Two Ways in Which PayPal is Restrictive for Website Owners

Whether I like it or not, I need to use PayPal. It is how 95% of affiliate companies pay me. It is also how I am paid by website owners to write for them and how I pay others to blog for me.

I know that most of you who are reading this are in the same position. PayPal is the de facto banking system of working online, particularly for those who freelance. There are many situations in which you will be leaving money on the table if you do not use them.

Websites such as PayPal Sucks highlight the danger of doing business with PayPal. Although I hate the fees that PayPal charges, I have not experienced any major problems from using the PayPal service that would stop me using them. In fact, I have called them a few times over the last few months and been happy with the service.

In this article, I want to highlight two issues about PayPal that have been brought to my attention recently. These issues affect anyone who uses PayPal to sell products or services through a website.

1. PayPal Subscriptions Cannot be Transferred

I offer a monthly and yearly premium membership option for my internet marketing forum Rise Forums. These memberships are on a subscription basis.

Rise Forums is a forum that I hope to be running in five or ten years. I have no reason to sell it. However, I am also aware that ten years is a long time. Over the next ten years, I hope to start a family, so my personal situation will be very differently. Not to mention that ten years in internet time feels like fifty years!

It is important to think about the future of any website you launch. That includes whether the website could be sold.

Here is something that may concern those of you sell subscriptions through one of your websites: PayPal Subscriptions Cannot be Transferred.

This is a big problem. A huge problem.

If you sell a website that is monetised by subscriptions, all users will have to cancel their subscription and sign up to a subscription again.

I read a comment from one website trader that said that if a website owner cannot transfer subscriptions, they would knock at least 50% off the value of the website. The reason for that is simple: When people cancel their subscription, a large percentage of them do not subscribe again. Anyone who has had to move their email newsletter to a different service will have experienced this firsthand.

I called PayPal about this today. They advised that:

  • Subscriptions are tied to the email address and the account ID of the initial subscription
  • Subscriptions cannot simply be transferred to another person – they have to be cancelled and the person has to re-subscribe
  • It is possible to open a second PayPal account for a new business or website, however that account cannot be transferred to another person

Many people assume that you can just remove the subscription email address from your account and allow someone else to add it to their account. It does not work that way. Nor can you simply pass on your PayPal account to someone else (technically, I guess you could if were comfortable giving the buyer access to your PayPal account).

PayPal is the easiest solution for subscriptions because so many people use it, though it is concerning that 50% of the value of my business could be lost in a sale because of this. It could be the loss of hundreds of thousands of dollars, if not more.

It may be in the interest of website owners who offer PayPal subscriptions to review alternative payment solutions. In the long term, it could save them a lot of money.

In theory, a seller could make an agreement with a buyer and promise to pay all subscription revenue for the first year. That would give the buyer a chance to get people to change their memberships.

I am still looking at the logistics of all of it, however it is clear that if I monetise a website using PayPal subscription payments, it is going to be a headache if I ever sell.

2. Auto-Return Does Not Work Unless the Customer Signs into Their PayPal Account

Rise Forums currently integrates with Amember for payments. I also have a tracking pixel from ShareASale for tracking affiliate conversions.

The pixel is displayed on the payment confirmation page. In the current setup, when a customer signs up to Rise Forums, they are taken to PayPal to enter their PayPal login details, confirm payment, and then be automatically redirected back to Rise Forums for confirmation that the payment has been successful. This occurs due to a feature on PayPal known as Auto Return.

Example of the Confirmation Page
This test payment was made a week or so ago to see whether tracking was working correctly.

A few weeks ago I was asked by ShareASale to test whether my affiliate tracking was working correctly. As I cannot send payment from my own PayPal account to itself, I made a test $1 payment using my bank card. I then did another $1 test transaction using my credit card.

In both situations, I noticed that Auto Return was not working. After paying with my card, I remained on PayPal with details of the payment I just made. This is a major problem as it means that the confirmation page (shown above) is not displayed. This means that the ShareASale tracking pixel, Facebook tracking pixel, and Google AdWords tracking code, were not displayed.

The payment confirmation page on PayPal displayed a link back to Rise Forums. Some customers would not click on this link. Though this is irrelevant as PayPal does not pass parameters to the confirmation page on my website unless Auto Return is used. This means that details of the transaction the customer just made would not be displayed to them on my website.

Because of this, ShareASale had to disable my affiliate program. I completely understand why they had to do this, however it was very frustrating for me and my affiliates (kudos to Brian Jackson who simply changed his affiliate URL to www.riseforums.com).

The situation was confusing to me as I had tested the payment process months ago and everything went smoothly. It soon became apparent that there was one major difference in my testing. When I first set up the website, I asked my friend to sign in using his PayPal account and do a test transaction. It worked correctly.

This made me suspect that the issue was being caused by not logging into PayPal. Therefore, I asked my friend Michael to do a few tests for me. He signed into PayPal and made a $1 test transaction. After paying, he was automatically redirected back to the confirmation page on Rise Forums.

This confirmed that Auto Return did not work unless a person paid using their PayPal account.

In my telephone call to PayPal today, I raised this issue. They replied around twenty minutes later with an explanation:

Hello Kevin,

Following a conversation with a Customer Support agent, I’m opening a new ticket to follow up on your issue.

First of all, please note that, if a customer pays with a credit/debit card without using a PayPal account, the return won’t ever be automatic. The main reason is that, most often, these kind of buyers can only view their transaction details after its completion, whereas a PayPal user can just login to his account and go to transaction history. They will need to click on the “Return to Merchant” link, in the same way as if you didn’t have Auto Return enabled.

However, the details sent in the return URL once the buyer clicks on the link should be the same as the details sent when automatically redirected.

If this is not the case, can you give us the following information?

– The variable sent back in a PayPal transaction and the variables sent back in a direct card transaction, for comparison.

– The URL where your buyers are paying you from, so that we can check the integration.

Thanks in advance.

Kind Regards,

Ignacio.
Merchant Technical Services
PayPal, an eBay Company

I was half expecting this problem to just be a quirk of the way PayPal works, though their reasoning for not allowing Auto Return for individual payments is sound.

What Does All of This Mean for Rise Forums

I have looked at many other payment gateways in the past such as Stripe, Authorize.net, and 2Checkout. However, these processors bring in a different set of problems. The truth is that all payment solutions have limitations.

The problem with Auto Return not functioning means that I need to choose to either remove the option for non-recurring payments from Rise Forums, or I need to end my affiliate program with ShareASale.

For the time being, I have simply removed the option to make a one off payment. It is not ideal. A recurring membership option is not a big deal when the membership is monthly, however people forget what they are subscribed to when the following subscription payment does not come off for another twelve months. This increases the chance of a payment coming off from someone who did not want to pay for another year.

At the moment, there does not seem to be any way around this. Either I give the customer the option of paying a one off fee, or I enforce subscriptions on everyone to ensure that affiliates can still promote the forum.

Hopefully, I will find a solution to this. Other online stores have an affiliate program and accept one off payments. At this time, I suspect that Amember is not displaying all the information it needs to on the confirmation page. Time will tell.

A compromise might be to simply offer one membership option of $9.99 per month. This simplifies everything in one respect as too many membership options can make a member hesitant about which option to choose. Forgetting about revenue for a second, I do believe that a monthly subscription option is the best option for many people because they can unsubscribe at any time.

On the other hand, offering discounts for longer subscriptions is a legitimate way of increasing revenue with a website. And while offering members the opportunity to cancel at any time is good from a member’s point of view, it means that members are more likely to cancel their membership during the year. For example, rather than charging $24 for a year of membership to an online course, you could charge $2 per month. The problem is that members then have eleven more opportunities to cancel their membership. This results in your total revenue being significantly lower.

If Rise Forums continues to be a good resource, members cancelling their monthly membership might never be a concern. After all, if too many people are cancelling their membership, it means that I am not offering a good service.

Those of you who know me know that I have never felt comfortable using common marketing tactics to fool people into buying something they do not want or need. If done right, I think that what is good for members is also good for me. I want a honest pricing policy when I purchase products and services, so I should offer this to my own members.

I will be making a decision on this, and a few other things, over the next few days. Stay tuned as I will be making a big announcement :)

In the mean time, I would love to hear from website owners who use PayPal on their website. Do the problems that I raised in this article concern you? Do you know of a better solution?

Please let me know your thoughts below in the comment area.

Thanks,
Kevin

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