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Why PayPal? Why Use or Pay with PayPal?

How PayPal Works

If you sell goods online, you’ve probably heard of PayPal. We offer an online payment service that enables you to accept bank or credit card payments for the items you sell. When a customer pays for his or her purchases, we process the payment and transfer the funds to your PayPal account.

PayPal facilitates online payments for hundreds of thousands of e-commerce ventures, as well as traditional brick-and-mortar companies with an online presence. Read on to learn how it can work for your business, too.

A step-by-step guide to PayPal

PayPal’s mission is to “build the web’s most convenient, secure, cost-effective payment solution.” But what is it that PayPal does, exactly?

A typical online transaction

Let’s take a look at a typical online transaction involving PayPal, as shown in Figure 1.1:

Figure 1.1

A typical PayPal transaction sequence.

  • The transaction starts when a customer (let’s call her Mary Ann) comes to your website. Let’s say Mary Ann finds a sweater she wants to purchase and clicks the Buy button on the product page. At this point, PayPal gets to work behind the scenes.
  • Mary Ann sees a shopping cart or checkout page next. Depending on the type of PayPal service you choose, she might see a shopping cart page integrated with your website. In other instances, she’ll see a shopping cart or checkout page hosted at the PayPal site (branded with your business’s logo).
  • After reviewing the checkout page, Mary Ann clicks the Pay Now button. This directs her to a payment page, hosted by PayPal. If you choose PayPal Payments Standard, your customer will be taken to the PayPal site to complete the transaction. With PayPal Payments Pro, that process is integrated into your site, so Mary Ann never leaves it.
  • If she has a PayPal account of her own, Mary Ann can simply enter her username and password, and the rest of her personal information – address, phone number, etc. – is retrieved from our database and automatically entered onto the payment form. (If Mary Ann doesn’t have a PayPal account, she can create one.)At the PayPal login, she’ll also see the option to “Stay logged in for faster purchases.” Called One Touch, this feature keeps her logged in on the device she’s using, so if she comes back to your site or another site using PayPal, buying is even faster and easier.At this point, her PayPal transaction is complete. If she chooses to pay with a credit or debit card, she’ll continue through the following steps.
  • If Mary Ann chooses to pay with a credit or debit card, she’ll enter her contact and card information in the web form and then clicks the Pay button to authorize payment. Behind the scenes, Mary Ann’s credit card information is encrypted and transmitted to PayPal, and then we contact the issuing bank for Mary Ann’s credit card. Assuming that her credit line can cover the purchase, the issuing bank authorizes the transaction, and the sale is approved. This process only takes a few seconds.Note: All PayPal transactions take place on web pages that utilize Secure Sockets Layer (SSL) encryption. This protects your customer’s personal data from prying electronic eyes and identity thieves.
  • Mary Ann sees a confirmation page with a message (sent by us) that says her purchase has been completed. At that point, we’ll notify you of the purchase via email.
  • Once notified of the purchase, you can start processing the order. You can also opt to send a confirmation email of your own, letting Mary Ann know the purchase has been put into your system and notifying her of the approximate ship date.
  • When the funds are confirmed from the credit card company, they’re deposited into your PayPal account – minus applicable fees (2.9% + $0.30 per transaction). This infographic has an easy-to-understand breakdown of how exactly the money gets to you.
  • Once the money reaches your PayPal account, which usually happens within minutes of making the sale, you can leave it in your account for use in paying business expenses or withdraw it to your bank account (which usually takes 2-3 days).

The whole process is easy for the customer to understand and navigate, which means buying from you is a great experience. And it’s easy for you to use, too, so you can keep driving your business forward.