Why One Business Owner Agreed to Pay More for Payments

Nearly four years ago, business owner Andy Brice decided to switch to a more expensive provider for payment processing.

He switched from PayPal to Avangate, and "the No. 1 reason was that my business reached the threshold where I had to register for [value-added tax]," says Brice, founder of ORYX Digital Ltd., the parent company of PerfectTablePlan, which organizes seating arrangements for parties.

The software company is based in Great Britain, where VAT is similar to a sales tax in the U.S. The threshold at which U.K. businesses must register for VAT is £81,000 in sales per year within the European Union, says Brice.

As a full-service processor, Avangate handles most of the VAT requirements. The company pays out ORYX in a single transaction each month, so its bookkeeping and tax management become far easier, Brice says. 

When his business started growing, Brice conducted a survey of a couple hundred small software vendors on his blog to determine which payment processor he would use.  Avangate squeaked to the top in front of e-commerce payment provider FastSpring.

Even though he's paying more for processing with Avangate, the company's features are worth the cost, he says. These include support for multiple languages and country-specific payment methods, such as China's Alipay.

"Avangate is very specific for those selling software…for example, they handle volume discounts on a sliding scale and money-off vouchers," Brice says.

Plus if a customer abandons a shopping cart, Brice has the system set up to send a chain of emails reminding the shopper finish the transaction. Avangate "has all sorts of extra features that are useful and potentially increase my conversion rate," says Brice.

Brice used PayPal for about six years with a front-end system called e-junkie.com, which provided a shopping cart and user interface for PerfectTablePlan.

Brice had a few clashes with PayPal's customer service. For example, when filling out a form Brice used his first name Andrew on one and his nickname Andy on another. PayPal then sent him an automated email asking him to scan legal documentation of the name change. Because the emails were automated Brice could not reply to them to explain the situation.  After several attempts to get through to PayPal by scanning and attaching an explanatory note, PayPal resolved the issue, he says.

While Avangate and PayPal are both cloud-based e-commerce payment providers, the two companies have vastly different ideas about their business models. Avangate wants to be its customer's sole provider, whereas PayPal sees itself as just one link in a chain of cloud-based services providers. 

Avangate "helps digital service sellers accelerate their worldwide revenues…by helping them automate and scale up," says Michael Ni, chief marketing officer and senior vice president of marketing and product at the e-commerce provider.

Ni says Braintree, PayPal and Square are starting to evolve their business models, but have been traditionally focused on the payment aspect of commerce, which isn't enough. "Most of our customers are graduates of PayPal or Braintree," says Ni.