Why Am I Not Using PayPal?


(This post originally appeared on Forbes)

You would think my small business would be using PayPal, right?

My ten person company is in the technology services business too! And yet for a tech company, I’m embarrassed to admit that we’re still in the dark ages. Particularly when it comes to cash. But we’re not alone.

Most of our invoices today still get sent by mail. Payments are normally received by check. We do accept credit cards but only after a client manually fills out and faxes us a form (yes, I said fax. That’s because most of my clients still fax!). I’m getting more and more embarrassed as I write this. But please understand – my business sells to mostly small and medium sized manufacturers and service firms who operate out of industrial parks near the airport or office buildings in the suburbs of Philadelphia. My clients, like me, are still part of an older generation that listens to the car radio, reads newspapers and watches TV shows on the day they actually air.

Not only that, but PayPal is one of my clients too! I admire them, follow them, write about them and do work with them. So you’d think I’d be drinking the Kool Aid as well, right? So why am I not part of this trend in my own business? And why aren’t the hundreds of small and medium sized service firms and manufacturers that my firm works with not using PayPal, or some other payment service like them?

“Basically, the entire service industry could really be better served by a payments solution that improves sales, makes paying simpler and allows their customers lives to just be easier,” admits Brad Brodigan, a Vice President and General Manager at PayPal. “Service providers have a common set of pain points that are not currently met by payment providers.”

For me, and most of my clients, the pain points are our customers’ growing demand to pay with their credit cards, the need to better and more quickly integrate payments with our scheduling, booking and operational systems and the desire to speed up our cash flow. We recognize this. We also respect those long-established companies like PayPal who provide these kinds of services while also taking into account the growing complexity of the back office processing required in a secure manner that goes (as they like to call it) “beyond the swipe.”

But actually, there are four obstacles that stop my company, and my clients from doing this today: ease, integration, internal control and cost.

PayPal makes the process as easy as possible, but it’s still not easy enough. It’s not their fault – it’s just that there are still too many players that need to be involved besides them: the credit card processor, the bank, the bookkeeper, the webmaster, the software developer, the IT guy, all the vendors and customers who we want to do business with and all the people who have to learn the new process. Not that this won’t change in the years to come, but setting up a mobile and online payment system is still a pain in the neck and ranks low on my list of the top 100 problems of the day. This is why many of my non-retail clients aren’t jumping on the bandwagon too.

Integration of payment apps to the back office remains poor. Even Brodigan admits this. “We want to help,” he tells me. “We are an open infrastructure that builds a platform for the next generation of payment.” So the foundation is there. But let’s all agree that the mobile payment industry is focusing on retail because that’s where the money and media are. Their development dollars are being funneled towards getting today’s point of sale systems to talk to their mobile apps and readers. This same type of integration barely exists for the typical service company, other than some services that provide a basic online billing capability. As I wrote last week, most service applications are still behind the 8-ball when it comes to the cloud and mobile. This stuff is coming, but it’s not close to being there yet.

For disbursements, internal control plays a part too. Maybe we’re naïve, but the physical act of reviewing an invoice and then signing a check is not only comforting, but gives us a sense of control over how our cash is being distributed. Most of my clients of a certain size have an approval process normally revolving around the company controller, payables and purchasing staffs that for the most part works. Changing that for some is disconcerting.

Finally, the cost of these services is still too high. Our typical projects run anywhere from $5,000- $25,000. A plumber or HVAC firm or landscaper also has jobs that are in this range. An approximate 3% service fee on a $10,000 job is equivalent to six hours of labor time. It may not sound like much, but multiply that by ten times a month and it really adds up.

Ultimately the service industry will wake up to mobile and online payments and PayPal will lead the charge.  In the meantime, I will probably move to PayPal sometime this year, if only so I can better understand the process and write about it. That way, as the inevitable approaches, I can help the rest of my non-retail clients get there.

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