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

2. 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

3. 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

4. 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

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

6. 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

7. 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

8. 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

9. 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

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

11. 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

12. 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

13. Context and market - Volume

14. Context and market - Volume

15. Context and market - Awareness

16. 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

17. 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

18. 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: sec)
Pricing:
5% or 1.9% + 30c (USD) per transaction
Only stands out from 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”

19. 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

20. 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

21. 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

22. 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

23. Sources