As a new merchant solution, we are frequently asked how we compare to our better-known competitors Stripe, PayPal and Square.
PayPal, Stripe, and Square are rather similar in the sense that they are known as “aggregators”, meaning they are the Merchant of Record (MOR) for the transactions they process. Aggregators essentially allow customers to use their own merchant account to process credit card payments. The two major advantages for PayPal/Stripe/Square to do this are:
1. Extremely fast sign up process
Because all businesses are essentially processing payments on the same merchant account, the merchant ID and processing platform are already connected. As a business, you are just joining the party. In fact, you can begin accepting payments immediately after enrollment.
By aggregating their customer’s merchant accounts, they are able to avoid charging any monthly fees. Because there is only one account used by all merchants, typical account and maintenance fees owed to the Card Associations are relatively diminished. This is why all three companies employ cost structures that have minimal or no monthly fees.
For payments companies like PayPal, Stripe, and Square, the biggest issue they have is that they take on substantial risk from their merchants and wind up with an unusually high burden of loss prevention. Due to their minimal due diligence and quick sign-up process, they know far less about the merchants they are working with, but have more financial incentive to be cautious with them.
So if they see something that they think could present an increased risk, like large transactions or sales volume, chargebacks, international sales, etc., they may be compelled to immediately mitigate the risk by placing reserves or limits on the merchant, withholding payout, or even shutting down a merchant’s ability to collect payments, all without negotiation or warning. PayPal in particular has earned a negative reputation in this regard (Google “PayPal shut me down”).
Although all three companies have minimal or no monthly fees, you will notice that they have much higher per transaction fees. Think about it like insurance; they hold much more risk and liability, and therefore charge a premium to provide the service.
All three companies are fine to use, and in fact recommended by Arrow Payments under these conditions; You do not process many credit card transactions, and you also do not think you will in the future. In these cases, PayPal, Stripe, and Square are less expensive and easier to setup.
The Better Side
The Arrow Payments approach is to help merchants get their own merchant account, so they can be their own Merchant of Record. While this requires a little more effort from the merchant during the enrollment process, it enables us to have a much better understanding of our customers and avoid problems down the road.
As far as price is concerned, there is a clear advantage to using Arrow Payments when processing moderate to heavy volume (starting around $10,000 a month). We are happy to provide a detailed cost comparison for your particular business.
In addition to these benefits, Arrow Payments is able to provide many more bells and whistles to Internet and B2B merchants like transparent Interchange-Plus pricing, a modern API, PCI-Compliance, Level-3 Payments, e-Invoicing, secure card storage, recurring billing, and exceptional support for merchants in their early stages all the way to becoming a serious online player.
Arrow Payments provides a Simply Better solution for processing payments online. Have a question? Tweet Antonia at @ArrowPayments