Paypal – Friend or Foe?

What I want to do is this post, is briefly cover why I use Paypal for the majority of my online transactions and then also go into some specifics of using Paypal as an Israeli.

Especially for the niches that I operate in, Paypal works extremely well. In the business to business marketplace, Paypal is accepted as a standard and people feel comfortable making payments.

Reasons why?

– it is perceived as secure

– people see it as ‘play’ money and are more likely to spend

– there is a certain amount of protection in some ways more and some ways less than paying with a normal credit card

– people indirectly use their credit card with Paypal, so it is an added bonus

– it is fairly explicit in the terms and conditions of a transaction

As an online business owner, there is an additional benefit in that it integrates very well with turnkey scripts. Also, there is far less hassle than using a regular merchant account provider as Paypal takes care of the background hassle for you.

There is no need to have your own secure server, or deal with credit card numbers or make sure that your payment page is set up according to terms and conditions of the providers – not always as easy as you may think – infact V difficult.

What interested me though, was that I was speaking with a business consultant (Daniel O) at a Bris a few weeks ago who said that he actually thought when a site was just offering Paypal that it gave less credibility as they had not bothered to get a ‘proper’ merchant account. Apples and Oranges I guess…

As an Israeli, there are some additional advantages of using Paypal over a merchant account provider:

– it is notoriously difficult to do any reasonable volume online through an Israeli credit card provider

– no need to fill out long forms in Hebrew (not even joking!)

– with a normal processor, your customer wherever in the world that they are is charged in Shekels which are then converted to their currency. How would that go down in Iraq?! ๐Ÿ™‚

To give you a bit of background about using Paypal as an Israeli:

1. Officially you are only allowed one Paypal account internationally

2. Paypal was introduced to Israel fairly recently and even more recently allowed you to withdraw money via your bank account and/or your credit card

3. There is no easy way to get money into your own Paypal account via your Israeli credit card or bank account, so you need to either be creative, receive a payment or make a purchase by using your credit card on your paypal account.

4. There IS a small Israeli office in Israel for Paypal who are currently working to make it more friendly for Israelis.

5. At present, Paypal does not accept or show screens in Hebrew – not so great if you are using Paypal to sell to Israelis who don’t know English…

A few tips if you are using Paypal as an Israeli:

1. Make sure that you have the correct address details. If your account is ever limited (convo for another time) then you will find it almost impossible to reopen otherwise.

2. If you are limited, then provide a translation that is signed by your lawyer of whatever they ask for you (probably also a convo for another time)

3. It is free and relatively quick to withdraw money to your bank account. If you withdraw to your credit card, it still ends up going to your bank account – it just costs you more and usually takes longer.

4. There is an option to automatically add VAT to anyone making a purchase from you in Israel. This is incredibly useful not just so you don’t lose the (currently) 16% but helps you also spot Israelis so that you can write them a separate receipt and pay the VAT. After all, is your usual price for a service $31.36?

5. Check your end of month spreadsheet line by line to check that there are no payments from Israelis. You can do a search in the downloadable Excel spreadsheet for Israel. Also do a search for netvision and other Israeli ISPs in the email address field – any other tips for noting Israeli transactions greatfully accepted.

In my next Paypal post, I will go into further details on how it seems one can handle their bookkeeping when using Paypal – not as easy as you may think. Especially if you have hundreds or thousands of transactions a month…

Am sure that I have missed something out. Let me know if any questions or comments below…

Keeping it real in an โ€˜Israeliโ€™ world,

Ben S

4 comments

  1. Dov Gordon says:

    Good tips, Ben.

    Looking forward to the next ones. This kind of step by step information is very useful.

    Thanks,
    Dov

  2. Sara Young says:

    Very comprehensive post.

    I do have a question:

    If I have a bank account in the US and in Israel, which one should I use? I am currently using the US one, but are there reasons to switch over?

    Keep up the great work,

    Sara

  3. BenShaffer says:

    Hey Sara,

    Here’s how I see it…

    If you are registered solely in Israel (like me) then there would be no reason to be dealing with an American Paypal account apart from the fact that that account has History and Reputation with Paypal.

    With an Israeli Paypal account, you can withdraw both to your Israeli bank account and also to an American bank account – all Paypal accounts internationally can withdraw both to a bank account of that country in addition to an American bank account.

    The advantage that you have in using an Israeli Paypal account is that you can also withdraw to your Israeli bank account and credit card if that is useful for you.

    Especially if registered as a company, it is a bit of a pain to be having too many different bank accounts in too many countries.

    Although Paypal says that you can only have one personal and one business Paypal account, unofficially you may want to open an Israeli one and also keep the American if there is nothing in PP’s eyes connecting the two.

    A bit reason for using a Paypal account in the country which you are genuinely doing business in is if something goes wrong and you need to supply Paypal with documentation proving your residence. They could easily shut down and ‘take’ your money from your American one if you can’t prove that is where you live. It happens fairly often as you will find doing a quick search on the internet.

    Sorry if a bit rambling ๐Ÿ™‚ Let me know if I missed anything out!

  4. Sara Young says:

    Thanks for the quick response. How about the exchange rate? Is it decent? This is important to me since all the payments I receive are in US Dollars.

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