PayPal is the Worst Payment Provider for Drop Shipping
PayPal might be the perfect all in one solution for a drop shipper to accepting credit cards on your shopify store and increasing your conversion rate, just because it is so freaking easy for everyone. This is all true until that you wake up in the morning and you see this devastating message from PayPal on your smart phone. ”Your PayPal Account’’ was restricted. And all of a sudden, you’re out of business.
The Reason Why Everyone Uses PayPal
PayPal might be the easiest to solution to receive payments on your shopify store. It’s super easy to set up, fast, convenient and everybody knows it. One of the biggest advantages is that PayPal allows you to accept credit cards without even making it necessary for the customer to have a PayPal account. Even better, PayPal Express Checkout makes it possible to checkout without creating an account on your store. A vast majority of the abandoned carts are just caused because it takes the customer too much time and effort to create an account on your store. Leaving you there with a bunch of abandoned carts and a big facebook ads bill. And even better, if you pay your facebook ads directly with your PayPal balance you can even save all the currency conversion fees!
PayPal and Drop Shipping
Most drop shippers don’t know about this but PayPal doesn’t supports high risk businesses. You might be surprised but drop shipping is considered a high risk business. So PayPal basically will let you use it for your shopify store but as soon as you have a problem with them, it’s over. Your account can be restricted for many reasons. One of them for example is when you scale too fast with facebook ads.
You still can process payments when your PayPal access is restricted but you can’t pay for your facebook ads anymore and even worse, you can’t withdraw your money. And believe me, sooner or later this happens to every drop shipper who’s scaling big time with facebook ads. It’s just a question of time. You still can process payments but you can’t pay for your facebook ads anymore and even worse, you can’t withdraw your money. And believe me, sooner or later this happens to every drop shipper who’s scaling big time with facebook ads. It’s just a question of time.
How to Remove the Restrictions?
To remove the restrictions from your account you have to send PayPal a lot of documents.
- Proof of identity
- Proof of address
- Proof of your business details
- Proof of shipping for a lot of orders including tracking numbers
If you have created a PayPal business account which I assume you have without having incorporated a real business which I hope you haven’t you’re f***ed. Because PayPal is fully automated including the customer service. And even if you have all these documents, in the worst case it takes 180 days until you have access to your money again, if at all.
How about Creating a new PayPal Account?
Don’t do that. As soon as you receive payments they will instantly recognize and freeze your new PayPal account. Their system is completely automated and detects everything. They will know right away that you have created a new account but they will only let you know as soon as you have money on your account.
And then you end up having multiple PayPal accounts with money on them but without having access to it.
So What’s the Solution?
It sounds hard but believe me, you don’t want to use PayPal for your shopify store if you want to scale your business with facebook ads big time.
The real solution for this problem is using a high risk merchant broker. These are basically companies which support high risk business like drop shipping. Having a much better customer service and more important they don’t restrict your account just because you exceed a certain revenue. Also they don’t keep so much of your money in case of refunds like PayPal does. PayPal keeps about 20-30% of your revenue for security reasons for a certain time. Considering a profit margin of 20-25% which is very common when drop shipping you won’t be able to scale your drop shipping business to the moon unless you have thousands of dollars you can use to pay for your orders. I have stopped using PayPal for my drop shipping stores completely. I just made too many bad experiences and I’m not the only one. The same goes for Stripe. Super easy to set up, but also super easy to loose it all.
What I Recommend for Drop Shipping?
I really recommend you using a high risk payment gateway like EasyPay Direct or highriskpay.com It takes more time to set up but in the long run this is the only solution that has worked for me scaling my stores to the max. There’s a lot of other high risk merchant brokers you can use. It depends on where you are located. Of course for US citizens there’s way more options available than for example citizens of EU states. For people in Asia it’s even more complicated to find a payment provider. Important Note: You need to have a real business, otherwise they won’t accept you. But that’s something I recommend you anyway since you don’t want to be responsible with your private capital and your personal assets.
PayPal is for sure the easiest to setup and the easiest to use but also the worst when it comes to customer service and especially when it comes to dispute management.
PayPal is good though if you are offering services or digital products. Also there’s some options on how to lower your risk for disputes and chargebacks. I will cover that in a separate post. So please subscribe to my blog.