eBay Merchant Accounts

eBay Merchant Accounts: A Comprehensive Guide

eBay is one of the largest online marketplaces in the world, and as such it grants sellers access to an unparalleled user base to sell their goods to. However, not many understand the different options available when it comes to processing payments on eBay and tend to opt for the default: PayPal.

But is PayPal always the best option? And can you use a standard payment processor with an eBay seller account? Let’s find out.

In this article, we’ll discuss the two most common options for payment processing on eBay: PayPal and a standard payment processor, and explain.

Services for eBay Merchant Accounts

eBay is without a doubt the world’s pioneer in online sales, and it continues to be one of the leading corporations in the online sales industry. As a multibillion-dollar corporation with operations in over 30 countries, eBay specializes in both business-to-consumer and consumer-to-consumer sales, gaining a dominant presence in the online marketplace due to the ease with which sellers can list things and consumers can purchase those commodities. Businesses selling online can use an eBay merchant account to take payments from customers.

For many years, the primary method of payment for any eBay purchase was through PayPal, which was originally part of the eBay organization but has since been spun off into an independent firm. 

PayPal’s success can be attributed to its quick and easy setup process for buyers and sellers. Thanks to minimal checks for buyers and sellers, and a simple setup process, it is essentially the easiest and fastest payment processor on the internet.

However, if you have a considerable amount of sales, having a merchant account is a more cost-effective and business-oriented choice. PayPal charges higher transaction fees and has a longer wait time for payment cash to be deposited into your account than a traditional payment gateway. Modern payment gateways make less financial sense for your business as you process more.

PayPal acts as a payment aggregator between merchants and customers, processing transactions, account funding, and transaction security. PayPal transactions are quick solutions that give high levels of security and functionality that necessitate the use of multiple credit card networks such as Visa, MasterCard, American Express, and Discover. The availability of PayPal has increased year after year, making it nearly a must for both customers and merchants to operate and simply make payments.

When you work with a standard merchant account provider, you will receive benefits such as lower rates, next-day funding, fraud detection capabilities, and the flexibility to process on both eBay and your own website (or the ability to expand if you do not have a website). Because the transaction rates are lower, you quickly recoup the cost of opening a merchant account. Customers can initiate chargebacks for credit card purchases made via PayPal or Authorize.net. However, this all depends on your payment platform.

If you have chargebacks on your PayPal account, PayPal may freeze your account at their discretion. You won’t be able to access funds or make reimbursements, and depending on the amount of the chargeback, you may not be able to reopen it. Furthermore, if PayPal deems your content to be objectionable, even though it is legal, your account may be closed without notice.

A merchant account tailored to your own business, on the other hand, is intended to assist you in managing chargebacks. Rather than freezing your account when you are charged back more than once, merchant service providers will assist you in attempting to win the customer’s dispute and reverse the claim. 

High Risk Factors

eBay merchant accounts are regarded as high-risk investments by banks and merchant service providers due to their financial volatility and proclivity for chargebacks. If the merchant is unable to pay for chargebacks and fraud losses, the merchant service provider is second in line to reimburse banks and credit card issuers. Because fraud and buyer’s remorse are more widespread, internet businesses are intrinsically more vulnerable to chargebacks than brick-and-mortar retail enterprises. Products, particularly used items on eBay, can appear different in person than they do online, leading to more payment disputes. Fortunately, eBay’s procedures mitigate risk concerns. It provides a money-back guarantee for faulty or damaged items, items that do not match its listing, or goods that aren’t delivered.

PayPal and eBay

PayPal, originally known as Confinity, debuted in the mid-1990s and swiftly became a subsidiary of eBay by 2002, becoming the principal payment mechanism for all eBay transactions. PayPal has been a component of eBay’s portfolio for almost ten years, becoming the company’s fastest-growing division and a significant income producer. PayPal was successfully spun out as a separate company in July 2015, but an agreement in place permits PayPal to continue as a payment processing service for eBay transactions.

PayPal’s success stems from its ability to make purchases and sales simple for both buyers and sellers. Sellers that choose PayPal face less scrutiny when applying for an account than those who apply for a standard merchant account. Accounts are also nearly instantly validated, and businesses can begin processing online transactions immediately, although this ease of use has significant drawbacks for merchants selling primarily through PayPal services.

eBay and PayPal have a long history of collaboration. eBay purchased PayPal in 2002 and aided in its expansion. However, the two companies split in 2015, despite the fact that PayPal remained the most popular payment option for eBay shoppers. In February 2018, eBay stated that the collaboration would end in 2020, as the firm is eliminating PayPal as its primary payment processor and transitioning to a more direct role in payments with the support of the Dutch startup Adyen. By July 2023, eBay will no longer accept PayPal as a payment method. In anticipation of this development, investing in a merchant account will assist to future-proof your firm.

PayPal as a Payment Processor

Payment processors accept liability for numerous transactions, making the processor financially responsible for both the customer’s protection on purchases and the paying of merchants once the transaction is done. Unlike many merchant accounts, a merchant often gets accepted rather quickly, often virtually instantly, which can be beneficial to merchants but also leaves PayPal with a lot of duty to combat fraud and other schemes.

One of the issues that many businesses have is from the terms and conditions, which give PayPal the authority to freeze an account for any type of suspicious trade behavior without prior warnings or notices. Funds can be held for months, and in some cases are never refunded. Accounts and funds can be suspended for a variety of reasons, including an unexpected increase in the number of chargebacks, a surge in sales volume, or anything else that they believe is out of the ordinary or could potentially harm the online credit card processing industry that PayPal has built and maintained.

Chargebacks are disputes that occur between the cardholder and the seller and are initiated by the client contacting their card issuing bank regarding an issue with a merchant transaction, which is not particularly common but may be quite difficult through PayPal. When a cardholder disputes a transaction, the merchant automatically returns the full amount of the sale to the customer account. 

This may not be a big deal for clients who only use eBay a few times a year, but it can be frustrating and harmful for long-term merchants that rely heavily on PayPal and eBay to run their operations. Aggregators typically have limited expertise of the inner workings of their merchants’ operations, resulting in many accounts being closed and monies being kept. As a result, PayPal is one of the worst solutions for merchants using eBay or a generic e-commerce site.

What to Do if You Need an eBay Merchant Account?

The question is whether it is worth jeopardizing business revenue by having a PayPal account, or whether it is preferable to go through the procedure of opening a legitimate merchant account. What other alternatives do traders have? Fortunately, there are extremely respectable financial services providers who specialize in assisting businesses regardless of the platforms on which they operate these days. Here are a few of the benefits of working with a payment processor that specializes in general e-commerce rather than a payment aggregator like PayPal.

Disputes Over Transactions

Such payment processors are not only prepared to deal with the difficult issue of chargebacks but can also advise and support you on how to significantly lower your risk in the market. A good payment processor will already have their own chargeback site in place. Unlike aggregators such as PayPal, who frequently charge exorbitant fees for chargebacks incurred with no understanding of the precise circumstances at issue. Using a merchant account processor can drastically minimize or eliminate these fees, depending on the situation and agreements you can put in place before signing on.


Working with a payment processor who knows how unique each business is and is prepared to work with those firms can lay the groundwork for a strong partnership. Having a payment processor who will work with you to resolve any potential difficulties or problems rather than immediately judging you can help make the e-commerce experience a success for all parties involved. Payment aggregators have little clout with payment card networks, making it difficult for PayPal or others to defend chargebacks on the merchant’s behalf.


Payment aggregators can hold cash for up to two weeks, depending on the arrangement between the merchant and the payment processor. PayPal will keep monies in a merchant’s account until they are transferred to a bank, giving PayPal access to that money until it is cleared. In a typical merchant account, payments are sent to the merchant’s bank account within 24-48 hours, eliminating many of the holdbacks that occur so frequently with PayPal.

Collaboration with PayPal

While PayPal may be the ideal option for buyers due to their buyer protection program, PayPal’s standards and restrictions are far stricter on sellers, making selling through PayPal challenging for businesses at times. Because there are numerous alternative eBay merchant account providers eager to provide payment services, it is critical to conduct thorough research on every conceivable financial services company with whom you may want to work. It might be more beneficial for a business to check other options before going with PayPal.

Final Thoughts

eBay has continued to evolve with the times, and now opening a seller account and using a standard merchant account provider is not only perfectly possible, but also even recommended. PayPal will no longer be the default option come 2023, so it’s good to have other options readily available. While eBay has risk factors that could push a merchant towards high-risk status, you can still find plenty of providers that offer unique benefits for your business that PayPal won’t.

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