Magazine Article | February 1, 2006

Payment Processing Gateway Cuts E-Tailing Costs

Source: Innovative Retail Technologies

Handling online transactions through an alternative processing gateway helps Big Wines, Inc. broaden its market reach and control its payment handling expenditures.

Integrated Solutions For Retailers, February 2006

Big Wines, Inc. sells California wines and wine gift sets on its Web site, The company also operates a wine club whose members receive quarterly shipments of featured wines, as well as a wholesale/wine brokerage arm and a consulting division. Approximately 100 different wines are offered on the Web site at any one time.

As has been the case since Big Wines' inception three years ago, customers ordering product from the e-tailer must use the PayPal payment processing gateway to pay for their purchases. To do so, consumers set up a PayPal account linked to their credit cards and/or bank accounts. Completing a PayPal transaction requires logging in to this account with a user name and password before the payment process can be initiated and completed.

Payment Gateway Reduces Fraud
"Security was definitely a factor in our decision to accept only PayPal rather than credit cards, electronic checks, and other forms of payment," says Brian McGonigle, Big Wines' CEO and founder. "We liked the idea that the login/password combination makes it easier to ensure that transactions are legitimate and won't have to be reversed later on because of fraud. Just as we expected, we've had very few problems with fraudulent transactions."

The potential to attract more customers to the Web site also came into play, McGonigle adds. Through its own Web site,, PayPal regularly highlights and provides information about e-tailers that accept PayPal, either exclusively or as one of several payment options. E-tailers in the former category are spotlighted once each quarter. "We knew this would be a good draw for us, and it has been," McGonigle observes. The PayPal Web site does not provide links to featured merchants, so McGonigle cannot track the number of cyber-shoppers who go to the home page after learning of its existence from PayPal. However, he asserts that traffic to the site spikes and wine club membership volume increases whenever Big Wines is among e-tailers being promoted by the payment gateway.

Two ancillary tools offered by PayPal, Payment Request Wizard and Virtual Terminal, further bolster the company's business. The Payment Request Wizard allows Big Wines to send customers itemized invoices that contain a link to the payment gateway. Clicking the link takes patrons to the PayPal login screen. Meanwhile, Virtual Terminal enables the e-tailer to execute the sale of its wines during wine-tasting and similar events held at restaurants and other venues. Payment information for purchases made during these events is entered directly into Big Wines' PayPal merchant account, using a laptop computer with a wireless Internet connection.

Besides enhanced fraud protection and expanded marketing opportunities, Big Wines is benefiting from using PayPal through reduced transaction expenditures. For each transaction, PayPal charges merchants a fee of approximately 1.9% of the total, plus an additional 30 cents. "This is several points less than the credit card interchange rate," McGonigle says. "What's more, we appreciate the simplicity of not needing to work with a merchant provider to handle the transaction processing. The security and marketing pieces have been very helpful, but staying off the credit card bandwagon has been a big boon."