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Mac Musings

A New Option for Online Funding

Dan Knight - 2001.11.30

Hey, Web users and webmasters, there's a new online payment game in town. Although I haven't compared it with the other micropay options, for very small donations Paythrough outperforms the other three programs I've been involved with.

Kagi

I signed up with Kagi years ago so people could support my research. I haven't used it much, since they only cut checks once a month and charge 50¢ plus 10% of the first $30 (that drops to 3.5% beyond the $30 mark). Still, Kagi is a tried and true way of handling payments, seems quite comfortable with international transactions, and has no fees when there are no transactions.

PayPal

I discovered PayPal when I started using eBay. It's a great way to transfer funds between buyers and sellers. It's also much less costly than Kagi: PayPal charges a 30¢ transaction fee and then anywhere from 2.2% to 2.9% of the total transaction - based on your account type and whether or not you're "PayPal Preferred." (For those with the old personal accounts who haven't upgraded, you can still receive fund for free, but with some limits on size.)

For a $5 donation, Kagi would leave me with $4.00 while PayPal would let me keep $4.51. At $10, Kagi leaves me $8.50 and PayPal $9.48. You can understand why PayPal has been our preferred online payment method.

PayPal has some other benefits: I can transfer money between my PayPal account and my checking account, although that can take several days. PayPal also pays money market rates on my balance.

A final benefit which I really appreciate is the PayPal Visa and MasterCard. These are debit cards and can only tap into your PayPal funds balance, but if you use them as though they were credit cards, PayPal will give you a 1.5% cash back bonus. Buy a $90 toner cartridge, get $1.35 credit to your PayPal account.

PayPal's biggest drawback is that it isn't available in all parts of the world.

Amazon Honor System

Several readers suggested I use the Amazon Honor System when they heard I was soliciting donations. Unlike PayPal, you don't have to live in the right country or have an account; you can use the same credit cards to send funds that you'd use to buy a book, CD, or movie from Amazon.com.

The drawback? Fees fall between Kagi and PayPal. Amazon charges 15¢ per transaction plus 15% of the total, leaving just 70¢ out of the first dollar. That's 2¢ better than PayPal, but at higher fund levels, PayPal has the advantage.

Still, with some visitors in places where PayPal isn't available and some with personal issues with PayPal, Amazon provides an alternative. Of course, some have issues with Amazon's privacy policy, so this solution isn't perfect either.

Paythrough

Rich Scherek of Paythrough contacted me in response to a series of articles about micropayment that we ran earlier this year. They were creating a micropayment business and wondered if Low End Mac was interested. Sure, send me the details.

The key to micropayments is keeping costs low. If it costs 15¢ per transaction plus a percentage, there's no point offering something for 25¢. So I was curious what Paythrough would offer.

These folks came up with four options - the basic and high volume accounts have no fixed fees; the other two have a monthly or per user fee plus a percentage. We're starting with their basic program, which currently charges a fixed 30% of each transaction. That means we can take in 7¢ on a 10¢ transaction - which is hardly worth the effort. But it does make it practical to offer 50¢ and $1 transactions.

Beyond the $1 mark, PayPal edges out Paythrough. In fact, by the $5 mark, it's the most costly way to transfer funds. After seeing these figures, Scherek said they'd see if Paythrough could be more competitive with bigger transactions.

I'm sure they can, since their "high volume" program offers steep discounts when handling funds in excess of $2. If we were to qualify as a high volume account, we'd net an additional 60¢ on a $5 donation. Every little bit helps.

Of course, we're not using Paythrough quite the way they envisioned it. Paythrough's strength is handling subscription-only and cost-per-article content, such as online magazines and newspapers. If we wanted to move a subscriber-only model or offer subscription only content, Paythrough could easily handle it.

Paythrough has very easy to access reports, making it quick and easy to track results.

Conclusion

Of the four programs, PayPal provides the most immediate access to funds and the lowest cost on transactions over $1. The ease of use is excellent, and they make it quite easy to set up an online store to sell things. PayPal's biggest drawback is the 30¢ transaction fee, which makes taking less than $1 impractical.

Paythrough is great on the low end. Whether you're accepting $1 donations or 10¢ to view a specific page, the fixed 30% cost isn't unreasonable.

In the best of all possible worlds, someone would take 30% of the first dollar or so, like Paythrough, and then a low rate on additional funds, like PayPal's 2.2% rate. Amazon comes in between the PayPal and Paythrough as transactions pass the $1 mark.

We're offering those who wish to donate to Low End Mac the opportunity to do so through any of these four vendors. We've clearly stated the costs of each on our support page and leave it to our supporters to choose which best fits their situation.

As always, any and all support is greatly appreciated.

Dan Knight has been using Macs since 1986, sold Macs for several years, supported them for many more years, and has been publishing Low End Mac since April 1997. If you find Dan's articles helpful, please consider making a donation to his tip jar.

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