Payment Gateway: Paypal and Stripe

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When it comes to deciding on the best payment gateway for online businesses, PayPal and Stripe have both made a name for themselves. They are both widely known payment service providers (PSPs) in the e-Commerce industry.

A PSP is a third party service that offers merchants various payment methods through a single channel. It allows online stores to accept electronic payments through credit cards, debit cards or bank transfers. An example would be Paypal and Stripe.

It works like this: a PSP acquires banks as payment processors, managing the entire transaction process from start to finish – from your customer’s wallet to your (the merchant) bank account.

Working with a PSP saves you money compared to individually integrating different payment types. Both PayPal and Stripe offer services that accept, process, manage payments and secure sensitive information with strong data encryption.

Now comes the question: Which one is better for my business? Let’s dive right in and take a look at the key features, similarities and differences, and the strengths and weaknesses of these two payment service providers.

 

PayPal and Stripe: An Overview

PayPal has been widely used and is a well-established brand strong enough to be considered a household name. While Stripe might not be as famous, especially among consumers and end-users, it has also gained ground, particularly among developers in the e-Commerce industry.

To smoothly scrutinize the two, let’s take a look at seven categories as points of comparison: products and services offered, rates and fees, ease of use, contract length, sales and advertising transparency, customer service, and user reviews.

Products & services offered by Paypal and Stripe

 

Paypal

When it comes to products and services offered, Stripe and PayPal have a lot of similarities, in a sense that they both offer various online payment methods, services like invoicing, and products that can be integrated with mPOS apps. Moreover, both PSPs take care of the responsibility of PCI Compliance for you.

PayPal is best known for its simple payment processing set up. They currently offer three types of service plans.

  • PayPal Checkout

It is a supplemental (stacking) option for e-Commerce websites and online stores that already have existing credit card payment supplied by a different processor. This offers customers an option to checkout using their PayPal accounts, PayPal Credit or Venmo.

  • PayPal Standard

Availing PayPal Standard makes PayPal your primary processor. You can conveniently place PayPal payment buttons to your website so that it’s the first and primary payment option in your shop. 

  • PayPal Payments Pro

Payments Pro offers all the features of PayPal Standard, plus a virtual terminal and hosted checkout page. Although it comes with an additional monthly fee, having a hosted checkout page improves customer experience since they no longer have to be redirected to PayPal’s website to complete a transaction. However, the trade-off has to share the PCI Compliance responsibility that PayPal would otherwise be shouldering for redirects.

Aside from these three service plans, PayPal also offers an mPOS, with online and in-app invoicing. They also provide services such as donations and buy buttons as well as mass payouts.

 

Stripe 

Stripe, unlike PayPal, has no service plans. Instead, it mainly provides developers access to powerful online payment processing tools. These tools allow developers to set up checkout elements on your website. It supports credit cards, ACH and localized payment methods, online and in-app checkouts, embed pre-built checkout forms into your online store and build away from scratch using pre-built Elements.

  • Stripe Billing offers invoicing, recurring billing and subscription tools.
  • Stripe Terminal is an SDK with pre-certified hardware and additional features that allows you to integrate Stripe’s payment processing into a POS app. However, this is not a ready-to-go mPOS.
  • Stripe Radar is its advanced fraud management tool.
  • Stripe Sigma is an SQL-based business intelligence you can use to generate customized reports.
  • Stripe Connect is a marketplace and platform-building tool.
  • Stripe Issuing generates physical and virtual cards for purposes like employee expenses accounts.
Fees and rates

Paypal and Stripe are pretty much equivalent and straightforward for the most part when it comes to pricing. Both PSPs do not charge monthly, interchange, and early termination fees. They also do not require merchants to meet a minimum amount of sales per month. 

Some add-on products and services might not be free of charge but are straightforward and have fixed rates.

Paypal Rates
  • Online transactions and invoice – 2.9% + $0.30
  • POS/mPOS transactions – 2.7%
  • Keyed entry transactions – 3.5% + $0.15
  • Nonprofit discount for online payment processing – 2.2% + $0.30
  • Micropayment options for low-value transactions – 5% + $0.05
  • Minimum international charges
    • US/Canada Based – 3.5%
  • Other countries – 4%
  • Optional costs
    • PayPal Payment Pro – $30/month
  • Recurring Billing – $10/month

PayPal also offers special rates for high-volume merchants in partnership with Vend.

When it comes to funding time, PayPal has near-instant funding deposited in PayPal wallets. They also provide business debit cards, and you can spend a PayPal balance anywhere that accepts Mastercard. If you want to transfer your PayPal funds to your bank, it only takes 1 to 2 business days.

Stripe Rates
  • Online credit card transactions

2.9% + $0.30

  • ACH transaction

0.8% (capped at $5)

  • Stripe Terminal (POS) transaction

2.7% + $0.50

  • Stripe Billing
    • Starter: Free for the 1st $1 Million in recurring transaction, 0.4% + processing cost 
    • Scale: 0.7% per transaction, with a discount on ACH credits and wire transfers, as well as access to Stripe Sigma as a trade-off.

Stripe offers the lowest international card processing rates at only a 1% fee, and an additional 1% fee if currency conversion is necessary.

Stripe follows the industry standard of 2 business days for US-based merchants when it comes to funding time.

Ease of use

PayPal offers tools that are designed for easy set-up for anyone without much technical knowledge. On the other hand, Stripe’s API is robust but requires a developer to maximize its customizability and other features.

PayPal and Stripe integrated with various third-party e-Commerce platforms, allowing you to create your site with payment buttons easily.

Contract length

Neither PayPal nor Strip requires a contract, which means you don’t have to worry about \early termination fees. Both processors employ pay-as-you-go. However, keep in mind that they are third party processors – they aggregate all their customers’ accounts in one merchant account.

Sales and Advertising Transparency

Both are very upfront with advertising their fees and services, and they don’t spam users with flashy, spam ads. However, they can be faulted for their lack of disclosure about the risks of using third party payments processors. Many merchants do not know that these processors can terminate the agreement for any violation of terms, any time.

Customer service and user reviews

PayPal and Stripe have multiple channels for customer service such as knowledge-based help centre, community forums, developer documentation, email, live chat and phone support, and social media. While users generally have positive reviews, they say that customer service quality can be improved. Moreover, as mentioned above, merchants experience sudden account freezing and termination. 

As both Stripe and PayPal are trustworthy payment gateways, the choice between the two would considerably be based on your business’s nature, the requirements you might have, and level of comfort with either brand. 

If you still have more concerns regarding cash management and financial issues you can have a call with Annette here.

Justine

Justine

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