When Paypal was conceived over 20 years ago, it was to be a true financial disruptor. As founder Luke Nosek recalled last year, it was intended to be a global currency, independent of government interference.
While it has never come close to achieving such lofty goals, Paypal became a household name as an online payment processing system soon after it was acquired by eBay in 2002 and has gone from strength to strength in recent years with the launch of Paypal credit.
But how does Paypal fare when it comes to its virtual terminal? We’ll give you a whistle-stop tour of its features, fees and online reviews so that you can decide if it’s the one for you.
Paypal Virtual Terminal Features
If you’re not familiar with the term ‘virtual terminal’, our article ‘what is a virtual terminal’ will get you up to speed.
Put simply, a virtual terminal is a way for you to accept debit card or credit card payments from customers over the phone or through invoice by entering their card details online. Unlike payment gateways and online checkouts which are customer-facing, the virtual terminal is almost always used by merchants that have been provided with a customer’s card information to process payments.
So, how does Paypal’s offering square up to the competition?
It’s a well-known, internationally recognised brand that integrates with other Paypal services and existing merchant accounts. If you’ve already got a Paypal business account and you’re happy with the level of service, there’s probably not much point looking elsewhere.
The Paypal virtual terminal can be used from any computer, smartphone or tablet with an internet connection using the Paypal website, and allows up to 200 users to process payments at the same time. It’s also got some great time-saving features such as automatic invoicing and label printing.
You’ll also be able to receive payments from over 200 countries and 26 different currencies.
Paypal has stepped up its game with regards to anti-fraud measures though, as we shall see, this sometimes works to its detriment as it can lead to lengthy delays for some payments.
Paypal Virtual Terminal Fees
If you’ve read any of our other reviews on Paypal products (like our PayPal Here Card Reader review), you’ll know that Paypal is generally one of the more expensive offerings. Their virtual terminal is no exception, in fact transaction fees are actually slightly higher for their Virtual Terminal transactions. This is perhaps only natural, as over-the-phone payments generally incur a higher transaction fee than card machine payments due to the increased risk involved, but it could be off-putting for many small or new businesses.
Paypal’s virtual terminal isn’t included in their payment processing plan as standard. Instead, you’ll have to pay an additional £20 a month for the privilege. That being said, you don’t have any contractual obligation, so if you decide that this payment method is something that you no longer wish to offer, or you find a better deal elsewhere, you should have no trouble moving.
It’s also refreshing to see no setup charges, despite the strict fraud protection measures in place which require a member of the Paypal team to get you verified over the phone.
On top of your £20 monthly fee, there’s a per-transaction charge which is calculated based on a blended pricing structure.
You’ll pay a fixed charge of 20p for each transaction, as well as an additional percentage, depending on the total card payments you processed the previous month.
For UK domestic transactions, the fees are as follows:
|Monthly card total (previous month)||Card fee the following month|
|Up to £1,500||3.4% + 20p|
|£1,500.01 – £6,000.00||2.9% + 20p|
|£6,000.01 – £15,000.00||2.4% + 20p|
|£15,000.01 or more||1.9% + 20p|
On top of this, there are also cross-border fees to take into consideration.
|Northern Europe (Aland Islands, Denmark, Faroe Islands, Finland, Greenland, Iceland, Norway, Sweden)||0.4%|
|Europe I (Austria, Belgium, Channel Islands, Cyprus, Estonia, France, Germany, Gibraltar, Greece, Ireland, Isle of Man, Italy, Luxembourg, Malta, Monaco, Montenegro, Netherlands, Portugal, San Marino, Slovakia, Slovenia, Spain, Vatican City State)||0.5%|
|Europe II (Albania, Andorra, Belarus, Bosnia and Herzegovina, Bulgaria, Croatia, Czech Republic, Georgia, Hungary, Kosovo, Latvia, Liechtenstein, Lithuania, Macedonia, Moldova, Poland, Romania, Russian Federation, Serbia, Switzerland, Ukraine)||1.3%|
|Rest of the world||2.0%|
Paypal offers a second pricing structure, known as Interchange Plus for Mastercard, Maestro and Visa payments. This is broken into the following parts:
- A percentage charged by Visa or Mastercard (the interchange). For most debit or credit cards from the UK or European Economic Area (EEA), this will usually be between 0.2 – 0.3%. Business credit card interchange fees usually start at around 1.3 – 2.0%
- A percentage charged by PayPal. This starts at 2.9% for a monthly sales volume of less than £1,500.
- An additional fixed fee charged by Paypal.
If the majority of your customers aren’t businesses and your main customer base resides in the EU, then you may find that the Interchange Plus fee is cheaper for you. Unfortunately, it’s also the less predictable pricing structure.
Of course, if you do have a customer base outside the UK, you’ll also have to take into consideration the added cost of exchange fees. These will usually amount to 3-4%, depending on the currency involved.
Chargebacks cost the same for both fee structures, at £14 per transaction.
What about PCI Compliance?
PCI DSS, or the Payment Card Industry Data Security Standard for those who don’t know, is a global security standard for all businesses that handle card transactions. It ensures that customer’s card data is protected. Failure to comply with PCI can do irreparable damage to your brand and result in some pretty hefty fines.
While Paypal is itself PCI DSS compliant, Paypal virtual terminal is not. This may be disappointing for some, as PCI is included in the costs of rival virtual terminals such as Sage Pay.
What’s it like for taking payments?
The payment process itself is actually pretty straightforward and easy to use. You can log into your virtual terminal using any internet browser, enter your order details (you’ll receive on-screen prompts to help you through this), enter the card details, billing and delivery address and submit the order. Easy.
Once the transaction has been verified you’ll be able to print a custom dispatch label which should save you some time and reduce the likelihood of any misprinted addresses.
Where things get a little more frustrating is when it comes to actually receiving your funds. Most of the time, this works smoothly and you’ll receive your funds straight away.
However, if Paypal considers the transaction to be potentially fraudulent, they’ll implement an ‘account hold’. This is where money has been taken from the customer but is kept indefinitely by Paypal. Account hold can occur if:
- A transaction is suspiciously larger than normal
- Significantly more transactions have been processed than normal
- There are other potential red flags which might signal a security issue.
This is a reasonably rare occurrence, but it’s something that reviewers have mentioned repeatedly, so it is worth bearing in mind, particularly if you’re a small business.
What do the reviews say?
While it’s difficult to separate the reviews for the virtual terminal from those for Paypal payment services in general, there are still some general points which we can glean from customer reviews.
On TrustPilot, Paypal has an average of 1.3 stars. While that may set alarm bells ringing it’s worth putting that number in context. As of 2019, Paypal has over 286 million active paypal accounts and operates in 202 markets.
In that context, the 2,521 reviews seem almost insignificant. Tellingly, they weren’t all negative: 17% considered the level of service ‘Excellent’, though 75% labelled it ‘bad’.
However, if one thing does stand out, it is that negative reviews repeatedly criticise the indifference of customer service. Responses, even when a case has been escalated, are typically ‘stock’ or automated, and there is general concern that Paypal lacks a consistent approach when it comes to dealing with disputes. This might be an issue if your business provides intangible services, as providing ‘proof of delivery’ can be more difficult.
Virtual terminals are an important part of any online strategy, so it’s crucial that you find a virtual terminal package that works for you, whether you are B2B or B2C, high volume or low.
Paypal’s virtual terminal is a great offering if you’re looking for an internationally recognised and trusted brand. The absence of any contractual obligation also means you won’t be tied down if you find something better. However, if you’re a very small business, the high fees, PCI compliance costs and problematic ‘account holds’ might prove an issue.
If you’re still undecided, why not check out some of our favourite virtual terminals such as Worldpay and Braintree in our best virtual terminals post.