PayPal vs. Stripe
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PayPal (see our review) and Stripe (see our review) are tools 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 whose name customers don’t necessarily recognize, has a long list of very popular clients and partners. So in the PayPal vs. Stripe debate, which has the advantage?
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. You’ll get some basic eCommerce support, which might be best if you’re focused on cost and not so much on features.
But if you’re looking for features and flexibility, you’re in the right place. PayPal and Stripe’s strengths lie in their myriad eCommerce features, including support for digital goods, subscriptions, and even mobile app payments. However, despite the fact that both these services do fundamentally the same thing, they do go about it in different ways.
If you’re not sure which of these online payment processors is right for your business, or just want a bit more context for both before you decide, read on for my comparison of both companies’ selling points: features, pricing, customer service, and more. If you have something to add or your experience differs from my conclusions, feel free to leave me a comment!
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Table of Contents
Products and Services
PayPal’s core offering has always been its payment processing: allowing anyone to make a payment to a merchant using their own 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 you to go beyond selling on eBay.
There are three service plans for PayPal:
- Express Checkout: Add PayPal as a supplemental checkout option in addition to your standard payment processor for standard PayPal rates.
- Payments Standard: Get online payment processing and invoicing for standard rates.
- Payments Pro: Get your standard PayPal features PLUS a Virtual Terminal and hosted checkout page for a monthly fee plus processing fee.
PayPal’s other services include:
- PayPal Here: PayPal’s mPOS app
- POS software integrations
- Hosted payment page (with PayPal Pro subscription)
- PCI compliance
- PayFlow Payment Gateway
- Online & in-app invoicing
- Virtual terminal
- Digital goods
- Donation collection tools
- Buy now buttons
- Mass payout
- PayPal Credit: Provide no-interest financing to customers
Plus, PayPal offers SDKs and other developer tools so you can create custom integrations — and even power your own mobile payments app with support for Android Pay and Apple Pay.
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Like PayPal, Stripe’s primary function is online payments. The company offers merchants a boatload of features to complement its core offering, but unlike PayPal, they’re more of supplements than additional features beyond payment processing. Here are Stripe’s main features:
- Payment processing
- Hosted payment page
- PCI compliance
- Customizable checkout
- Marketplace tools
- Platform-building tools
- Coupons and free trials
- Customizable reporting tools
- Buy buttons in mobile apps
It bears mentioning that Stripe claims to have more than 100 features — and I’m inclined to believe it. It’s a very robust platform that can cater to almost any kind of internet businesses. Plus, beyond the general features, you’ll also find Stripe’s Atlas suite of tools, designed to help international entrepreneurs start a business in the US. Stripe also has a robust API for easy integration with a host of other applications. You can also integrate stripe with mPOS apps — though you’ll still be paying the same rate, which is significantly higher than most mPOS apps. However, the integrations do support Android and Apple Pay as well.
PayPal vs. Stripe: Which Features Do You Really Need?
Now that we’ve covered the basics, it’s time to consider what’s important for your business.
Sigma is Stripe’s reporting tool, and I want to call attention to it because it’s easily the most robust and unique reporting tool I’ve seen. PayPal will generate reports for you — but no one besides Stripe allows you to create your own custom SQL queries to generate reports. This isn’t just selecting from a pre-generated list of options — if you can ask it using SQL, you can get a report. If you’re after some serious business data, it’s hard to ignore this tool. PayPal’s reports are fairly advanced (and it’s a long list), but they are not customizable. At least not like Stripe’s.
I continue to be surprised by Stripe’s lack of a virtual terminal. You can manually enter transactions through the dashboard, but the company actively discourages using this feature more than occasionally. It also leaves you on the hook for PCI compliance. PayPal’s virtual terminal comes at a cost — and a higher processing rate — but depending on your business, it could be an invaluable tool. Most omnichannel platforms offer a virtual terminal these days. Then again, Stripe is mostly for online commerce.
A related note: Stripe generally handles PCI compliance for you, which means no fees or additional work. If you have the PayPal Standard plan, you’re automatically PCI compliant as well. However, on the PayPal Pro plan you aren’t. Instead, PayPal gives you transparent redirects to help, and you much complete an annual self-assessment as well as quarterly scans and more. It won’t cost you more beyond the monthly plan; you’ll just have to put more work into it.
Something that Stripe recommends to get around PCI compliance concerns for manual transactions is using an invoicing service. You’ll have to find an add-on service that integrates with Stripe — for example, Zoho Invoice. This is important because Stripe has no native invoicing support. PayPal will let you send invoices from your computer or from within the PayPal Here app.
However, there’s no doubt that Stripe has some of the most capable tools for designing checkout processes and managing subscriptions. PayPal has some solid management tools for subscriptions and recurring billing, but you have zero control over the checkout process on the Standard plan, and the Pro Plan’s checkout tools just don’t seem to stack up against Stripe’s.
While PayPal and Stripe offer solutions to the same problem (online payments), they go about it in VERY different ways. PayPal is the entry-level solution — something that anyone (or at least, almost anyone) with even a basic understanding of eCommerce or technology could use. However, you also get a lot more tools to take your business beyond just the Internet: an mPOS, invoicing, POS integrations, and more. Unless you’re looking at something completely custom, most of PayPal’s features don’t require specialized knowledge.
To get the most out of Stripe, you’re going to need a developer, because it was not designed for the layperson. It’s meant for businesses that need a highly customizable and tech-based solution for payment processing. If you need an abundant array of features, Stripe is the clear winner and your emphasis is specifically online payments. If your priorities lie elsewhere (ease of use, or omnichannel commerce), you might be more inclined to consider PayPal.
Fees and Rates
Both PayPal and Stripe charge merchants the same per-transaction processing fee: 2.9% + $.0.30. In addition, Stripe also supports both ACH and Bitcoin, charging 0.8% per transaction, capped at $5 maximum.
Stripe charges nothing extra for accepting international cards, for its subscription services, or its hosted payments page. This is definitely a perk. However, if you plan to use Connect, Stripe’s platform-building suite, you’ll encounter additional fees.
PayPal’s base subscription charges you nothing per month — but you don’t get a hosted payment page. To do that, you need to upgrade your plan to PayPal Payments Pro. You also get PayPal’s virtual terminal (which comes with a different pricing scheme for transactions). However, if you want recurring billing/subscriptions, there’s an additional fee.
- PayPal Payments Pro + Virtual Terminal: $30/month
- Virtual terminal pricing: 3.1% + $0.30
- American Express pricing for Pro and Virtual Terminal: 3.5%
- Recurring billing: $10/month
Forty bucks a month for hosted payment page and recurring billing seems like a lot. However, you do also get the virtual terminal — a feature Stripe doesn’t support. Plus, if you’re only after subscription management, you don’t need to have PayPal Payments Pro. A $10/month add-on is a lot more reasonable, if not ideal.
It’s also worth mentioning that PayPal is actually more cost-effective in other situations. Specifically, PayPal offers a non-profit discount for 501(c)(3) organizations, where you’ll pay 2.2% + $0.30 for transactions. And if you sell low-value digital goods (under $10 on average), PayPal actually offers a micropayments plan that could save you money over the typical rates. You’ll pay 5% + $0.05 per transaction — and because the transaction fee is lower, you wind up saving money even though the percentage fee is higher. There’s also a Mass Payout option, where you can send a bulk wave of payments for 2%, capped at $1 per transaction.
If you need an mPOS, PayPal Here is also more cost-effective than going through Stripe — 2.7% per swipe, as opposed to 2.9% + $0.30. Again, depending on your average ticket size, this could translate to substantial savings. (However, if you use Shopify Payments, which is powered by Stripe, you can get 2.7% on swiped transactions. But that means building on Shopify’s platform, not Stripe’s.)
I really dislike PayPal’s cost for its hosted payment page, virtual terminal, and recurring billing, given that other options out there — not just Stripe — with lower pricing. But I also like that you can get nonprofit pricing, that there’s a micropayments option for merchants who sell digital goods, and that you get a flat percentage rate for mPOS transactions. That makes PayPal a lot more flexible on pricing compared with Stripe.
Ease of Use
Both Stripe and PayPal make it easy for customers to pay merchants. But as a merchant, your experience 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 have no experience with code, setting up Stripe is going to be a lot more complicated. You may be able to set up the basics yourself (we’ve seen user reviews affirming this). However, if you need anything more complicated than a basic eCommerce site, you probably want to just bite the bullet and hire a developer. Otherwise, you’ll be fairly limited in what you can do.
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 create the necessary coding framework.
Now, if you are a developer, there’s no question that Stripe is the better choice. You can do a lot with PayPal these days. But you can do so much more with Stripe. Again, Stripe was designed first and foremost for developers…so this makes a lot of sense. But if you’re not tech savvy and you don’t have easy access to someone with the requisite skills, PayPal is going to be the smarter option.
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 because of their complexities. Still, 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, and you’re not going to get salespeople pounding at your door (or your email inbox).
Customer Service and Technical Support
PayPal offers several ways to reach a support rep. These include:
- Self-Help Center
- Community Forum
- Email support
- Developer Center: PayPal’s dev documentation probably isn’t as thorough as Stripe’s, but it does exist.
- Phone support (available Mon–Fri 5 a.m.–10 p.m. PST): Word on the street (see “Negative 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 – 5 PM CST
- Facebook: You can’t post to the page, but you can comment on posts and message PayPal directly if you have questions.
Stripe, on the other hand, offers more limited support:
- Email support
- Developer Docs: 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…really isn’t all that surprising. Again, this is a developer-focused option, and Stripe’s invested its resources accordingly.
- Freenode-based chat support (#stripe)
- Facebook: No posting to the page allowed, but you can message Stripe.
- Twitter: There’s no dedicated support account, but you can tweet @Stripe or check @StripeStatus for outage notices and updates.
Stripe’s support is decent, sure, but PayPal gives you an option to get on the phone about actual payment-related issues. 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
You’re going to see a similar thread of complaints about Stripe. Here are the most common issues merchants encounter:
- 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. This is because they’re both third-party processors — they aggregate accounts into one large account. On the one hand, it’s fairly easy to create an account. On the other, 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 sounds scary, but people build successful businesses on the backs of these services all the time. If you think you might be a high-risk merchant, or you know your line of business is on either company’s list of prohibited businesses, you should probably consider going with a traditional merchant account or even a high-risk processor such as Durango Merchant Services (DMS) instead.
You can also check our guide: How to avoid merchant holds, freezes, and terminations.
Positive Reviews and Testimonials
It sounds scary, but people build successful businesses on the backs of these services all the time, even with all the associated risk. Finding positive reviews of any service tends to be more challenging than finding complaints because people are more likely to speak up if they are unhappy with something, but it is possible to find them.
Stripe’s list of high-profile users, such as Reddit, Mashable, Foursquare, Squarespace, and Shopify speaks for itself. Clearly, it is the darling of tech-savvy businesses. But dig a little deeper and you’ll find more feedback from other users. Here’s what people like about Stripe:
- Quick and easy signup
- No “fine print” fees
- Nice API to work with
- Great documentation
- All services included in one price point
You’ll find some similar praises for PayPal, specifically about its payment processing and pricing. I’m not too surprised by the lack of praise for its API or more advanced features — though they did come up in a couple of reviews. Here are the highlights:
- Easy setup
- Widely accepted/trusted payment form
- Offers multiple products/services besides payment processing
- Transparent pricing
In the end, I don’t think it’s easy to draw a clear winner in the PayPal vs. Stripe debate.
Ultimately, the choice depends on your needs. If you have developing 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. If you’re not a developer, don’t have the means to hire one, or don’t have very complex needs, PayPal is likely more suitable. 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 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.
However, either service requires you to sign a contract, which means you can try out one of these services (or both services) without having to commit. Want to see which runs better? It might take a little bit of work, but you can totally test them both out for as long as you’d like.
And that, my friend, is pretty cool.
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!