Stripe VS PayPal: How to Choose The Right Payment Processor For Your Online Business
Both offer reasonably-priced payment processing, especially for eCommerce, but while PayPal wins in ease of use, Stripe potentially offers more bang for your buck.
|Ideal For||Online businesses, businesses seeking a customizable platform, international commerce, fraud prevention||Online businesses, businesses that want to accept PayPal transactions, low-volume businesses, international commerce|
|Online Transaction Pricing||2.9% + $0.30 per transaction||3.49% + $0.49 per transaction (as of Aug. 2021)|
|Supported Payment Methods||Credit card, debit cards, ACH Payments, ApplePay, GooglePay, MicrosoftPay, numerous foreign payment methods with their markets||Credit cards, debit cards, PayPal, Pay in 4, Venmo, GooglePay|
|Standout Features||Top-of-the-line developer support, advanced (optional) security tools, strong support for multiple currencies||Enormous proprietary ecosystem, easy to use, strong international support|
|What’s Missing?||More support for POS; bundled packages to cut down on transaction costs for advanced features||Competitive pricing, ACH payment support|
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, 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?
Table of Contents
- Stripe VS PayPal: Quick Comparison
- The Key Differences Between Stripe & PayPal
- Which Payment Processor Is Best For My Business Needs?
- Stripe Fees VS PayPal Fees
- Ease Of Use
- Technical Support & Customer Service
- PayPal & Stripe Features, Compared
- Alternatives To PayPal & Stripe
- Comparing Stripe VS PayPal: Final Verdict
Stripe VS PayPal: Quick Comparison
Stripe and PayPal are online credit card processors primarily focused on eCommerce. 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 also cheaper, charging 1.49% + $0.19 less than PayPal per transaction.
Stripe At A Glance
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.
- Developer focused
- Standard flat-rate pricing for eCommerce
- No standalone gateway
- Advanced features are usually paid for with additional cost per transaction
- Highly customizable
- Has account stability issues typical of a third-party processor
PayPal At A Glance
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).
- Designed for ease-of-use
- Expensive flat-rate pricing for eCommerce
- Standalone gateway is available
- PayPal’s advanced features/services usually cost a monthly fee
- One of only a handful of ways to accept PayPal payments
- Has account stability issues typical of a third-party processor
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.
- Cost Per Transaction: Unless you’re loaded up with advanced features, Stripe is significantly cheaper per transaction than PayPal. While this may not be a big deal if you’re a very low-volume business, the cost difference will add up very, very quickly.
- 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.
- The Breadth Of Services: Stripe has a bigger ecosystem than your typical payment processor, but PayPal is on an entirely different level.
Which Payment Processor Is Best For My Business Needs?
Want a quick idea of which processor will likely be 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
- You want competitive flat-rate pricing
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
- You want to do cryptocurrency transactions in the future
Stripe Fees VS PayPal Fees
|Online Credit Card Payments||2.9% + $0.30 per transaction||3.49% + $0.49 per transaction (as of Aug. 2021)|
|ACH Payments||0.8% per transaction (capped at $5)||N/A|
|Monthly Fee||$0||$0 (for base service)|
|Invoice Rate||First 25 are free; 0.4%-0.5% after||3.49% + $0.49 (PayPal doesn’t charge per invoice, but having your invoice paid is considered an online transaction|
|In-Person Transactions||2.7% + $0.05 per transaction||2.29% + $0.09 per transaction (PayPal Zettle)|
|Currency Conversion Fee||1.50%||4.50%|
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.
One of the bigger differences is in how Stripe and PayPal handle invoices. Stripe charges a specific fee for invoices after you’ve exhausted your allotment of freebies. PayPal, on the other hand, doesn’t have a separate pricing scheme for invoices — when the customer pays you, you’re charged at normal transaction rates.
PayPal Rates At A Glance
- Online Transactions (With Chargeback Protection): 2.5% + $0.49
- Chargeback Protection: 2.99% + $0.49
- PayPal QR Code Transactions: 1.9% + $0.10 (transactions above $10), 2.4% + $0.05 (transactions below $10)
- Payflow Gateway (without PayPal Checkout): $25/month
PayPal’s August 2021 transaction fee hike has affected a number of different pricing elements for the service. It is possible to reduce the fee by opting into chargeback protection, although this itself will cost you an additional $2.99 + $0.49.
Unlike Stripe, it is possible to use PayPal’s gateway service separately from PayPal’s other functionality. This service is free if you’re cool with using Checkout or $25/mo if you want to really dive into its guts and customize it on your terms.
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 Rates At A Glance
- Chargeback Protection: 0.4%
- 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.
Stripe’s advanced features generally add a small fee to your per-transaction costs. While intuitive, this system can get a bit complicated if you start juggling multiple advanced features. Because of this, you’ll want to monitor what features you’re using and under what circumstances you’re using features.
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.
Which Is Cheaper, Stripe Or PayPal?
This used to be a harder question to answer, but with PayPal’s August 2021 price hike, the answer in most cases will be that Stripe is cheaper.
Online transactions cost 1.49% + $0.19 more with PayPal under the new pricing scheme. Unless you’re loading your Stripe transactions up with advanced features, that’s a massive difference in cost from the start. On top of that, Stripe’s fees tend to be less expensive than PayPal’s. That doesn’t necessarily mean Stripe will deliver more value, but if you’re looking to minimize costs it’s the obvious choice at this point.
While both services are extremely well-supported, at the niche-level Stripe is able to accommodate some services that PayPal does not. This is most apparent when it comes to customer relationship management (CRM) software.
Note that Stripe is often pre-integrated into eCommerce shopping carts. In fact, this is the best way to get Stripe if you don’t want the hassle of setting it up via a developer.
Ease Of Use
For the average merchant, PayPal Commerce will be significantly easier to 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.
Technical Support & Customer Service
|Live Chat||✔||✔ (chatbot)|
|Next Steps||Visit Site
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.
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 has expanded their customer support efforts, but it hasn’t necessarily translated into improved customer reviews. 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.
PayPal & Stripe Features, Compared
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 by charging a flat-rate processing fee: 2.9% + $0.30 for Stripe, 3.49% + $0.49 for PayPal. Both offer strong support for international commerce and the ability to customize your payment processes through code.
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. And with PayPal now charging more for its services, you’ll want to know if it’s delivering the goods.
Business Accounts With Stripe & PayPal
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, 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. This feature costs an additional $30/month
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 Zettle 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
Online Checkout Options
Both Stripe and PayPal offer standardized, pre-built checkout experiences for customers who don’t want to bother diving into code. These checkout suites provide the basics–taking payment information under the payment processor’s branded label.
If you don’t want to use these, you’ll have to design your own. PayPal allows developers to make some tweaks to the PayPal checkout experience to alter visuals, make having a PayPal account optional for the customer, provide or request additional information to/from the customer, and automatically return the customer to your website after checkout.
Stripe offers similar opportunities. Developers can change the look of checkout to better reflect your branding, provide policy and contact information, enable 1-button purchasing, and tweak localization and supported languages by providing a specific locale rather than having Stripe detect the client’s locale.
Invoice & Billing
As mentioned above, Stripe and PayPal have slightly different approaches to their invoicing features. With Stripe, you can select between Starter and Plus plans for your invoicing. Starter gives you 25 free invoices per month, after which you’re charged 0.4% per paid invoice. Plus provides some automation and advanced collection features, and costs 0.5% per invoice. PayPal has no limit on the number of invoices you send, but you’ll pay the standard online transaction fee of 3.49% + $0.49 for each paid invoice.
Stripe Billing is an additional feature that’s available if you’re dealing with recurring charges. This feature is available at 0.5% per recurring charge. There’s also a Scale plan for 0.8% per recurring charge that connects to NetSuite and sends customers an initial quote before they start a subscription. Custom pricing is available for large volumes. PayPal allows you to design and enable subscription pricing from your dashboard for no additional charge (keep in mind that PayPal does not support ACH payments under its name-branded label, however).
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.
Point Of Sale
Of the two, PayPal’s service is the more well-developed via the PayPal Zettle 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 Zettle.
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 on the feature 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 & Access To Funds
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.
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.
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.
Alternatives To PayPal & Stripe
PayPal and Stripe are far from the only payment processors with eCommerce capabilities. If you’ve been reading this comparison and don’t feel like either company fits, you still have additional options.
- Square: While Square is better known for being a leader in POS transactions, its eCommerce capabilities are pretty well-developed at this point. If you’re looking for an expansive ecosystem not unlike PayPal’s, but at Stripe’s price, Square isn’t a bad choice. Just be aware that Square doesn’t offer much in terms of international support.
- 2Checkout: While it may not be as big a name, Verifone’s 2Checkout service offers a similar type of flat-rate, month-to-month service to Stripe and PayPal. It also offers comprehensive international support. It doesn’t support in-person transactions at all, however.
Comparing Stripe VS PayPal: Final Verdict
The PayPal price hike greatly changes the math when it comes to evaluating Stripe VS PayPal. While PayPal still offers convenience, brand recognition, and ease-of-use to eCommerce businesses, it now comes at one of the highest rates for a service of its type. PayPal is clearly counting on its reputation and unique features (like its proprietary digital wallet) to help customers swallow the fee. Unfortunately, it’s hard to see how that fee doesn’t cut deeply into the revenue of businesses that are doing more than an occasional transaction.
This could be a great opportunity for Stripe to grab market share so long as it can keep its own prices under control. While not as convenient for very small businesses that lack developer support, it’s now able to market itself as a low-cost alternative to PayPal. It’s an incredibly powerful and feature-rich platform in its own right, and a bit more customizable with the right skill set.
As always, focus on the features you need, not just now, but in the future, and choose the service that offers what you need at an acceptable price point.
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!