If PayPal is returning the error: "This transaction cannot be processed. The merchant's account is not able to process transactions," it is likely because you are not using the PayPal Payments Pro account. The free PayPal account does not work with REACH, only the PayPal Payments Pro.
If you do not want to pay the monthly amount for a PayPal Payments Pro account we suggest you use Stripe (https://stripe.com/)
Here's how to set up your payment gateway once you have a PayPal Pro account:
Go to Settings > Donation Setup
Scroll down to the Payment Gateway setup area
Follow the instructions shown to set up PayPal, selecting the PayPal dropdown under the instructions
Once you have provided the information, scroll to the bottom of the page and be sure to click the green 'Save Changes' button.
Now, you should be able to make a test donation. We always recommend you make a test donation to ensure everything has been set up properly. You can refund the donation through REACH afterwards if desired.