Reseller Toolkit  >  Learn  >  Newsletter Archive  >  Reseller Newsletter - November 2005  

Reseller Newsletter - November 2005

Dear Valued Authorize.Net Reseller:

As you know, ours is an industry where exciting news and unexpected change is the norm rather than the novelty—and it is reflected almost daily in broad industry trends, new payment products, and especially in mergers and acquisitions.

Anticipating change is always a challenge—and it's always something Authorize.Net considers in planning for the future. For example, earlier this year, we shared with you our thoughts and concerns regarding trends we identified in the payments industry that we felt were of particular importance to the success and prosperity of our valued reseller partners. In addition to an unfortunate increase in data security breaches, the most significant trend we observed was the movement and efforts of eBay's PayPal to increase their presence in the small-to-medium sized business (SMB) segment of the payments industry. At that time we asked three thought-provoking questions about the direction PayPal was pursuing in the payments industry:

  • Is PayPal poised to compete head-to-head with Independent Sales Organizations (ISOs) for online merchant business?
  • Will your revenue model and sales be disrupted by PayPal's continued growth?
  • Does PayPal see ISOs and payment gateways as valuable partners, or are they just waiting to put them out of business?

These questions were apparently on your minds as well. As reflected in our annual reseller survey, 64% of you indicated that you were concerned about PayPal adversely affecting business and cutting into your merchant banking revenue stream. The remaining 36% were unsure of the potential impact, or hadn't thought about it.

PayPal's Recent Moves

Since we asked those questions, the industry has witnessed the following events:

  • June 20, 2005 – PayPal announced Website Payments Pro, a new suite of payment solutions that support credit card processing for small-to-medium sized merchants. Website Payments Pro circumnavigates the need for a traditional merchant account and allows PayPal merchants' customers without a PayPal account, to use credit cards—interjecting their services to be in direct competition with ISOs and payment gateways. PayPal stated that the launch of these services "extend the value of using PayPal to the SMB market."
  • October 10, 2005 – PayPal announced its acquisition of VeriSign's payment gateway business, stating that it "plans to accelerate its merchant services business by expanding its customer base to tens of thousands of new small and medium-sized business customers online" and "extend the benefits of PayPal's services to the VeriSign customer base."

Based upon these announcements, there is now no doubt whatsoever that the answer to all three questions we posed earlier this year is "Yes"! Clearly it is time to assess how PayPal's increased growth and influence in the payments industry may negatively impact your bottom line. Authorize.Net is dedicated to providing you with information and resources that will help you make important decisions and competitively protect your business. After all, our business would not be what it is today without your hard work and contributions.

Is PayPal a Threat?

Is PayPal really a threat to ISOs and Acquirers? PayPal's clearly stated business objectives and intentions are to seize every opportunity to provide a full spectrum of financial services to small- and medium-sized merchants currently on the PayPal and VeriSign platforms, eventually cutting out the ISO community entirely by providing merchant account services and monopolizing payment gateway services. Read for yourself what PayPal articulated in their press release* announcing the VeriSign acquisition:

"PayPal plans to accelerate its merchant services business by expanding its customer base to tens of thousands of new small and medium-sized business customers online."

"We're very excited about the opportunity to extend the benefits of PayPal's services to the VeriSign customer base. This acquisition allows PayPal to give our customers more choice in payment services and grow our merchant services business even more quickly."

"...the acquisition provides [VeriSign's] worldwide merchant base with the benefits of PayPal's already robust payment capabilities."
*http://www.shareholder.com/paypal/releaseDetail.cfm?ReleaseID=175999&Category=US

As a reseller, there are several new questions you should be asking in light of PayPal's recent moves:

  • What is the likelihood that PayPal will disintermediate my merchants from the merchant services I provide?
  • What are the risks of all my merchants being automatically converted to accept PayPal?
  • How do I educate my merchants and defend myself from this competitive threat?

Read on as we attempt to provide you with some answers to these questions.

The Merchant Account and Payment Gateway Advantage

Authorize.Net has remained committed to its premier reseller channel. Our resellers enjoy the simplest, yet most reliable program available—including reliable residuals and convenient merchant boarding and billing. And, Authorize.Net continually invests in its channel program by developing and enhancing products and services to provide resellers with even more benefits, like the flexible billing options introduced for eCheck.Net last month.

Why do we do all of this? At Authorize.Net, we understand that our growth and success depends on our relationships with our dedicated resellers. These are partnerships that we value and vigorously support.

As your partner, we want to be a resource for you. The following table (which we hope you'll share with your merchants as appropriate) compares Authorize.Net and PayPal services, detailing some of the key benefits for providing merchants with a full merchant account combined with an Authorize.Net Payment Gateway. We've also highlighted a few guidelines for safeguarding the profitability of your merchant portfolio. As you will see, Authorize.Net's service offering is highly competitive with PayPal and is the most advantageous solution for you and your merchants.

FEATURE PAYPAL MERCHANT ACCOUNT AND
AUTHORIZE.NET PAYMENT GATEWAY
Funds Accessibility Traditionally, PayPal has required merchants to log into their PayPal account and select the "Withdraw" function in order to access their funds. To receive funds, merchants must either request a bank transfer or have a physical check mailed to them. Funds transferred between bank accounts appear within 3-4 business days, while PayPal-issued checks can take as long as two weeks to arrive and cost $1.50 per check. On top of that, PayPal will often hold merchants' funds for extended periods of time to manage their risk—one of the disadvantages for merchants without a full merchant account. With a full merchant account and the Authorize.Net Payment Gateway, merchants' funds are deposited directly and generally appear in within 1-2 days, saving both time and money. And because merchant accounts are FDIC insured, merchants' funds are protected from miscellaneous technological outages that may "freeze" the PayPal Web site or its operations.
Transaction Dispute Resolution PayPal's Seller Protection Policy does not apply to Website Payments Pro, their payment gateway product. Even with the Seller Protection Policy, PayPal represents both sides of the dispute—the buyer and seller—making fair representation impossible for either. Merchants using a full merchant account are represented by the reseller and acquiring bank—independent of the cardholder and issuing bank.
Standard Features The classic PayPal account does not come with a Virtual Terminal, making Mail Order/Telephone Order (MOTO) payments impossible. PayPal now includes a Virtual Terminal with their Website Payments Pro product, but charges $20 per month for it as a value add to their other offerings. PayPal provides one free shopping cart and is integrated to several others. With Authorize.Net, all accounts include a Virtual Terminal and are pre-integrated to over 500 e-commerce shopping carts, auction management solutions, and billing systems.
Customer Support Toll-free customer support phone numbers are not immediately visible on the PayPal Web site. An online Web form is available for email support. With an Authorize.Net Payment Gateway and a merchant account, toll-free phone support, online chat, and a variety of customer support email addresses and contacts are readily available to merchants.
Advanced Fraud Protection The classic PayPal merchant account does not include frontend fraud detection tools. PayPal automatically declines transactions that result in AVS/CCV mismatch, leaving no opportunity for merchants to review transactions for possible legitimacy. Fraud detection tools for Website Payments Pro are limited to a transaction amount filter and a country-blocking feature. Through Authorize.Net's Fraud Detection Suite, merchants have access to several fraud filters that they can customize to suit their business needs. These filters identify and track suspicious transactions and place them on hold for merchants to accept or decline.
Integrated Card Present (CP) Opportunities PayPal provides none. Through Authorize.Net and its third-party partners, merchants can also leverage the power of Internet Protocol (IP) to process retail and mobile transactions—taking advantage of lower Card Present rates and consolidating all merchant services costs.
Low Cost Alternative PayPal's payment gateway product costs $20 per month plus $.30 per transaction and a 2.2-2.9% discount rate. With a merchant account plus Authorize.Net Payment Gateway, resellers have the ability to set rates competitively.

Protecting Your Merchant Accounts from PayPal

You may have read the headlines and heard the horror stories. There are numerous Web sites including PayPalSucks.com and PayPalWarning.com that are dedicated to aggregating and disseminating information from merchants and customers who have been impacted by numerous PayPal transactions gone wrong. PayPal accounts have been subject to fraudulent scams that may require a separate set of protections from the many industry fraud prevention tools offered by full-fledged service providers, credit card issuers, acquirers and payment processors. Is PayPal doing all it can to provide effective fraud management solutions designed to prevent the kind of scams that are unique to its platform? Can they provide the level of overall protection offered by a full merchant account? We strongly suggest you check out the above sites to learn more.

Can your merchants really afford to be associated with PayPal? Your merchants are serious about their business, and they need a serious, respected, and reliable payment solution. Fortunately there are steps you can take:

  • Identify your VeriSign accounts. Actively campaign to and educate your merchants that retaining their full merchant account with you will be of the greatest benefit to them in the long run. Full merchant accounts include advanced support and increased reliability and security for merchants' funds. In particular, focus on those merchants that may be nearing the end of a term commitment with you for their merchant account. As your merchants become aware of the importance of their merchant account and relationship with you, they will not be "poached" by PayPal.
  • Provide your merchants conversion options. As part of your outreach to educate VeriSign merchants about the possible disadvantages of PayPal merchant services, advise them that their merchant services can easily be converted to the Authorize.Net Payment Gateway. By switching to Authorize.Net, your merchants have access to the customer support they need, as well as timely, secure access to funds, advanced fraud protection and numerous integrated Card Present (CP) options. When you refer merchants to Authorize.Net, everybody wins. Merchants are provided secure payment processing and free full support, and you are able to focus on protecting and growing your merchant relationships.

Authorize.Net – Your Trusted Partner

Credit cards remain the most prevalent payment form used today. But PayPal is no longer just a person-to-person (P2P) money transfer network. Any merchant with a business or a premier PayPal account also has the ability to accept credit card payments—and these payments are routed through PayPal. In fact, as of August 19, 2005, any person listing on eBay is required to accept credit cards. Merchants with traditional merchant accounts that sell on eBay, or those that want to benefit from the incremental PayPal P2P transactions, will now have redundant means to accept credit cards. What are they likely to choose to do? PayPal's move is to displace the traditional merchant account.

Don't let PayPal poach your merchants and adversely affect your revenue potential. Make sure you're offering your merchants and your business the best possible solutions available—your merchant services and payment processing solutions from Authorize.Net.

Authorize.Net has developed conversion scripts to quickly and smoothly convert your threatened accounts to the Authorize.Net platform. Our free, industry-leading reseller and customer support are available to answer your questions as well as those of your merchants.

SPECIAL OFFER!
We are committed to making the transition to Authorize.Net as smooth and painless as possible for your merchants.

For each VeriSign account you convert to the Authorize.Net Payment Gateway, Authorize.Net will rebate all billable fees associated with those accounts through December 31, 2005! That means, from now through the busy holiday season, for each converted VeriSign merchant, you will earn the FULL sell rate* associated with the setup fees, monthly fees and transaction fees! Simply provide us with a proof of VeriSign service for the merchant, and we'll get the conversion process started.

Go to http://www.authorize.net/files/merchantconversion.pdf to download the Merchant Conversion Request form.

* The buy rate associated with the setup fees, monthly fees and transaction fees will be credited to your account.

We are here to be a resource for you. For more information on reaching your merchants about the essential benefits of a full merchant account and the Authorize.Net Payment Gateway, contact resellersupport@authorize.net or call us at 888-437-0481.

 
Contact Information