PayPal VS Stripe: How to Choose The Right Payment Processor For Your Online Business
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|Tie||Fees & Rates||Tie|
|✓||Ease Of Use|
|Tie||Contract Length & Cancellation||Tie|
|Tie||Sales & Advertising Transparency||Tie|
|Tie||Customer Service & Technical Support||Tie|
PayPal and Stripe 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 PayPal vs. Stripe debate, which has the advantage?
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PayPal VS Stripe: Quick Comparison
PayPal and Stripe 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.
Products & Services
PayPal Features & Services
PayPal’s core offering has always been its payment processing, allowing anyone to make a payment to a merchant using their PayPal balance or a credit or debit card. But these days, merchants who use PayPal get access to a variety of supplemental services that allow them to go beyond selling on eBay.
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 are integrating 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 Features & Services
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 build a form from scratch or using pre-built components (Elements).
- Invoicing, recurring billing, and subscription tools
Technically speaking, Stripe’s invoicing, recurring billing, and subscription tools all fall under the auspices of Stripe Billing, one of the supplemental services that will potentially incur additional charges.
Stripe now has a beta for what it calls Stripe Terminal, which is 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.
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
I need to point out that, generally speaking, you need a developer to even begin using these tools. They aren’t ready-made for someone without coding experience the way PayPal’s tools are. 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.
Comparing Stripe VS PayPal
So these are two very different platforms. But I do want to draw your attention to a couple of things they have in common: PCI compliance and reporting.
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 as well (and again, no extra fees). However, on the PayPal Payments Pro plan, you do 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.
You also get comprehensive reports from both PayPal and Stripe. PayPal’s reports are fairly advanced (and it’s a long list), but they are not customizable. At least not like Stripe’s reports. With Sigma, you’re not just selecting from a pre-generated list of options — if you can ask a question using SQL, you can get a report. If you’re after some serious business data, it’s hard to ignore this tool, and it is competitively priced, even for small businesses.
I also want to mention that PayPal does have developer tools. If you do have a developer on hand and you like PayPal’s feature set, but you need a little bit of customization, that’s certainly a possibility. PayPal’s developer tools can be used for tweaking the checkout process, sending mass payouts, and even building marketplaces and platforms. However, PayPal’s platform isn’t even close to being on the same level as Stripe’s developer tools. When I say Stripe is the gold standard, it’s because this company truly has set the bar for how all other payment processing platforms go about building their APIs and documentation.
At the end of the day, there’s a lot more “product” in Stripe; it’s just a matter of whether you have the skills and inclination to put them to use.
Fees & Rates
PayPal’s pricing is, for the most part, pretty straightforward. You have no monthly fees, no monthly minimums, and no interchange costs to worry about. You pay one flat fee regardless of the type of card. That makes for very predictable pricing. Just keep in mind that PayPal charges different amounts for different payment processing methods:
- 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 micropayments 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 3.5% as an exchange fee between the US and Canada, and a minimum of 4% 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 or The Complete Guide to PayPal’s Rates, Fees & Pricing.
Stripe’s payment processing costs have gotten a little more complicated, in particular for merchants who plan to take advantage of the complete range of Stripe’s tools, from recurring billing to business intelligence. However, again, 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 or The Complete Guide to Stripe Pricing & 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.
The good news is that for most online transactions, PayPal and Stripe charge the same amount. However, Stripe also accepts ACH transactions, which PayPal doesn’t, and offers them for just 0.8% per transfer. Stripe’s in-person payments solution is still in beta, so it isn’t widely available. However, it will still cost more than using PayPal, and merchants with small ticket sizes will see the biggest difference.
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.
It’s hard to say that one offers better pricing than the other because part of what affects the value of each platform is what features and services a merchant needs and plans to make use of. But if you’re just planning on integrating one of these payment gateways into an eCommerce platform, the pricing is identical.
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. You can integrate with various third-party eCommerce platforms for the easiest possible setup, or create your own site with payment buttons. If you can copy/paste and read a little bit of HTML, you’ll be able to use PayPal with no fuss.
Stripe’s API is its major selling point, however. And while it’s not hard to use from a development perspective, using anything beyond simple integrations may be difficult for laypeople. 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.
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.
Contract Length & 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! That’s a very good thing.
Just be aware that both services are third-party processors. Third-party processors aggregate all of their customer accounts into a single merchant account rather than giving each their own. That means that while it’s easier to get and set up your account, you’ll face a lot more scrutiny afterward. Suspicious transactions could trigger an account hold and review. If you want to know more about the difference between third-party processors and merchant account providers, read our breakdown.
Sales & Advertising Transparency
Both PayPal and Stripe are very upfront about their fees and services. Neither company employs any schemes or gimmicks that will catch you by surprise. Both services are also pretty well known, so they don’t need to spam the internet with annoying advertising, and you’re not going to get salespeople pounding at your door (or your email inbox). For what it’s worth, you’ll probably come across more PayPal ads than Stripe ones but nothing too obnoxious.
If there’s one area where we can say there’s a flaw in the transparency of these companies, it’s in the lack of disclosure about the risks of using a third-party payment processor. And this is across the board with any aggregator. Many merchants who sign up for payment processing with them don’t realize there’s usually (almost always) a clause in the agreement that explicitly warns that the processor can and will terminate your agreement for any violation of the terms or no reason at all. It’s also very difficult to plead your case to customer service after this happens, so be prepared for the possibility that you’ll have to seek another processor down the road.
This shouldn’t scare you away, though; most merchants will never have a problem.
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”) 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, well, 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 options they make available.
With PayPal and Stripe, 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 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. 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 a 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 customer support reps are rarely privy to the knowledge of 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 avoid 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.
Uh oh. Here it is, the famous “tie” copout. I know, I know. It’s not what you came here to read. Still, I must insist.
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, there’s no reason not to use PayPal’s developer tools.
Keep in mind that you aren’t just looking for a way to take payments online. Just about 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!