Jamie Andrews

Start-ups: Beware Paypal!

This is a quick post to document our experiences at Loco2 in working with Paypal. Hopefully the lessons we’ve learnt can be useful for other online start-ups seeking to add payment to their site.

A few months ago we realised that we needed to start taking payment on the Loco2 site. We wanted the entire booking process to take place on the Loco2 site, because our testing told us that is what users expect when they book rail tickets.

After doing some basic research (e.g. by reading very informative blog posts like this) we realised that we had a choice between using Paypal’s Website Payments Pro or going for a full merchant account and payment gateway solution. Our software is built using Ruby on Rails, and there is a great ruby library called Active Merchant which handles integration with a number of a payment gateways, including website payments pro.

Because Paypal doesn’t require the set up of a full merchant account or payment gateway (and we already had a Paypal account set up to receive payments into a Loco2 bank account) we thought this would be the simplest way to get up and running quickly. We could then switch to a full merchant account and payment gateway solution (where charges would be lower) later when we’d had a chance to make applications and shop around for the best deal. Because of our use of Active Merchant, the switching process between Paypal and another payment gateway would be straightforward.

So… I made the application with Paypal to use Website Payments Pro. I understood that there would need to be a vetting process and so I made sure that we provided all requested information in a timely fashion. Thankfully (or so we thought), the application was approved relatively quickly and with minimum hassle, and we proceeded with the integration process. We invested a significant amount of development effort in integrating with the test server and making test bookings, and then when we were satisfied that the integration was working as expected, we switched to the live server and made our first transaction.

And that’s when Paypal told us our account was suspended.

I got a phone call from Paypal soon after the first transaction on the live server and was told that as per the small print of the application, Paypal reserve the right to review our usage as soon as we made our first sale. Only then were we expected to provide detailed information about the booking terms and conditions for the tickets being sold via our site, and legal documentation such as our company’s Certificate of Incorporation.

It was at this point that I discovered how bloated and poorly architected the B2B customer experience is on Paypal. There were about four separate parts of the account section of the website that I needed to refer to, and I received automated emails from about four separate email address (none of which I could reply to) each with different reference numbers, and each requesting very similar information but supposedly for different purposes. When I called customer services, I was told on a number of occasions that the relevant department did not accept calls, and all I was able to do was have a note left on our account by the operator.

Finally, after a couple of weeks of complying with Paypal’s demands for documentation, I was told that we were not successful in our application for Website Payments Pro, but that our account in general had been reinstated. The nuance of this news was not communicated very clearly, and for a while I thought that our Website Payments Pro had been reinstated as well (only when making a call to the server did we realise that our access was still denied).

So for the past few months we’ve been using normal Paypal, and taking users off our site to make the booking. Thankfully we have now switched and are using a proper payment gateway and merchant account (still through Active Merchant) and so I feel calm enough to vent my frustration without the risk of needing to deal with Paypal again in the immediate future.

In conclusion, my clear words of warning for other start-ups in this position are as follows:

When Paypal tell you that they have approved your Website Payments Pro application, they haven’t really. They will only look at it properly (and ask you for lots of inf0) after you have invested the development effort in the integration, and actually made a live payment.

For a company that claims to support innovation, I think Paypal need to work much harder to clearly articulate their policies before companies invest their precious time and resources. Why not just make the test integration server open to everyone? It would then be far clearer that the initial application process was not the real one, and that the small print about “reserving the right to review” was the real thing to be concerned about.

I would also just like to reiterate how absolutely awful the information architecture is throughout the whole B2B Paypal process. It seems to be a classic example of a company being the first mover in a market, succeeding commercially and then getting massively bloated, and the polar opposite of lean. As a success story of the internet generation, I would have hoped for better.

Perhaps we were naive: we could have read all the small print more clearly and enquired before starting the integration. And perhaps we only got reviewed/rejected because travel is seen as a high-risk industry. But nevertheless, I am very glad that the process is over! Any comments/questions very welcome.

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2 total comments, leave your comment or trackback.
  1. So which merchant/gateway did you end up using?

  2. We went with Sagepay as the payment gateway, and FirstData as the merchant. Sagepay do offer a merchant account through their partner Elavon, but we weren’t able to use them because travel is classed as a ‘high risk’ industry.


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