Stripe VS PayPal: How to Choose The Right Payment Processor For Your Online Business
|Products & Services||Excellent||Excellent|
|Pricing||2.9% + $0.30||2.9% + $0.30|
|Sales & Advertising Transparency||Excellent||Excellent|
Stripe and PayPal are tools you can use to handle online payment processing, but they’re also 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 with a brand name customers don’t necessarily recognize — also has a long list of very popular clients and partners. Both are popular ways of processing payments for eCommerce; if you’ve bought something online, there’s a good chance your payment went through one of the two.
So in the Stripe vs. PayPal debate, which has the advantage?
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Stripe VS PayPal: Quick Comparison
Stripe and PayPal are online credit card processors with similar pricing. Both charge 2.9% + $0.30 per online transaction. Both support invoicing and recurring billing. PayPal is a trusted name and incredibly easy to use, but Stripe offers a deeper feature-set thanks to powerful developer tools.
Stripe is an all-in-one payment processor, combining a third-party payment processor’s functionality with that of a payment gateway. This is a take-it-or-leave-it scenario; you can’t purchase Stripe’s payment gateway or payment processing service independently. Though it is possible to use it for point of sale transactions, Stripe is almost entirely focused on eCommerce. To that end, it offers a powerful suite of developer tools for integrating Stripe’s payment features into your shopping cart or eCommerce site. With international transactions, Stripe provides robust support for numerous currencies and payment methods as well as other quality of life features that can help you navigate VATs and exchange rates.
Stripe’s developer-centric approach can’t be understated. While it is possible to utilize Stripe with third-party integrations that take the technical work off your hands, you’ll be missing out on a lot of what Stripe can do with the help of a software developer or even a competent coder.
Stripe’s pricing is fairly standard for card-not-present transactions — PayPal charges the same rate. The only really significant black mark on Stripe, and it’s one shared by PayPal, is that as a third-party processor, Stripe’s account stability leaves much to be desired.
PayPal is easily one of the biggest brands in eCommerce, with services ranging from digital wallets to loans. It also offers merchants payment processing through its recently rebranded PayPal for Business (now PayPal Commerce). PayPal Commerce is primarily focused on eCommerce but can be used to take POS payments through PayPal Here, the brand’s mobile processing app, or through a third-party partner.
While PayPal generally has a reputation for being user-friendly, the service does have a pretty robust set of developer tools, particularly in its latest incarnation. That said, PayPal Commerce shouldn’t be confused with another PayPal service, Braintree, which is more developer-centric (as well as offering individual merchant accounts rather than third-party processing).
Like Stripe, PayPal suffers from account holds and freezes, which are par for the course for aggregators. As I noted above, PayPal charges the same flat rate as Stripe for basic payments.
Unlike Stripe, it is possible to get payment gateway services from PayPal independent of payment processing. Called Payflow, PayPal’s payment gateway is available for free as a checkout hosted by PayPal or a fully customizable service for $25/month.
PayPal and Stripe fill nearly identical niches, so it should be no surprise that their feature-sets closely resemble each other. Their bread and butter is online payment processing, and both competently deliver the goods at the same flat-rate processing fee of 2.9% + $0.30. Both offer strong support for international commerce and the ability to customize your payment processes through code. You may have even noticed in the chart at the top of this article that we rated them the same in each category (trust me, this is as frustrating for me as it is for you).
That said, the devil is in the details. These aren’t identical services going under a different name, but two subtlely different ways to accomplish many of the same goals. Let’s take a look at some of the differences.
There are three service plans for PayPal:
- Checkout: PayPal Checkout is a supplemental option 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 Standard 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 your 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.
Stripe doesn’t have “service plans” the way PayPal does. Your access to Stripe’s payment processing features remains the same regardless of which other features and tools you choose to use.
Stripe’s online payment processing tools include:
- Support for credit cards, ACH, and localized payment methods
- Support for online and in-app checkouts
- A pre-built embeddable checkout form (Checkout), plus the ability to either build a form from scratch or use pre-built components (Elements)
- Invoicing, recurring billing, and subscription tools
Instead, Stripe offers numerous add-ons you can tack onto your service à la carte, such as Stripe Billing, which includes Stripe’s invoicing, recurring billing, and subscription tools.
Additional noteworthy features include:
- Stripe Radar: Advanced fraud management tools
- Stripe Sigma: SQL-based business intelligence
- Stripe Connect: Marketplace and platform-building tools
- Stripe Issuing: Generate physical and virtual cards for purposes such as employee expense accounts
Point Of Sale
Both Stripe and PayPal aren’t really known for in-person, card-present transactions. That said, if your business is mostly online with some supplemental point of sale retail, they both offer the ability to take those types of payments.
Of the two, PayPal’s service is the more well-developed via the PayPal Here service. It’s far from fully-featured, but it’s robust enough to allow you to take the occasional card-present transaction when you need to reliably. 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 this is a lot more limited than what a company like Square offers at point of sale.
Stripe now has a beta for what it calls Stripe Terminal, an SDK that allows you to build Stripe’s payment processing into a point of sale app, either on a mobile platform or on the web. It comes with pre-certified hardware and additional features to make the integration process as simple as possible. Please keep in mind that this is not a ready-to-go POS or mPOS and will require some coding to bring online. Stripe’s card-present rate is 2.7% + $0.05, making it marginally more expensive than PayPal Here.
If you’re making your decision based on POS capabilities alone — which would seem unlikely with these two companies, but who am I to judge — PayPal is the pretty clear choice here. If you want to process with Stripe, but you also want an easy-to-use payments platform that doesn’t require a developer, I would recommend looking at Shopify (and, by extension, Shopify Payments, which is just a white-label version of Stripe). However, you do get an eCommerce integration, the ability to create buy buttons, a virtual terminal, the ability to send invoices, and a mobile/tablet-based POS with a free chip card reader. So basically, everything PayPal offers, including a free credit card reader. For more information, check out our complete Shopify review.
If you rely on Automated Clearing House payments to process echecks and recurring payments, then your choice just got a lot simpler: Stripe offers ACH transactions, PayPal Commerce does not. If you want ACH payment capabilities through a PayPal branded product, you’ll have to use Braintree.
Stripe accepts ACH transactions for just 0.8% per transfer, capped at $5.
Both Stripe and PayPal feature robust international support. You can read about the difference in fees in the Fees & Rates section below. Here, I want to look at what kind of support the services currently provide.
Stripe supports a variety of payment methods and over 135 currencies. Stripe’s supported payment methods are broken down into two categories: universal and local. Local payment types are only available in the regions in which they are most popular:
- SEPA Direct Debit
There are too many currencies supported by Stripe to list them here, but you can find them on Stripe’s website. Additionally, Stripe gives businesses the ability to avoid exchange fees by specifying “presentment” currencies when you set Stripe up. Stripe will accumulate separate balances for each currency you’re paid with, which it can then route to different bank accounts. If your presentment currency differs from the settlement currency, Stripe will automatically make the conversion for you, but this comes at an additional 1% fee. As is the case with just about all Stripe’s services, you’ll probably need to do some coding to set this up.
PayPal handles things a little differently. To accept international payments, you simply toggle the feature 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:
Which is better? It depends on how much coding you’re willing to do. Stripe allows for an extraordinary amount of precise control over how you want your international payments handled. PayPal makes it pretty easy so long as you don’t need to do anything fancy. The edge goes to Stripe in terms of potential and to PayPal for ease of use.
Time To Funding
But what about funding times? Stripe is in line with industry standards in that most US-based merchants will see funds deposited in their bank account within two business days. In other countries, your payout time may be a bit longer. However, PayPal offers its merchants near-instant funding by depositing funds in their PayPal wallets, which can be spent online. Merchants who also have the PayPal business debit card can spend their PayPal balance anywhere that accepts Mastercard. However, you can also send your PayPal funds to your bank within one to two business days or initiate an instant deposit for 1% of the transfer amount.
PCI Compliance & Security
Stripe handles PCI compliance for its merchants, which means no fees or additional work on your part. If you have the PayPal Standard plan, you’re automatically PCI compliant (and again, no extra fees). However, on the PayPal Payments Pro plan, you take on some of the burdens for ensuring PCI compliance. It won’t cost you more beyond the monthly plan; you’ll just have to put more work into it. PayPal gives you transparent redirects to help, and you must complete an annual self-assessment as well as quarterly scans.
Both Stripe and PayPal allow for programmatic customization, as is typical for most payment processors. That said, while PayPal Commerce’s developer tools are good, Stripe more or less IS its developer tools, assuming you aren’t using it through a white label service (such as Shopify).
Stripe’s API, on the other hand, is its major selling point. Stripe is a RESTful API that uses API keys to authenticate requests. Stripe provides official libraries for various programming languages and mobile platforms. You can code your features from scratch, follow one of the detailed guides, or clone an existing project to build off of.
Five years ago, it would have been strange to see a payment processor offering its customers loans, but it’s an increasingly common perk among the bigger platforms.
Both PayPal and Stripe offer loans, but PayPal’s lender infrastructure is older, more developed, and spread across a number of products, including PayPal Working Capital and Loanbuilder (Stripe’s service is called Stripe Capital). As Loanbuilder is autonomous from PayPal Commerce, let’s stick to comparing similar products: PayPal Working Capital and Stripe Capital.
Both of these services are available only to customers and are repaid through the processor keeping a percentage of your credit card sales until you’ve settled your account. In that way, they’re similar to a merchant cash advance. Neither PayPal nor Stripe offers much information about fees and rates, which is at odds with their otherwise transparent practices. PayPal does, however, disclose the maximum borrowing amount — up to 35% of your annual sales for a max of $300K.
Fees & Rates
Both Stripe and PayPal are expandable services, meaning there are a lot — and I do mean a lot — of optional features you can purchase to expand their functionality. But at their basic level, they have simple, predictable, flat-rate pricing.
In both cases, you’ll have no monthly fees, no monthly minimums, and no interchange costs to worry about. You pay one flat fee, 2.9% + $0.30, regardless of the type of card. That means, relative to other pricing schemes, you’ll probably pay a little less for processing Amex and a little more for processing Visa or Mastercard.
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 options 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.
Stripe’s Base Fees
Stripe’s payment processing costs have gotten a little more complicated, particularly for merchants who plan to take advantage of the complete range of Stripe’s tools, from recurring billing to business intelligence. However, you will not pay any monthly fees, monthly minimums, or any early termination fees to use Stripe’s service.
- Online Credit Card Transactions: 2.9% + $0.30
- ACH Transactions: 0.8% (capped at $5)
- Stripe Terminal (POS) Transactions: 2.7% + $0.5
- Billing: Stripe has broken its billing tools down into two tiers: Starter and Scale. The Starter plan for Billing is free for the first $1 million in recurring transactions. After that threshold, Stripe charges 0.4% per transaction, on top of processing costs. The Scale plan charges 0.7% per transaction. However, as a tradeoff, Stripe offers a discount on ACH credits and wire transfers as well as access to Stripe Sigma, which would be a separate charge on its own.
Check out our Stripe review and The Complete Guide To Stripe Pricing, Processing Fees & Costs for a complete look at what using Stripe’s additional tools will cost. Specifically, using Connect and Sigma (as well as Billing, which I covered above) will incur additional fees.
Stripe charges a 1% fee for processing international cards and an additional 1% fee if currency conversion is necessary.
Ease Of Use
Both Stripe and PayPal make it easy for customers to pay merchants. But as a merchant, your experience setting up your payment processing will be quite a bit different. While PayPal does offer tools for developers, it’s designed for almost anyone to be able to set up and start taking payments. If you’re happy with the basic functionality of PayPal, you can get by just fine with pasting a little bit of code into your website.
Stripe also integrates directly with third-party eCommerce platforms for easy setup (typically a plugin). You can certainly go this route — but if that’s all you’re after, I honestly don’t know why you wouldn’t choose PayPal or even Square, both of which offer identical pricing and comparable contract terms with better user experience. Beyond that, you’re going to have to get your hands dirty with code.
For the average merchant, PayPal Commerce will be significantly easier to use.
Customer Service & Technical Support
PayPal offers several ways to get answers to your questions. These include:
- Help Center: If you have a simple question about how PayPal works, PayPal’s knowledgebase is a good start. It covers commonly asked questions about accepting payments, issuing refunds, and other day-to-day management of your account.
- Community Forum: If you just want to know whether PayPal supports a feature, if others are experiencing the same problem, or to find a workaround to a missing feature, you can post in the PayPal Community Forum.
- Developer Center: PayPal’s dev documentation probably isn’t as thorough as Stripe’s, but it does exist, and it sounds like PayPal’s investing resources to improve.
- Email Support: If it’s not a pressing query, you can send an email to PayPal’s team. Note that you have to log into your account to be able to do this.
- Live Chat Support: This is relatively new, but now you can hop into a live chat with a PayPal customer service rep to get your questions answered. PayPal posts the estimated wait time before you join in, so you know how long you’ll have to wait.
- Phone Support: Word on the street (see User Reviews below) is that the quality of PayPal’s phone support is inconsistent at best, but you can reach a real live person if you need to.
- Social Media: The PayPal twitter account fields service and support questions Mon-Fri 9 AM-5 PM CST. You can’t post to the PayPal Facebook page, but you can comment on posts and message PayPal directly if you have questions.
Stripe has changed its customer support options to include free 24/7 live support for all its merchants. This is a big deal because one of the most contentious issues with Stripe has been the inability to reach someone to talk to in real-time. You can still fall back on Stripe’s other help resources:
- Knowledgebase: Stripe’s knowledgebase covers the basics, but to be honest, I haven’t found it particularly helpful for information about features. That’s because most of the information is based on the documentation, instead.
- Developer Documentation: Stripe’s documentation is often the best place to learn more about what particular features can do, even if you aren’t a developer. This part of Stripe’s support is far more comprehensive than the knowledgebase, which isn’t all that surprising. Again, this is a developer-focused option, and Stripe’s invested its resources accordingly.
- Freenode-Based Chat Support (#stripe): Want to reach Stripe’s developers for a very technical question? The IRC chat is where you’ll find them.
- Live Chat Support: Stripe’s live chat support isn’t the same as the Freenode channel. When you log into your Stripe account and go to the Contact Us page, you can hop into a live chat with a support rep.
- Phone Support: You can request that Stripe call you back, rather than calling in and waiting on hold. I actually like this, though it’s pretty rare to see. Off the top of my head, the only other company I’ve seen take this approach is SquareTrade, the third-party electronics warranty company.
- Email Support: If your question isn’t urgent, send Stripe’s team an email. This has been the mainstay of Stripe’s support network for a long time.
- Social Media: There’s no dedicated Twitter support account like you see with PayPal and Square, but you can tweet Stripe or check with Stripe Status for outage notices and updates. You can also message the Facebook page.
Here’s the thing, though. Just because a company has multiple support channels and a phone number to call or even a Twitter support account doesn’t mean that the actual customer service is any good. While I am happy to see that both PayPal and Stripe are trying to make it easy for customers to reach them, we can’t overlook the fact that the quality of both companies’ customer service is dubious at best.
Both companies seem to struggle with providing a consistently strong customer service experience to their clients. Stripe’s phone support is a much-needed step forward for the company, but it hasn’t necessarily translated into better user reviews yet. Meanwhile, whether you have a great or poor customer service experience with PayPal seems like a coin flip; there appears to be a considerable discrepancy between reps.
All in all, even though there are some differences, PayPal and Stripe are pretty evenly matched in the quality of customer support and the variety of customer support.
Both Stripe and PayPal have an enormous number of integrations should you want to expand their functionality, ranging from shopping carts to accounting software to email marketing services. Unless there are specific brands you’re looking for that are only supported by one of these services, you shouldn’t have much trouble finding a tool that performs the task you want it to do or to make an API call that pulls the information you need into your program of choice.
The one point of difference I’d draw attention to here, however, is that, in the case of Stripe, you’re also presented with options for programs that integrate Stripe. These are mainly aimed at people who want to use Stripe but don’t want to get a computer science degree to implement it.
User Reviews & Complaints
With Stripe and PayPal, the two major complaints (from merchants, not consumers) are identical:
- Withheld funds, freezing of accounts, and termination of accounts
- Inconsistent or unresponsive phone support
Both Stripe and PayPal have a pretty cautious approach to accepting online payments, which could result in account freezes and chargebacks for some merchants. That’s because they’re both third-party processors. As I mentioned before, it’s fairly easy to create an account. As a trade-off, the minimal underwriting means you’re at greater risk of a sudden hold or termination. Unfortunately, that’s something you’ll have to deal with if you choose any third-party processor.
It’s kind of difficult to separate the complaints about held/terminated accounts from those about phone support since, more often than not, the customer service complaints are about not being able to resolve their account hold/termination. The problem is that customer support reps are rarely privy to what happened with a given account and can’t usually divulge anything even if they do know. This seems to be pretty standard across third-party processors. Unless one of them figures out a means of resolving these issues through customer service, this problem probably isn’t going away.
While there’s no bulletproof method, you can read our feature on how to avoid merchant holds, freezes, and terminations to try to prevent some of the more common pitfalls.
There is no shortage of positive reviews for both companies, however. They are popular services for a reason.
Let’s start with Stripe. Here’s what happy merchants say about the service:
- Quick and easy signup
- Nice API to work with
- Great documentation
- Good international support
Fans of PayPal’s merchant services generally have a few consistent comments concerning what they like:
- Easy setup
- Widely accepted/trusted payment form
- Offers multiple products/services besides payment processing
- Transparent pricing
Both companies tend toward very polarized user reviews, so take both extremes with a grain of salt.
The Key Differences Between Stripe & PayPal
While they are remarkably similar, let’s sum up some of the key differences between Stripe and PayPal Commerce.
- Ease of Use: If there’s one thing that really stands out between the services, it’s that PayPal is designed for ease of use. Stripe is not.
- Customizability: On the other hand, PayPal’s ease of use comes at the cost of potential. If you have a developer, you can fine-tune Stripe in ways you may not be able to with PayPal.
- ACH Support: Stripe has it, PayPal Commerce doesn’t.
- Point of Sale: It’s not either service’s forte, but PayPal offers more mature POS options and at a better processing rate.
- Digital Wallet: PayPal’s signature service is handy in its own right. Stripe doesn’t offer anything comparable.
Which Payment Processor Is Best For My Business Needs?
By now, you probably have a sense of which payment processor is better for you. Here’s our take:
Choose Stripe If …
- You own a business with complex and specific eCommerce needs
- You process ACH payments
- You have an in-house development team or are a developer yourself
Choose PayPal If …
- You want an easy-to-use solution for your eCommerce needs
- You want to make use of PayPal’s digital wallet ecosystem
- You do some card-present transactions
Comparing Stripe VS PayPal: Final Verdict
While the two services are very similar on the surface, they’re aimed at different types of customers, making it hard to make a blanket statement about which one is better. The truth is, PayPal will clearly be better for businesses with fairly simple or standard eCommerce needs. Though you don’t get a hosted payment page without a $30/month subscription, PayPal does have a high degree of consumer trust, so it’s less of a concern if PayPal redirects your customers to its site to complete the transaction. Keep in mind that you also get invoicing, a free mPOS app, customizable buy buttons, and more.
On the other hand, if you have coding experience (or someone on your payroll with the requisite skills) and want to build a customized online storefront or a complex platform for a SaaS subscription product, Stripe is the better choice. It’s an incredibly powerful and feature-rich platform. PayPal also offers developer tools, but they aren’t as robust or flexible as what Stripe has. Still, if you like everything else PayPal offers, the developer tools should prove adequate.
Keep in mind that you aren’t just looking for a way to take payments online. Pretty much any service out there can do that. Focus on the features you need, not just now but in the future. An mPOS, invoicing, flexible checkouts, subscriptions — whatever will help you run your business more easily.
What are your thoughts on Stripe vs. PayPal? Have you tried both services? Which did you opt for? We love to hear from readers, so please leave us your comments!