Ben Allfree :: Painless Programming

I am getting good at setting up the subscription management infrastructure that you need to run a good paid service.

PayPal is the first thing that comes to mind when I think about easy ways to start a paid service. They handle all the billing and collection and you just rake in the rewards. They will take about 3.5% of your business revenue for the service, but they have an extremely easy-to-use subscription system and I have only ever had a few people confused by how to manage their subscriptions through PayPal.

But I do have a nagging suspicion that PayPal makes the service seem rink-a-dink. I can’t say absolutely, but I can say that my personal reaction to a PayPal-powered subscription service is that that the business is temporary or new. From a merchant standpoint, I can tell you it’s much more convenient to use PayPal than to roll your own infrastructure.

If you do want to roll your own infrastructure, you have to find an Internet Merchant Gateway service. Popular services include BrainTree, Authorize.Net, and some others. The gateway is not the processing house. The gateway only forwards your information to a processing house like Card Services International who actually process the transaction with card banks like VISA and MasterCard. A processing house like CSI would also get your telephone and merchant terminal (point of sale) orders. Eventually everything funnels into a central transaction center at the customer’s credit card provider where the charge is accepted or declined.

All along the way, at each step, there are fees. Fees for the transaction. Fees for reversing the transaction. Fees for fraud risk. While you can’t avoid these, it is extremely helpful to have an integrated processor like PayPal that can facilitate communication between all the links in the chain. Otherwise, you’re stuck waiting 30 days before a piece of paper arrives in your mailbox telling you that a customer disputed a charge 50 days ago and has no intention of paying. That’s the risk you run with true credit card processing that you do not run to as large a degree with PayPal because PayPal has a “dispute resolution process” that they like to see their customers use.