PayPal VS Stripe
PayPal and Stripe are tools to handle online payment processing, but they’re also oh-so-much more. With its slew of interconnected products ranging from mobile payments to financing services, I think it’s safe to say that PayPal is a household name. And Stripe, while more of a “behind the scenes” processor whose name customers don’t necessarily recognize, might just be a dark horse in the running to become the new leader in online payments – the five-year-old online payment startup was valued at $3.5 billion after its latest funding round and also recently became an Apple Pay preferred vendor. But maybe I’m getting ahead of myself.
First, allow me to explain that neither PayPal nor Stripe offers the cheapest payment processing rates around. For a basic payment processor with lower rates, you’d be better off getting a regular merchant account. Rather, PayPal and Stripe’s strengths lie in their myriad ecommerce features and simplified setup that makes it easy for your business to sell products or services online (and also from your brick-and-mortar store, if you want), without a merchant account.
In case you’re not sure which of these online payment processors is right for your business, I’ve put together this handy guide comparing the two services across their most important features. If you have something to add or your experience differs from my conclusions, feel free to holler at me in the comments!
Table of Contents
Products and Services:
PayPal offers a ton of services, but the main one is its payment processing service, which allows merchants to accept funds online. Customers do not have to have a PayPal account to send you funds through PayPal; they can pay you with their credit card if they prefer.
The three main types of accounts PayPal offers are:
- PayPal Payments Standard.
- PayPal Payments Advanced
- PayPal Payments Pro
The main difference between Advanced/Pro accounts and the free Standard account is that Advanced and Pro accounts integrate natively to your website, meaning customers aren’t redirected to PayPal when they go to pay. Funds are received within one business day. You can find out more about these different plans here.
PayPal’s other services include:
- PayPal Here – PayPal’s mobile payment app
- PayFlow Payment Gateway
- Online invoicing
- Virtual terminal
- Digital Goods selling options – Subscriptions, micropayments, etc.
- BillMeLater – Provide no-interest financing to customers
So, here’s the thing: Stripe is just as feature-packed a payment platform as PayPal, and also offers developer tools. These APIs (application programming interfaces) allow developers to easily build on the basic Stripe framework. What’s more is these additional features aren’t part of a separate service and fee scheme the way PayPal’s are; with Stripe, you pay one flat rate for everything. Your options are only limited by the abilities of your developer.
Here are Stripe’s main features:
- Payment processing that incorporates natively into your site; customers aren’t directed off-site to pay as they are with PayPal’s Standard account
- Two-day payouts
- Stripe checkout (saves developers from having to design payment flows and forms from scratch)
- Mobile payment documentation; you can build your own app with Apple Pay enabled
- Subscription solutions
- Advanced reporting
- Platform-building tools
- Coupons and free trials
- Marketplace solutions
- … and much more (according to Stripe, it has “over 100 features” – and I believe it!)
Another cool thing is that after PayPal’s talks with Apple fell apart, Stripe became an Apple Pay preferred partner, meaning merchants with Stripe accounts can now accept Apple Pay mobile payments (while PayPal … not so much. They have inked a deal with Samsung to integrate its payment system with the new Galaxy S5, though).
Anyway, although both PayPal and Stripe offer excellent and similar online payment services, Stripe offers more flexibility and options for one price, thanks mostly to its API architecture.
Fees and Rates:
Both PayPal and Stripe charge merchants the same per-transaction processing fee, but Stripe is a marginally better deal because it doesn’t charge a monthly fee (PayPal charges a monthly fee for its Advanced and Pro Versions), nor does it charge extra fees for things like accepting international cards and American Express cards – whereas PayPal does.
In the past, PayPal offered lower rates for higher-volume merchants who processed more than $3,000 each month. As of October 2015, PayPal’s standard transaction fee, which is the same regardless of which plan you are on (Standard, Advanced, or Pro), is now 2.9% + $0.30 per transaction. (Before October 2015, you could get a 2.5% rate if you processed at least $3,000 monthly and a $2.2% rate if you processed more than $10,000.)
PayPal also charges an additional $5 and $30 a month for PayPal Payments Advanced and PayPal Payments Pro respectively. The main advantages of using Advanced or Pro is that customers are not redirected to PayPal’s website; they can pay directly from your site. You can find more information on PayPal’s pricing here.
Stripe offers the same standard fee for all users: 2.9% + $0.30. If you process more than $80,000 or more than 10,000 transactions per month, then you might qualify for a slightly lower fee; ask by sending an email to email@example.com. Stripe does not charge a monthly fee and for the same price as PayPal, it includes a variety of developer tools for adding marketplace solutions and more. Stripe also natively incorporates into your website (as mentioned, PayPal charges a monthly fee for this option).
PayPal charges more “fine-print” fees than Stripe. These fees are annoying and could make your monthly PayPal bill rather unpredictable. Here’s the fee breakdown for both PayPal and Stripe:
|Take payments from your site||$5/month||Free|
|Accept American Express||Same rate as other cards for Standard; 3.5% for Pro or Advanced||Same rate as other cards|
|International cards||1% to accept funds, *plus 2.5% currency conversion fee||Free to accept funds,*plus 2% currency conversion fee|
*Fee only applies if you charge in USD.
Ease of Use:
Importantly, both Stripe and PayPal are easy for customers to use and make payments with. But for webmasters, the experience of setting up Stripe and PayPal differs considerably. Seeing as Stripe was built for developers, most merchants who lack developing experience find PayPal easier to integrate into their website at the most basic level. If you aren’t a developer, you’ll probably have to hire one if you want to use Stripe.
Here’s an example: You’ve probably seen PayPal’s ubiquitous “Buy it now” button, which allows you to order and pay for items on a number of sites. In order to integrate a “Buy it now” button into your site, all you need to do is copy the corresponding code from PayPal’s website and paste it into your own site. Stripe has a similar “Pay with card” option, but it requires you as the merchant/developer to develop the necessary coding framework.
Now, if you have developing experience (which I admittedly most definitely do not), I understand that Stripe is the better choice. For setting up the advanced integration of payment processing into your website – i.e., for merchants who want to host the entire checkout process onsite and bypass the whole “Buy it now” or “Pay with card” option – developers praise Stripe over PayPal.
Contract Length and Early Termination Fee:
Neither PayPal nor Stripe requires a contract (both services are pay-as-you-go), and that means no early termination fee for either service either. Yay!
Sales and Advertising Transparency:
Both PayPal and Strike are very upfront about their fees and services. Neither company employs any schemes or gimmicks that will catch you by surprise when you see your bill. As mentioned, PayPal’s fees can be a little trickier to wrap your mind around, but they are all clearly laid out on the firm’s website so you certainly couldn’t call them “hidden fees.” Both services are also pretty well known, so they don’t need to spam the internet with annoying advertising.
Customer Service and Technical Support:
PayPal offers several different ways to reach them. These include:
Phone support – Offered Mon–Fri 4AM – 10PM PST, Sat/Sun 6AM – 8PM PST. However, word on the street (see “Negatve Reviews and Complaints”) is that the quality of PayPal’s phone support is inconsistent.
- Twitter – The @AskPayPal account fields service and support questions Mon–Fri 9 AM – 5PM CST
Stripe, on the other hand, offers far fewer ways to receive support. These include:
- Email-based support
- Support through social media accounts
- Freenode-based chat support (#stripe)
Stripe’s support is decent, sure, but PayPal simply has more support channels. Even if the quality isn’t terrific, the importance of having live phone support can’t be understated.
Negative Reviews and Complaints:
Both services are generally liked, but it is not difficult to find complaints online. Here are some of the main complaints about PayPal:
- Withheld funds, freezing of accounts, and termination of accounts
- High transaction fees (compared to traditional payment processors)
- Inconsistent phone support
- Limited seller protection
Customers also complain about unjustified account cancellations and subpar customer service. Here are some common Stripe gripes (Hey, that rhymed!):
- Terminated accounts, often with funds inside
- Unresponsive customer service
- Frequent chargebacks
Both PayPal and Stripe have a pretty cautious approach when it comes to accepting online payments, which could result in account freezes and chargebacks for some merchants. If you think you might be a high-risk merchant, you should probably consider going with a high-risk processor such as Durango Merchant Services (DMS) instead of PayPal or Stripe.
You can also check out this resource on how to avoid merchant holds, freezes, and terminations.
Positive Reviews and Testimonials:
Stripe has a lot of fans, and its list of high-profile users like reddit, Mashable, Foursquare, Squarespace and Shopify speaks for itself. With Stripe being such a new service, user reviews are currently scarce. Still, I managed to dig up a few of them, and most of these were positively glowing. Here’s what people like about Stripe:
- Quick and easy signup
- No “fine print” fees
- Nice API to work with
- All services included for same price
Since PayPal has been around since 1998, countless reviews have been written about the company, both positive and negative. As with Stripe, users also appreciate PayPal’s straightforward pricing structure (which admittedly isn’t as straightforward as Stripe’s) and the ease with which you can start service.
- Easy setup
- Widely accepted/trusted payment form
- Offers multiple products/services besides payment processing
- Transparent pricing
Try as I did, I just couldn’t determine a definitive “winner” when evaluating PayPal and Stripe side-by-side. Their services and prices are quite similar, but Stripe offers the advantage of its numerous developer tools to build the perfect store with all the features you need, for one flat price. On the other hand, PayPal has live phone support, offers lower transaction rates for higher-volume merchants, and is easier for basic (non-developer) users to get started with.
Ultimately, the choice depends on your needs. If you have developing experience and want to build a customized online storefront or an Apple Pay-enabled mobile payment app, Stripe is the better choice. If you’re a non-developer who doesn’t need many advanced features and doesn’t mind customers being directed to PayPal’s site (PayPal is a pretty trusted name, after all), you’ll probably save time and money with PayPal.
Keep in mind that you can always add one of these processors as a payment option in addition to your current processor, so as to allow customers to pay with PayPal or Stripe/Apple Pay. Neither service requires you to sign a contract, which means you can try out one of these services (or both services) without having to make a commitment. And that, my friend, is pretty cool.
What are your thoughts on Stripe vs PayPal?