Oct 19, 2011

What's the best alternative to PayPal for accepting online donations?


Paypal has just frozen the account of Diaspora, an online social networking site. Their startup is building a competitor to Facebook, and now they have $45,000 in donations that is locked away which they cannot access to use to pay their staff. Diaspora filed a complaint with Paypal, who did not warn them that their account would be frozen, and the response stated that they would review the freeze in 180 days. 


Since Paypal is a defacto bank, but not a real banking institution, they do not have to comply with federal laws. Yet they're the main source of income for Ebay due to their parent company's ownership and the limits that Ebay has put on third party internet financing companies. This presents a danger not just to startups like Diaspora, but to any business which uses Paypal as a payment handler. Think of all the charities which could be hurt by this kind of action.


Are there any worthy competitors to Paypal? Does anyone have experience with Square, the Google Wallet, or online banks like ING Direct? It would be good to hear your perspectives.



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Outside of work I run a Non profit ogranization that is 100% dependent on the donations that we receive through our website. I had looked in to using paypal for collecting the donations but was not impressed, frankly I was a bit scared after reading some of the many horror stories about paypal. I found a company called MerchantInc and they are a real federally regulated merchant account, unlike paypal which made me feel better rightaway. Ther offer a donate button that was very easy to install on our website. All donations are received 2 business days after they are made on our website in our checking account. They never hold any funds. Definetly something I would recommend to other Non profit organisations.

Hi rtrembley,

There are a number of different alternatives, and each has its virtues and drawbacks. Here are a couple of articles that might help you differentiate between the various options.

5 Alternatives to PayPal as Anonymous organises Boycott #OpPayPal

17 paypal alternatives for easier e-commerce
Answer this