Authorize.Net VS PayPal: Comparing Fees, Features & More For Online Payments

Payment processing is an industry full of fierce competition between both well- and lesser-known brands. At the same time, the complexity of payment services and differences in fee structure can make it difficult to do direct comparisons.

But we’re gluttons for punishment here at Merchant Maverick, so we’re more than happy to make the comparisons for you. In the left corner, we have the popular Visa-owned payment gateway, Authorize.Net. In the right corner, we have the ubiquitous PayPal. Let’s see how they match up.

Authorize.Net VS PayPal: A Quick Look

Authorize.Net and PayPal are actually two very different services. Authorize.Net is a payment gateway that is used to connect eCommerce transactions with payment processors. PayPal is a full-stack payment processing service that includes both payment processing and a payment gateway.

If those words don’t mean anything to you yet, don’t worry, we’ll break it down for you.

Authorize.Net

Authorize.Net is a payment gateway, one of the oldest and most popular ones. A payment gateway does not provide payment processing functionality. However, you do need a payment gateway (as well as a payment processor) to process transactions online.

That’s not all a payment gateway can do, and, in fact, Authorize.Net offers quite a bit more. Want enhanced fraud protection? The ability to sell, digitally, across borders? The ability to take echeck/ACH payments or recurring payments? Easy integration with your shopping carts? Authorize.Net can do all of these things for you.

So what about that piece of the puzzle it can’t provide? Well, technically, you can go through Authorize.Net to get a merchant account with one of its partners. We generally don’t recommend this, as you can probably get payment processing with Authorize.Net as your payment gateway for a lower price if you go through a payment processor. This isn’t too difficult as Authorize.Net is the default payment gateway for many merchant services that offer eCommerce support.

PayPal

On the other hand, PayPal is designed to be a complete, easy-to-use payment processing service focused on online transactions. PayPal was one of the first in the business and now offers some of the most well-developed eCommerce infrastructure available. PayPal currently boasts over 305 million active accounts and usage by over 22 million merchants. With PayPal Here, you can even use PayPal for in-person POS transactions.

The PayPal ecosystem is enormous, ranging from digital wallets to working capital loans. Even if you don’t plan on making use of everything PayPal can do, there’s comfort in having the options available with little fuss if you ever do want to use them. Unlike competing services, such as Stripe, it is possible to just use PayPal’s gateway separately from its other services if you’re determined to do so.

All of PayPal’s services are designed to be extremely easy to use and accessible, making it a great choice for businesses with modest eCommerce needs. That said, PayPal can get a bit inefficient for merchants who process more than $10K/month. And then there’re the account stability issues common to all third-party processors, made all the more frustrating by PayPal’s less-than-stellar customer service.

Features

There’s considerable overlap between the features that Authorize.Net and PayPal can offer merchants. That said, PayPal’s breadth of services is far greater than the more specialized ones offered by Authorize.Net. Remember that while Authorize.Net can hook you up with a merchant account service, it will not be the one providing that service.

Plans

There are three service plans for PayPal:

• Checkout: PayPal Checkout is a supplemental option that you can add to your existing payments page if you already accept credit card payments through another processor or integrate with an eCommerce platform. PayPal will offer your customers an option to check out with PayPal as well as PayPal Credit and Venmo, based on what user data it has available.
• Payments Standard: If you don’t have another payment processor, PayPal essentially becomes your primary processor on the Standard plan. You can build your payment buttons and simply copy/paste some code onto your site to enable PayPal as your shopping cart. The Standard plan is customizable but doesn’t require a lot of technical knowledge.
• Payments Pro: Get your standard PayPal features PLUS a virtual terminal and a hosted checkout page for a monthly fee and processing costs. The hosted checkout page means customers stay on your website during their purchase instead of being rerouted to PayPal’s site.

Customers worried about PCI compliance may appreciate that most of PayPal’s plans take the issue entirely out of their hands. By redirecting customers to its site to complete transactions, PayPal effectively puts all the PCI compliance issues under its roof. The PayPal Payments Pro plan does allow you to keep the customer on your website for the entire transaction, but this means taking on some of the burdens of PCI compliance yourself. Even then, PayPal offers tools (such as transparent redirects) to make things easier.

PayPal’s other services include:

• PayPal Here mPOS
• Online and in-app invoicing
• Donation and Buy buttons
• Mass payouts

Plus, if you want to sell in-person, PayPal offers several integrations with leading POS systems for retail and food businesses, with predictable, flat-rate pricing.

Authorize.Net offers three plans:

• All-In-One: This option pairs the Authorize.Net gateway with a merchant account through one of its partners.
• Payment Gateway Only: This is Authorize.Net without any third-party bundles.
• Enterprise Solutions: Custom pricing for high-volume businesses.

Merchant Accounts

I know, I know, we just drove home the idea that Authorize.Net doesn’t directly offer merchant accounts. Nevertheless, there’s an important distinction to make here in how PayPal vs. Authorize.Net process payments. PayPal is an aggregator, meaning that it pools all of its customers into a single uber-account used for processing the payments. PayPal takes its interchange and applicable bank and services fees from the transaction before routing the remaining money into your business bank account. This is also called third-party processing. The advantage of using a third-party processor is that it’s often easier and faster to use one rather than a traditional merchant account, especially if you’re new to taking card payments. Additionally, most third-party processors don’t like to deal with businesses categorized as high-risk.

On the other hand, third-party processors suffer from stability issues, meaning that your account could end up frozen with little explanation of what went wrong. Authorize.Net doesn’t offer merchant accounts in-house, but it can hook you up with your own account through one of its partners.

Point Of Sale

Neither Authorize.Net nor PayPal is a name that springs to mind when you think of in-person transactions. However, thanks to the miracles of modern mobile technology, you can swipe or dip transactions through both services.

PayPal Here is PayPal’s mobile processing app. While you probably wouldn’t want to rely on it if you do most of your transactions face-to-face, it’s a perfectly respectable tool for eCommerce businesses that do the occasional in-person transaction. The basic stuff is free, but you’ll need to pay a monthly fee of $39-$49/month if you want inventory tracking. Swiped or dipped credit or debit card transactions are charged a flat 2.7% per transaction, which may recall the halcyon days of Square’s flat 2.75% rate for card-present transactions. Just keep in mind that this is a lot more limited than what a company such as Square offers at the point of sale.

Authorize.Net has an app that can accept mobile payments in conjunction with a smartphone or tablet and a plug-in card reader. The app is available for both iOS and Android. While the app is free, and this feature is included with your account, you’ll have to purchase a card reader. Choices include the IDTech Shuttle Two-Track Secure Magstripe Reader, which is magstripe-only and costs $42.88, or the BBPOS Chipper card reader mentioned above. Both readers plug into the headphone jack, but the Chipper also comes with a Bluetooth variant, which we generally recommend merchants get with any card reader.

Fraud Detection

Authorize.Net prides itself on its Advanced Fraud Detection Suite (AFDS), which consists of 13 filters you can customize to flag any potentially screwy transactions. As chargebacks can really burn a hole in your wallet, this is always a nice feature to see, especially when it’s available at no additional cost.

PayPal doesn’t have anything quite comparable to AFDS, but the service does handle PCI compliance for you.

Online Invoicing

Authorize.Net can do a lot of nifty things, including storing customer information, but it doesn’t have a fully-featured invoicing system.

Consultants and contractors can use PayPal’s invoicing features for invoicing their clients for the same rate as regular web transactions. PayPal’s invoicing tools are pretty solid, allowing you to add a tipping option to the invoice and even setting up installments. Recently, PayPal added support for recurring invoicing as well. You can also create custom billing apps with PayPal Invoicing APIs.

ACH Transactions

ACH transactions remain a chink in PayPal’s otherwise formidable armor. While you can process ACH transactions through PayPal’s infrastructure, you’ll need to look at Braintree, one of PayPal’s subsidiary services.

Authorize.Net offers ACH/echeck processing as an add-on or a standalone feature you can get if you only want to process ACH transactions. Pricing is 0.75% per echeck, which is a lower rate than you’ll get for a credit card or debit transaction.

International Support

PayPal is accepted in over 200 countries. To accept international payments, you simply toggle the feature to “on” from your account. You can then specify whether you want all foreign sales to be automatically converted to US dollars or do so manually. You can hold foreign currencies in your PayPal Commerce account until you want to convert them. PayPal Commerce supports over 100 currencies.

PayPal Commerce also supports numerous local payment types, including:

• Bancontact
• BLIK
• EPS
• Giropay
• iDEAL
• MyBank
• P24
• SOFORT

Authorize.Net supports Visa, Mastercard, Discover, American Express, JCB, PayPal, Visa Checkout, Apple Pay, Chase Pay, and echeck payment types.

Authorize.Net can handle transactions in American, Canadian, Australian, and New Zealand dollars; Swiss francs; Danish and Norwegian krone; Swedish krona; euros; British pounds; and Polish zloty. Just be aware that supported currencies may vary depending on your business’s location. For example, a US-based business would have currency support for US and Canadian dollars.

Developer Tools

PayPal has taken some pains to flesh out its developer environment. Documentation is now broken up according to the type of business you’re coding for, so you can easily find tutorials for small businesses, marketplace platforms, or large enterprises. In the last case, PayPal will nudge you toward one of its subsidiary services, such as Braintree, Hyperwallet, or Simility. Note that Braintree is an excellent payment platform in its own right. Vanilla PayPal doesn’t appear to have quite that level of comprehensive developer support, but you will get some easy-to-follow tutorials for getting things up and running as well as a JavaScript SDK.

I’d put Authorize.Net’s developer tools roughly on par with PayPal’s, but they’ve been at this level for longer. The tutorials and forums feel a little more “mature” and well-traveled (if that makes any sense). The guides are easy to parse, with convenient links to both API references and thorough developer guides. Authorize.Net does provide SDKs for convenience, but they’re entirely optional.

Loans

Maybe this isn’t a fair comparison for Authorize.Net, but there are advantages that come with using a platform such as PayPal’s, and that’s having access to PayPal’s enormous service infrastructure. This happens to include financing.

PayPal Working Capital allows you to borrow up to 35% of your annual PayPal sales. This functions a bit like a merchant cash advance, with PayPal holding back a percentage of your daily PayPal sales until it’s recouped its money, plus a flat fee of x1.01-x1.58 the amount borrowed. As far as rates go, there’s a huge range, so make sure you know what kind of deal you’re getting from PayPal before you accept it.

Authorize.Net VS PayPal Fees

Features are well and good, but you’re probably wondering what all of this will cost you, so let’s take a look at Authorize.Net’s fees vs. PayPal’s. The fee structure for these services can be a little complex. In the case of PayPal, it’s an expandable service with a lot of optional costs. In the case of Authorize.Net, it’s frequently bundled with other services.

PayPal’s Base Fees

• Online Transactions: 2.9% + $0.30
• Online Invoices: 2.9% + $0.30
• POS/mPOS (PayPal Here) Transactions: 2.7%
• Keyed Entry Transactions: 3.5% + $0.15

PayPal also offers a nonprofit discount for online payment processing (2.2% + $0.30) and a micropayment option for low-value transactions (5% + $0.05). High-volume merchants might also qualify for special rates if they go through one of PayPal’s partners, such as Vend.

If you’re doing business internationally, PayPal charges a minimum of 4.2% between any other combination of countries.

PayPal charges an additional $30/month for its Payments Pro service, which includes a hosted payment page and a virtual terminal. Recurring billing is another $10/month fee. Both of these are optional costs. For a more detailed look at PayPal’s payment processing, check out our PayPal review and our article, How Much Does PayPal Charge? The Complete Guide to PayPal Credit Card Processing Fees.

Authorize.Net’s Base Fees

• Payment Gateway Only
  • $25/month gateway fee
  • Flat $0.10 transaction processing fee (on top of whatever your merchant account provider charges)
  • $0.10 daily batch fee
• Payment Gateway + Merchant Account
  • $25/month gateway fee
  • 2.9% + $0.30 per-transaction processing fee

Additionally, there’s a $25 fee on chargebacks and a 1.5% charge on international transactions. As mentioned above, you can also add echeck processing at 0.75% per transaction.

Here’s the thing, though: Your best bet for getting Authorize.Net usually isn’t going directly to the service itself. For example, if you get Authorize.Net through Payment Depot, you’ll essentially be able to waive Authorize.Net’s monthly fee (you still have to pay Payment Depot’s, but why pay both?).

Ease Of Use

PayPal and Authorize.Net should both be pretty easy for merchants to use.

PayPal is designed with usability foremost in mind — there’s little setup, and you can tweak many of its settings and features without writing a line of code. That said, if you do want to write a line of code or two, PayPal offers some pretty solid developer tools and guides for using them.

Authorize.Net is likewise easy to use so long as you aren’t trying to do anything fancy with it. However, if you are a fancy-thing-doer, you’ll appreciate the SDKs, forums, and guides the payment gateway offers.

Customer Service & Support

Customer support is one of those areas defined largely by individual experience. That said, certain trends emerge over time. One such trend is that PayPal’s customer service — consisting of phone support during business hours, email, online resources, and social media — is inconsistent and frequently unhelpful. This isn’t a trait you want in a third-party processor, where your account could wind up frozen with little warning.

On the other hand, Authorize.Net has developed a reputation for excellent customer service. You’ll get phone support 24 hours a day, minus major holidays, as well as great online resources, an email ticketing system, and social media.

User Reviews & Complaints

Looking at user responses to both services can help you get a broader perspective of what to expect when you plug them into your business.

As you might expect, customers appreciate PayPal’s easy setup, the speed with which PayPal gets customers their money, the transparent pricing model, and the sheer breadth of services available under a single roof. They were far less fond of the withheld funds and account freezes and terminations, all of which seem to be endemic to the third-party processing model.

Over in the land of Authorize.Net, customers generally appreciate the excellent customer service, support for recurring billing, and user-friendly API. On the other hand, the company’s monthly billing system has led to no shortage of confusion regarding when accounts are active or not. Authorize.Net also has a reputation for being difficult to migrate data from.

Integrations

Between third-party support and APIs, you shouldn’t have any trouble finding the integrations you want for either service. Most of the major customer management and popular email marketing services play nice with these services. That includes the ever-popular QuickBooks and ubiquitous Mailchimp.

The ease of integration will, of course, vary from program to program. In general, however, you can expect a more “plug-and-play” experience with larger, popular services than with niche ones, which may require some do-it-yourself API calls.

The Key Differences Between Authorize.Net & PayPal

We’re in the home stretch here, so let’s recap the key differences between Authorize.Net and PayPal.

1. Gateway VS Full-Stack: PayPal aims to be a complete service for low-volume businesses. Authorize.Net is specifically a payment gateway, even if you can get a merchant account through one of its partners.
2. The Breadth Of Services: PayPal’s ecosystem is enormous (loans, invoicing, digital wallet, etc.). Authorize.Net’s is more niche.
3. ACH Support: Authorize.Net has it; PayPal does not.
4. Fraud Detection: One of Authorize.Net’s specialties. PayPal, while secure, doesn’t have as robust or deep fraud detection services.

Which Is Best For My Business Needs?

Authorize.Net and PayPal are ultimately different services aimed at slightly different markets. Which category do you fall into?

Choose Authorize.Net If…

• If you have a merchant account that you’re happy with and need to add eCommerce support
• Need to take recurring payments
• It’s included in a bundle with a payment processor you like
• You need enhanced fraud protection

Choose PayPal If…

• You’re a low-volume merchant
• You’re looking for an expandable, easy-to-use service
• You’re not in a high-risk industry
• You want to make use of PayPal’s ecosystem

Comparing Authorize.Net VS PayPal: The Final Verdict

So which one comes out ahead in the Authorize.Net vs. PayPal battle royale? It depends on what your business needs. Authorize.Net and PayPal are two pretty different services with different target audiences in mind. Small businesses that aren’t considered high-risk will probably be better served by PayPal so long as their sales volume remains low. Businesses with more complex needs — the ones that might even care what a payment gateway is — may find Authorize.Net a more malleable option for their specific needs. In this case, they may want to consider going through a reseller such as Payment Depot or CDGcommerce to get the best rate possible.