Merchant Accounts vs PayPal: Which Is the Better Solution for My Business?


These days, great products and fantastic services just aren’t enough if you’re really serious about making your business successful. Customers expect the process of shopping and paying for their purchases to be convenient as well, so the ability to accept credit cards as payment is an absolute must for any merchant.

However, it’s only natural to wonder whether a traditional merchant account is really the right fit for your business if you run a small online business or a tiny one-person proprietorship as opposed to a big company with multiple brick-and-mortar locations. Is it really necessary? Is an alternative solution like PayPal actually a better fit? What might make one option a better choice than another? Here we’ll go over everything you need to know to make an informed decision that’s right for you, your business, and your clientele.

Why Do So Many Modern Merchants Choose PayPal?

Here in the year 2017, convenience isn’t just something that’s important to consumers. It’s increasingly important to would-be business owners and entrepreneurs. More and more people are choosing to freelance or run their own small businesses online over more traditional employment options because of the freedom those options bring to the table. They not only get to set their own rates and hours, but they enjoy more freedom in regards to how they work as well.

PayPal fits perfectly into their mental picture of how an ideal professional life should look. Setting up an account couldn’t be simpler. It doesn’t cost anything and the overall process is quick, easy, and painless from start to finish. In theory, you could wake up with a cool idea for a new company and be in business for yourself (complete with the ability to accept credit cards) by the end of the day.

The process attached to getting a merchant account, on the other hand, is a little more involved. You must apply for the account through a broker, a bank, or a third party payment processing company and you may or may not be approved based on the viability of your business. Many banks are reluctant to work with businesses that are small, based solely online, or just too new. Most business owners are asked to provide business plans, evidence of investment capital, or years’ worth of financial records. Going with an intermediary company instead is often easier, but there’s still an approval process involved.

The Advantages of Choosing a Merchant Account Over PayPal

All things considered, it’s not difficult to see why so many new business owners and independent proprietors would rather just go the PayPal route. It’s easy, it’s convenient, and it’s instant. However, it doesn’t bring the same advantages to the table. Here we’ll go over why it’s well worth choosing a traditional merchant account over alternatives like PayPal, even if your business is brand new or solely based online.

  1. Quicker Access to Funds

When you use PayPal to collect payment from your customers, the funds are deposited into your PayPal account. That’s where they’ll stay until you initiate a transfer to a connected, confirmed bank account of your choice. Although transfer times can vary from transaction to transaction, a PayPal-to-bank transaction can take up to seven days. For many business owners, that’s longer than they can afford to wait to have access to money earned.

A merchant account, on the other hand, lets you enjoy access to your funds much sooner – usually within just a day or two. Funds go straight to your bank account instead of having to pass through PayPal first.

  1. Lower Long-Term Costs

Any payment solution you might choose is going to come attached to fees. After all, payment processors are businesses too and they need to make money somehow. However, not all fees are created equally. Some services will charge you a monthly service fee while others might attach an individual fee to each transaction instead. Still more might require additional fees when it comes to particular services.

PayPal doesn’t charge its users by the month for the privilege of using the service. It does charge per-transaction fees that can be pretty hefty in comparison to the alternatives. This can quickly become problematic for businesses that see a high number of transactions during the average month (or hope to someday). Merchant accounts, on the other hand, tend to be much better fits for high-volume businesses and cost much less over the long haul.

  1. Keep Customers On-Site

These days, there are many advantages to letting your customers enjoy the option of shopping online even if you also have traditional brick-and-mortar locations. People can shop with you outside of business hours or on days they can’t make it to one of your offline shops. Online transactions also open the door to ongoing correspondence with your clientele into the future.

When it comes to doing business online, it’s to your advantage to keep your customer on-site for as long as possible. If you rely on PayPal to collect payment, that customer will be redirected to the PayPal website in order to complete their transaction and pay for their purchase. Some customers won’t care for that and may elect not to complete the transaction at all.

If you have a merchant instead, that same customer remains on your website from the very beginning of their shopping experience all the way through the payment process. More customers will feel comfortable shopping with you as a result. Your business comes across as more professional and legitimate. The completed transaction will also include your business name when it shows up on the customer’s billing statement.

  1. Better Customer Service

While it’s true that most merchant account providers do charge their clients a monthly service fee, it’s important to realize that you’re definitely getting something for your money. If you ever run into an issue with something related to your account, you can expect prompt access to professional assistance and excellent customer care. You can count on your issue being resolved quickly so that you can get back to business as usual as soon as possible.

When you rely on PayPal to handle all your payments, you won’t enjoy the same level of service. It could take days to resolve a given issue to everyone’s satisfaction. Plus, there’s always the chance PayPal could freeze your account if any of your transactions are deemed suspicious for any reason. When you’re running a business, you need to be able to resolve such matters ASAP and that’s a lot easier to do with a bona fide merchant account in your corner.

  1. Customizable Security

In a day and age that finds people doing an increasing amount of their shopping online, security is a huge concern. Consumers want to know their sensitive information is safe, especially when shopping with small, independent, or unfamiliar businesses. While there’s not necessarily anything wrong with PayPal’s approach to security, you the merchant won’t have a lot of personal control over it and can’t offer much of a personal guarantee to your clientele.

Most merchant accounts, on the other hand, come attached to a secure payment gateway with settings and security levels you can customize to your liking. You’re in the driver’s seat as far as which transactions are auto-declined or flagged for further review. Plus, you can personally guarantee the security of each transaction since shoppers are never redirected away from your site even for a moment. Everything is handled through your payment processor’s airtight secure gateway.

You can let your customers know that their personal information will never be sold or shared with third-party companies under any circumstances as well. PayPal is relatively open about the fact that they share customer info with other companies for research and marketing purposes. Handling payments through a merchant account instead lets you control what (if anything) is ever shared with third parties.

When Is It Acceptable to Go with PayPal?

Which payment option you’ll trust your business to is really important. In fact, it’s probably one of the most important decisions you’ll make when it comes to starting or expanding a given operation. It’s only natural to want to know whether PayPal is ever the smarter, better choice.

The fact of the matter is PayPal can be an excellent option for people that are just getting started in the world of online or mobile sales. It’s also not a bad choice if your business handles a relatively low number of online sales on a monthly basis. However, relying on PayPal alone can be incredibly limiting for a high-volume business or a business that is swiftly growing.

For that reason, a merchant account is something you’ll definitely want to consider if you’re serious about growing your business, saving money on operation costs, and providing your customers with the highest level of customer service. You don’t have to open one right at the beginning, but it is something you’ll want to have in your corner sooner or later. Explore the possibilities today!


Mia Hyun is the President and Founder of Mobius Pay, Inc. ( a firm which provides businesses with streamlined payment processing solutions in the ever-evolving electronic payment industry.  Mia is a seasoned veteran and regarded as an expert by her peers in the payments industry.  She has dedicated most of her career to developing and executing global e-commerce solutions for companies of all sizes.  Mia’s career has been highlighted by several organizations and companies, including RBS Lynk (Worldpay), Comerica Bank, and many others.  Mia has assisted hundreds of companies in their electronic payment solutions, and served as a board member of the Western State Acquirers Association for five years.  Mia has been an active member with the Electronic Transactions Association (ETA) for over a decade and has served on the public relations committee for Women’s Network in Electronic Transactions (  As a leading force in building and growing portfolios, Mia has been strategizing with and globally connecting members and stakeholders of the electronic processing space for over a decade.  Mia is frequently called upon to provide insight and promote discourse about online payments, as well as merchant rules and regulations; specific to MasterCard and VISA acceptance compliance. Mia holds a Master’s Degree in Behavioral Science from Loma Linda University.  She currently resides in Los Angeles and enjoys spending time with her friends and family wherever life’s adventure takes her.