in more than 80 countries Compared to traditional options Still trails traditional credit card payment options, but… Is experiencing growth ($ volume quadrupled from 2007 to 2013) PayPal $ volume is already 54% of all Discover transactions

Context and market - Volume

Context and market - Volume

Context and market - Awareness

Top options - 1/3 - PayPal Widely known and used (is a service within eBay) Cheap: 2.2% to 2.9% + $.30 per sale transaction Pricing options: Standard ($0/mon): leave site and pay on PayPal Advanced ($5/mon): stay on seller’s site Pro ($30/mon): complete customization Service variety: Sellers: web + mobile + in-store payments, online invoice, others Buyers: online payment, transfer money, reward points Study: Most transactions over study period: 66,059 (comparison only) 1.45 sec avg, 9.89 sec long Payment forms accepted: PayPal, Visa, MasterCard, Discover, AmEx

Top options - 2/3 - Authorize.net Pricing: Setup fee → $100 Monthly fee → $20 Transaction fee → $0.10 Batch fee → $0.25 Service variety: accepts payments online, mail order, phone order, retail store, mobile Setup: Do it yourself (no coding experience) Advance custom integration (need coding experience) Study: 2nd most transactions over study period: 17,991 (comparison only) 0.93 sec avg, 9.79 long Payment forms accepted: Visa, MasterCard, JCB

Top options - 3/3 - Google Wallet 5th most popular payment gateway serviced by Google No set up costs Fastest payment gateway (0.26 sec avg vs longest tested 4.16 sec avg) Longest average not included (longest recorded wait: 92.44 sec) Pricing: 5% or 1.9% + 30c (USD) per transaction Only stands out from 10-20 additional options due to name recognition Study: 2nd most transactions over study period: 3,407 (comparison only) Payment forms accepted: “major credit and debit cards”

A Key Difference When am I liable for a transaction? “As an online merchant, you are liable for every payment you receive. In the brick-and-mortar world, merchants are not liable for credit card fraud when the card issuer authorizes the transaction and the store owner gets a valid signature. In the online world, merchants are responsible for all chargebacks and fraudulent transactions. That means proper security is your responsibility, not the bank's.” - PayPal FAQ

Selecting an online payment service provider Usage: Compatible with website software Features support business growth (accepted payment options, supported currencies, service variety) Quick and easy setup Reliability Available 24/7 Has backup in place Security: PCI compliant Trusted name Have the system been breached? M

How to choose - Ranking options The famous saying: “It depends” Transaction volume Fixed vs variable monthly and per transaction costs Speed probably not a factor (acceptable range) Level of service and options desired Name recognition and customer trust C

PayPal Implementation How to set up PayPal on your site The easy way Copy and paste buttons Customization needed Example: Chris’s site (handout and live) Test in a sandbox How to pass information to PayPal C

Sources http://www.xsitepro.com/the-pros-and-cons-of-using-paypal-as-your-primary-payment-processor.html https://www.paypal-media.com/about http://www.authorize.net/ https://www.internetretailer.com/2010/02/19/credit-cards-are-losing-some-luster-with-online-shoppers http://www.statista.com/chart/873/consumer-awareness-and-usage-of-digital-wallet-services/ http://www.theonlineseller.com/2012/04/24/payment-processors-comparing-third-parties/ https://www.formstack.com/payment-gateway-comparison http://venturebeat.com/2012/05/18/paypa-60-percent-of-web-transactions/ http://www.businessinsider.com.au/how-bitcoin-works-and-could-change-payments-2014-1 http://www.blogmarketingacademy.com/merchant-account-or-paypal/ https://www.paypal.com/cgi-bin/webscr?cmd=_payflow-fraud-faq-outside