Pay Your Own WayFor more than a decade PayPal has been virtually synonymous with online payments. The service has 106 million active users and can be used to make purchases at thousands of online merchants. The sheer volume of PayPal users also means that it’s often the go-to method of cash-free person-to-person (P2P) payments.
There’s just one problem: A lot of people really hate it.
The company has found itself at the center of numerous controversies over the years, with some users going public with complaints over frozen accounts and poor customer service. There was, for instance, the incident during the holiday season in which a charitable Secret Santa campaign run by the blog Regretsy was derailed when the company forced the blog to refund hundreds of contributions. (PayPal ultimately relented in the face of widespread media coverage.) Another recent incident involved a dispute over the authenticity of a violin sold over the Internet using PayPal, which ended with the company telling the buyer to destroy the violin.
Given the millions of active PayPal users, it’s clear that these customer service incidents impact a very small minority of customers and merchants, and most are perfectly happy with its free and easy P2P services. But those who don’t like PayPal have plenty of alternatives.
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ServeWhile PayPal is pretty firmly established among online merchants, there are plenty of competitors on the P2P side of the equation. One is Serve, which allows you to send money for free to friends who also have Serve accounts. It can be accessed online or via smartphone apps.
Signing up is free, and once you have an account you can add money by linking it to a checking account, using a credit card or adding cash via MoneyPak. Adding funds directly from your checking account is free, using a credit card will cost 2.9% of the amount transferred plus an additional 30 cents (starting June 1), and MoneyPak transfers cost up to $4.95 each (though Serve will refund you that amount the first time you use a MoneyPak).
Signing up also comes with a couple of perks. You’ll get a prepaid card that can be used wherever MasterCard is accepted, and it can also be used as an ATM card; the first withdrawal of the month is free, and $2 per withdrawal after that (fees by the ATM owner will also apply). And most importantly, if you sign up for an account by March 31 you’ll get a $10 credit.
Photo Credit: Apple.com
ZashPayZashPay, which we first explored back in August 2010, is another P2P alternative to PayPal. The main advantage here is that when you transfer money, it goes directly into the other person’s bank account. (By contrast, if you receive money using Serve and want to put it in the bank, you’ll have to go into your Serve account and manually withdraw it into your linked bank account.) If you’re a customer of one of the 900-plus banking institutions already signed on with ZashPay you’ll be able to use the service directly through your bank’s online services, but anyone with a checking account can join. It offers free apps for the iPhone, iPad and Android devices.
ZashPay does have some downsides, though. Since the transactions happen directly from account to account, you’ll need to have a checking account to join – cash deposits and credit cards won’t do the trick, as they do with Serve. And it’s not completely free to use: The sender will have to pay a 75-cent fee for every transaction.
Photo Credit: Android.com
WePayWePay is intended for those who want to set themselves up to receive payments, and as such the target audience is small-business owners and people who want to sell things online – whether it’s sports tickets or homemade art. Much like PayPal, it allows you to send bills to customers and receive payments by credit card or e-check. The site charges a flat 3.5% fee per transaction, with a 50-cent minimum fee.
WePay has taken pains to bill itself as the anti-PayPal, emphasizing the ease with which “informal merchants” like nonprofits can set up “pay-to” accounts – while noting that such merchants often get caught in the “PayPal Vortex” that has been the subject of so many controversies. In one memorable publicity stunt, WePay called attention to PayPal’s practice of freezing accounts by freezing money in a giant block of ice outside PayPal’s developer conference in October 2010.
Photo Credit: WePay.com
SquareWhile WePay is a great alternative for Internet-based small merchants and nonprofits, those who do business in person have Square. Anyone with an iPhone, iPad or Android device can accept credit card payments using the free app and free card reader, a tiny device that attaches to the phone or tablet’s headphone jack. The company, which was created in 2009 by Twitter co-founder Jack Dorsey, makes its money by taking a flat 2.75% transaction fee for every swipe. The money is deposited directly into your linked bank account, and you can send your customer a receipt by email or print it out if you’re using an iPad hooked wirelessly to a printer.
Photo Credit: SquareUp.com
DwollaDwolla combines elements of P2P, mobile payments and location-based social networking. The service is meant to be an extension of your checking account, and to use it you’ll either need to transfer money from an outside account or directly link your checking account to Dwolla. Funding it via a credit card or cash won’t work.
The big appeal here is that all transactions – whether P2P or at a merchant – carry just a 25-cent fee, though if the transaction amount is less than $10 that fee will be waived. Both parties in the transaction must have a Dwolla account, and if you send money to someone who isn’t signed up, they’ll need to create an account to access the money. You can also link Dwolla to your social networking accounts in order to quickly transfer money to friends and contacts who use the service.
Another thing that sets Dwolla apart is that there is a growing list of merchants that accept Dwolla at their stores: Instead of whipping out cash or a credit card, whip out your smartphone instead and make the transaction. That said, it’s not as easy as mobile payment systems like Google Wallet that let you pay by tapping your phone against a special reader, though such systems aren’t yet widely used.
If there’s a downside here, it’s that money doesn’t exactly travel at the speed of light between Dwolla and your bank account. You’ll need to transfer cash into your Dwolla account to use it, a process that will take a few days. There are, however, systems to make that easier: You can set up automatic deposits from your checking account to keep things funded, and if you find yourself short on funds, Dwolla has an “Instant” function that will essentially front you $500 for instant use, though that will cost you $3 a month.
Photo Credit: Apple.com
CloverClover is a new player on the P2P scene, and the company emphasizes the convenience of its mobile apps in facilitating payments among friends. But it’s not afraid to use a little bribery to get people on board, offering $5 to new customers that can be kept in your Clover account or used as an Amazon gift card. You can also earn $5 for each friend you invite, with up to $85 available in recruitment bonuses.
Unfortunately the service is still behind something of a velvet rope, which lends it an air of exclusivity but makes it hard to find other people who use it. When you download the app and verify your phone, you’re given the option of sitting on a waitlist or upgrading to a “gold” membership which is free to join but requires you to link the account to a credit card. And for now, credit card (or prepaid card) appears to be the only way to add money to the account, with checking account linking not yet available. That’s too bad, since there’s a $200 lifetime cap on how much you can add via credit card.
The lack of bank account functionality and the small user base means that Clover may not be the right tool for everyone just yet. That’s too bad, because the app is easy and intuitive to use and there are no fees for P2P transfers. We’re eager to see how this one pans out, but for now you may as well sign up, grab your $5 bonus and start inviting friends. If nothing else, you’ll score some free cash from the deal.
Photo Credit: Clover.com
Your BankWhile these services have easy-to-use apps and various perks for use, your best bet for transferring cash to your friends might very well be to cut out the middleman and just use your bank. As a general rule, transfers to other customers of the same bank are free and instant, while transfers to friends who use other banks may take a few days. The interface may not be as slick as you’ll see from the likes of Clover and others, and the money will take a bit longer to arrive, but it may be worth it to not have to add an intermediary for person-to-person payments. Some services, like Chase QuickPay, offer sophisticated mobile apps as well.
Photo Credit: Apple.com
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