When I look at site stats, a very high percentage of paypal sales are forwarded to cancel.html page. Should I switch to a different (faster)cart system? Seems like they go thru 3 steps to making a purchase and change thier mind. Shipping is low, flat rate, and clearly marked, so no surprises. It's a clothing accessory site, average price is $30.

Are you letting customers know up front that payment is through PayPal? I've never had a problem with PayPal, but there are a lot of people who don't like it. It could be that when they see the payment method, they get skittish.

You might want to offer an alternative payment method in addition to PayPal.

All the alt text on the paypal buttons have "pay pal" plus it's free and secure etc. I have a paypal logo and a mail payment page, but that still doesn't explain all the cancellations.

Are you based in the UK? You can use Nochex as there is no signup required. Some users tend to avoid signing up with a new service everytime they shop. For example, I personally don't like to signup with websites (like those who use oscommerce) and prefer to pay directly. That's why I develop mine...

Anyway, if you have your paypal's "Website Payment" enable, you can accept credit card directly from your customer witout having them to register with paypal. But... you need to be a verified business account.
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Do you state somewhere on your site that you accept payments through Visa, Mastercard, etc..? A lot of customers will see the Paypal shopping cart and automatically think they need to use Paypal or have the money up front. So if someone was wanting to make a credit card purchase that might scare them off.

BTW, how did you setup your site so that when someone cancels their order it goes to the cancel.html page? This would be really good to have. Thanks!

If you refer to Paypal user manual, you can include a variable called "cancel_return". Specify the url where you want your customer to send to. But I found this wasn't very useful as users tend to use forward and backward button on the browser to travel between pages.

I would suggest you have a statement, may be at the shopping cart page, to tell your customers the procedure of paying you online and mentioned the payment gateway you are using. I do not have any feedback from my clients regarding their customers drop the order when they are redirect to paypal or nochex site.
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Ufortunately, the fact is that most people do not feel comfortable paying on a separate site and that is one reason why your cart abandonment rate is so high. Another reason may be an in-effective checkout process (not explaining the checkout correctly etc.).

Care to link the site in your signature or profile for us to look at?

Also, if you can affoard it, a merchant account is always the best and most professional solution.

pulse, it may be true in Asia or South America, but paypal is considered as a safer mean to pay sellers in Europe and USA. They simply need to have fund (and enter credit card detail) and pay for everyone from one source, rather than have to typed in cc details everytime visiting a new website.

Merchant account wasn't something "you can afford, you can get it". Normally a merchant bank would require you in business for a min 12 months and has transactions size they are happy with. To be honest, if you have >£1,000 sales per month, then merchant account may be a cheaper option as compare to third party gateway.

Put this shopping site in my profile.
There is a "mail payment" page, but those numbers don't explain
the high numbers or canceled transactions.
It is sort an elderly market, still they go pretty far before changing
their mind. Might add a visa, mastercard etc, image, so they don't bail when they see paypal.

After the holiday season, will try the
PayPal Website Payments Pro, it's only $20 a month.
I wonder if that would make the checkout process move along easier.