PayPal VS Stripe

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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!

Products and Services:

Winner: Stripe

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:

Winner: Stripe

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 sales@stripe.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).

Added Fees

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:

ServicePayPalStripe
Take payments from your site$5/monthFree
Accept American ExpressSame rate as other cards for Standard; 3.5% for Pro or AdvancedSame rate as other cards
Chargebacks$20$15
RefundsTransaction feeFree
International cards1% to accept funds, *plus 2.5% currency conversion feeFree to accept funds,*plus 2% currency conversion fee
Card authorization$0.30Free

*Fee only applies if you charge in USD.

Ease of Use:

Winner: PayPal

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:

Winner: Tie

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:

Winner: Tie

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:

Winner: PayPal

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
  • Facebook

Stripe, on the other hand, offers far fewer ways to receive support. These include:

  • Email-based support
  • Support through social media accounts
  • Knowledgebase
  • 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:

Winner: Tie

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:

Winner: Tie

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

Final Verdict:

Winner: Tie

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?

Melissa Johnson

Melissa Johnson

Melissa Johnson is an independent writer and editor who loves e-commerce, digital marketing, technology, and social media. Once upon a time, she earned a journalism degree, but she went on to discover that she could work from home, researching, editing, and writing about the things she found most interesting. When she's not tied to her laptop, Melissa can usually be found in the kitchen, reading a book, or doing something of the nerdy persuasion.
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29 Comments

    SenegalStyle

    Great info! U left off whether Stripe has an atm card with an electronic chip that will work in the rest of the world (paypal doesn’t) and that’s the one thing I wanted to know. Earlier this year I was unable to receive funds from paypal thru the atm outside of America because paypal, being CHEAP doesn’t want to send their customers, millions I’m thinking, new cards… that’s expensive. I get it but they make a lot of money and it’s the cost of doing business.

    Somehow they got yet ANOTHER extension from the EU banking systems on top of the one Prez Obama gave them the year before. I don’t know when they will finally join the rest of the world but if Apple is using Stripe, I assume they have international Mastercard/Visa.

    I’ll check it out on their site directly. Thanks for the info about Stripe vs Paypal. It’s good to know that the bottom line is 6 of 1 half a dozen of the other!

    Jessica Dinsmore

    Thanks for your feedback! Unfortunately stripe does not yet offer an EMV chip card.

    Bradford Cathey

    I’m a developer (client and server side) and have dealt a fair amount with both PayPal and Stripe support. My experience: PayPal is frustratingly slow and uninformed, not for developers; Stripe is fast, helpful, and knowledgeable. We bailed on PayPal because I couldn’t serve my clients with the lousy support I was getting. We are Stripe all the way.

    That said, you are correct: Stripe requires programming knowledge to get up an running. I’m experienced and had trouble with my first one (though Stripe support was amazing).

    Alki

    Very nice article, exactly what I needed.
    One issue I had: I’m in the US and selling to companies in Europe (not individuals) is a nightmare of taxes and paperwork. Paypal and Stripe can’t help there. I found one company that does: Paddle. They charge more (5%+50c), but they take into account all taxes in Europe and Japan.

    Uzer

    can Strip suppport Split payment? is there supported in Portugal and brazil.?

    Chloe Bahal

    Hi Uzer,

    Stripe should be able to support split payments but access in Portugal and Brazil are still in Beta testing, but you can be notified when it launches here.

    Uzer

    can Sprite Support Split payment? is there supported in brazil and portugal?

    Chloe Bahal

    Yes, Stripe can support split payments but unfortunately at this time, access in Brazil and Portugal have not yet released and are still in beta testing.

    imogen

    This review does not cover a huge issue for EU customers – data protection…
    In general people in the EU do not trust the poor data protection in the US and the reselling of information that happens as a result. Paypal has been forced by EU law to warn all customers that if they use Paypal, their data is being transferred to the US. This leads to cart abandonment. I have a query into Stripe at the moment because even if you turn off Paypal on Shopify, you still get that warning. Not sure if it’s a Shopify or a Stripe function as yet but I’ll let you know if I find out.

    Kristen

    Hi Imogen, did you ever find out how stripe handles the EU issue?

    Tom Rubens

    Thank you so much for this review, Shannon! This was exactly what I was looking for, and I have no need to read another review. You nailed it!

    Rikke

    Thanks Shannon for the article, great explanation! But isn’t it that most of the merchants are working on ecommerce features and simplified setup? I was thinking about these two options before, but since my business is in Europe, I have chosen Cardinity (https://cardinity.com/), not so well know brand as PayPal or Stripe, but service is good and price is lower. Sometimes it’s worth trying something new, not only most popular brands.

    Anna

    Very informative Shannon. Thank you. Is it true that Stripe has the option of installment payments, while PayPal doesn’t. In other words, if I am offering my clients 2 options, pay now in full, or pay in 3 installments, then Stripe has an automated payment option for installments and PayPal cannot. That would bet an advantage for Stripe. Is that true?

    Andrew Walsh

    Hi Shannon… thanks for an informative article – great job!

    Lin

    Can anyone tell me if Stripe will allow payments via paypal adaptive inside their system?

    Judy

    Hello, can you tell me if Stripe allows you to manually enter credit cards in the system? It is a pain the booty with PayPal

    Chloe Bahal

    Hi Judy,

    Yes, you can manually enter credit card information with Stripe: https://support.stripe.com/questions/phone-orders

    Allan

    Thank you for the comprehensive article. The information is very helpful for sellers who are undecided which payment method to choose between the two.

    Do you have any comparison of these two payment methods from the buyers’ experience? If a buyer is presented with these two payment options during checkout, which payment method would they prefer? What would the pie chart split between the two look like?

    Tom DeSimone

    Hi Allan,

    It depends on how the business chooses to integrate the payment service – whether the merchant chooses to use the hosted payment page option or integrate with some other shopping cart or use one of the other options offered by both PayPal and Stripe. With both services, the merchant can have a lot of control over the appearance if they want to. But in terms of the easiest most basic integration options, I think Stripe tends be a little cleaner. Although of course PayPal’s payment processing makes it easier to accept PayPal payments.

    Indrajeet

    Thanks Shannon !! really the best understanding I got through your precious arrangement of words.

    Shannon George

    Terrific, thanks for reading! Glad I could be of help.

    Jason

    Thanks Shannon – great write up!

    I have a question: I’ve narrowed my options between these two processors, but was wondering about Paypal’s tolerance for Marketplace websites. I’ve heard that, in general, payment processors don’t like Marketplaces because the site owner and the providers of goods/services are not the same and it is believed that it leads to more disputes/chargebacks/etc. Stripe Connect has specifically stated that it is made for this type of business, but I haven’t seen anything like that for Paypal Payments Pro (PPP). I’m hesitant to use PPP if there is a chance that they either won’t approve me or will close my account down at some point for this. Any insight into how Paypal views this?

    Tom DeSimone

    Hi Jason,

    You are correct. Most marketplace businesses bring more risk to the table than conventional online sales. This is true no matter which company does the processing. With higher risk comes a greater chance of having funds withheld or, worst-case, the account terminated.

    It’s difficult to say whether Stripe or PayPal would be more prone to account instability for marketplaces. I’d say that PayPal (especially via PPP) is more stable overall, but I honestly haven’t heard from any marketplace-style sites using that platform. Have you considered Braintree? It’s a company owned by PayPal that offers marketplace solutions. It might be a good alternative for you.

    Jason

    Thanks for the response, Tom.

    I actually called PayPal today and asked them flat out how they view marketplace sites and they said that their PPP product is not allowed to be used with that type of site. So, that is a no go. However, their Adaptive Payments product does allow it – unfortunately, they redirect to the PayPal domain during checkout which I don’t want.

    Stripe Connect is my leading option right now as it is specifically set up for marketplace sites. Good call on Braintree as well – I stumbled upon them earlier, but haven’t really researched what they offer, but they appear to be focused on marketplace sites as well. So, that seems like another solid option.

    Nathan Hanlon

    Jason, I’d love to hear who you went with (Stripe Connect (standalone), Braintree or PayPal adaptive payments).

    I’m looking into the same thing right now. I might be off with the following notes, please feel free (anyone) to advise on comments or your experience with these platforms.

    Stripe Connect (Standalone accounts, not the managed accounts):
    Pros: merchants communicate with Stripe for issues, my app is not routed anywhere for payments (seamless, great UX), split payments for my fee. I don’t have any web, cart, sales.
    Cons: no credit card verification, very limited merchant support.

    PayPal adaptive:
    Pros: Merchant support, verified customers (using a pay pal account), split payments for my fee.
    Cons: my app is routed to PalPal for verification & payments (not ideal), expensive due to monthly fees for me and my merchants.

    PalPal Braintree:
    Cons: I have to manage all merchants for refunds. deal killer…..

    End.

    Oomair

    I talked to Braintree and they only support marketplaces that are focused one aspect

    For example if your website is a marketplace where sellers can sell electronics then you have to make sure all sellers are selling electronics, cannot sell other categories of items.

    The best choice right now for a marketplace website is to use stripe connect standalone accounts, that way sellers are responsible for any chargebacks and bot the platform. I’m sure as long as any seller follows the stripe tos correctly, they wont get shutdown for no reason

    A lot of complaints you see about stripe are from shopify users who do drop shipping when drop shipping is clearly not allowed according to stripe TOS, so shopify is really misleading a lot of merchants by marketing how great drop shipping is, but also don’t tell merchants that it is a high risk business according to stripe

    Umang

    Very useful post!

    Sylvain

    Thanks Shannon, really usefull.

    Gina

    Thank you, Shannon! The clearest breakdown I’ve found.

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