Stripe vs PayPal: Which payment platform should you choose?

Let’s do a thorough review of Stripe vs PayPal. Nowadays, both have a trusted brand and a long history of processing payments on the web, making it easy for businesses to start accepting payments seamlessly.

Stripe was founded in 2010 and PayPal in 1998. PayPal has widespread recognition and familiarity, with over 360 million active users. But Stripe’s support team is available 24/7 via phone, email, and chat, and they offer comprehensive documentation and resources for developers. We’ll compare each payment processor in six key categories and we’ll point out some of the important differences, which should help you make a more informed decision.

Introduction to Online Payments

Online payments have become an essential part of any business, allowing customers to make transactions quickly and securely. With the rise of e-commerce, online payment processing has become a crucial aspect of business operations. Payment processors, such as Stripe, PayPal, and Square, provide businesses with the tools they need to accept payments online and in-person. These platforms offer various features, including secure payment gateways, fraud protection, and support for multiple payment methods. Additionally, Stripe offers numerous ready integrations with various business tools, ranging from accounting to project management platforms, showcasing the versatility and adaptability of their services. In this article, we will explore the different payment gateway options available, including Stripe, PayPal, and Square, and help you decide which one is best for your business to process payments.

Payment Gateway Options

When it comes to choosing a payment gateway, businesses have several options to consider. Stripe, PayPal, and Square are three of the most popular payment processors, each with its own strengths and weaknesses. Stripe is known for its customizable payment solutions and low transaction fees, making it a popular choice for online businesses. It offers a flat rate for transactions and supports a wide range of payment methods, including credit and debit card payments, ACH payments, and digital wallets. Additionally, Stripe can be seamlessly integrated into an e-commerce site, highlighting its flexibility and support for various payment methods.

PayPal, on the other hand, is a well-established payment processor with a wide range of payment options, including credit and debit card payments, as well as PayPal Credit. It is widely recognized and trusted by consumers, making it a convenient option for many businesses. However, PayPal’s fees can be more complex and higher compared to Stripe, especially for international transactions. Stripe also offers more advanced options for designing checkout pages, including features like custom fields and automation, which enhance branding and adapt to customer needs, in contrast to PayPal's limited customization capabilities.

Square is a popular choice for brick and mortar businesses, with its user-friendly POS systems and competitive transaction fees. It offers a comprehensive suite of tools for in-person sales, including hardware for retail stores and mobile payment solutions. Square’s simplicity and ease of use make it an attractive option for small businesses and retail stores.

Transaction and service fees

Here's a breakdown of the pricing structure and transaction fees for both payment processing platforms:

Stripe fees

There is a simple approach when it comes to Stripe fees. Stripe charges you a flat rate of 2.9% + 30¢ per successful charge as long as you’re doing under $1 million in volume per year. This rate varies country to country, but it’s always flat. They don’t disclose any special high volume rates. Stripe also offers custom pricing for businesses with specific needs or higher transaction volumes.

However, in November 2022, there were a few changes to this structure: +0.5% for manually entered cards; +1% for international cards; and +1% if currency conversion is required. Volume discounts can benefit larger businesses by offering reduced fees based on their annual transaction volumes.

You can accept large payments or recurring charges securely with ACH debit, ACH credit, or wire transfers: Stripe’s fees are 0.8% with a $5 cap.

PayPal fees

For PayPal, there are some complications. There’s an additional percentage-based fee for international commercial transactions of 1.50%. PayPal also throws in some extra service fees that make things a bit more complicated. Understanding PayPal's fees is crucial as they are more complex and include additional charges compared to Stripe. Let’s compare Stripe’s fees and PayPal’s fees at a glance:

Service	PayPal	Stripe
Transaction fees [1]	3.49% + 49¢	2.9% + 30¢
Charge cards from your website	$30 / month [2]	Free
Chargeback	$20	$15
American Express	3.5% [3]	Same flat rate
Micropayments (less than $10)	5% + .05¢	Same flat rate
Refund	Fixed fee only returned [4]	Fees not returned
International cards	1% [5]	Free [6]
Authorize card	30¢ [7]	Free
Recurring Billing	$10 / month (Optional recurring payment tool: $30 / month)	Free
Fraud Protection	Basic free; Advanced $10 / month [8]	Free [9]

1. United States transaction fees. Stripe and Paypal transaction fees vary by country.

2. PayPal Payments Pro allows you to provide a fully customized checkout experience on your site and includes Virtual Terminal.

3. American Express fee is only charged for PayPal Payments Pro, PayPal Payments Advanced, and Virtual Terminal, which is required for certain features (see note 2).

4. Fixed fee portion of the original transaction fee (for example, the refund fee is $0.30 for domestic payments).

5. PayPal cross border fees.

6. International cards are free, but currency conversion costs 2%. Example: You connect a GBP bank account to Stripe, but charge in USD. Stripe will automatically convert your funds to GBP (for a 2% fee) and deposit them into your GBP bank account. If you instead charged in GBP (or connected a USD bank to Stripe), it would be free.

7. PayPal charges 30¢ for uncaptured authorizations and card verification transactions.

8. $10 monthly + $0.05 per transaction. Excludes Express Checkout transactions.

9. See Stripe Radar.

You’ll notice that PayPal fees are far more complex and nuanced. For example, they only charge extra for American Express when you’re on one of the paid plans, which seems a bit counterintuitive. In almost all cases, Stripe is the cheaper option because of lower service fees (unless you’re exclusively processing micropayments).

PayPal checkout offers significant advantages, including accessibility for businesses of all sizes and enhanced trust among online consumers due to the recognizable PayPal branding.

Stripe vs PayPal payment schedule: When do I get paid?

PayPal usually pays out within one business day. Stripe has rolling two-day transfers in the United States and Australia, and rolling seven-day transfers in most other countries (see the Stripe automatic transfer schedules). If fast access to your funds is important and you're outside the United or Australia, keep this in mind.

What is PayPal? Here is someone using it on their mobile device © PayPal.com

Chargeback Fees: What You Need to Know

Chargeback fees are an essential consideration for businesses when choosing a payment processor. A chargeback occurs when a customer disputes a transaction, and the payment processor reverses the payment. Both Stripe and PayPal charge chargeback fees, which can range from $15 to $25 per chargeback. Stripe charges a flat fee of $15 per chargeback, while PayPal charges a fee of $15 per chargeback for most transactions. However, PayPal’s chargeback fees can be higher for certain types of transactions, such as international or high-risk transactions. It’s crucial for businesses to understand the chargeback fees associated with each payment processor to avoid unexpected costs.

Security

Both Stripe and PayPal take security seriously. At the core, they’re both very stable and secure platforms. Stripe enhances its security with Stripe Radar, which utilizes machine learning to detect and prevent fraudulent transactions in real-time, thereby ensuring better protection for users who opt for Stripe payments. Let’s talk about how they’re different, and how Stripe intrinsically encourages good security

When considering payment processors, it's crucial to review the supported countries and currencies to effectively manage international payments. This is especially important for businesses that operate overseas.

Stripe

People often ask us, 'Is Stripe safe?' and our understanding is that Stripe is generally considered to be a safe and secure payment processing platform. They use industry-standard security measures to protect the sensitive information of both businesses and customers. Stripe's killer feature when they first launched was its browser-side JavaScript library Stripe.js

When you use Stripe.js on your website, the credit card data entered into your payment form is never sent to your server. Instead, the data is sent directly to Stripe. Why is this so important?

• Automatically PCI compliant because you don't handle any sensitive credit card data on your servers.

• More secure because a breach of your servers won't result in any stolen credit card data.

• You're not tempted to store credit card data on your servers, which you really shouldn't be doing unless you're a big business and want to pay for PCI compliance.

What is Stripe? Here is the Stripe payment flow © Stripe.com

It's important to note that no system is completely immune to security breaches, so it's recommended to follow best practices for online security, such as using strong passwords and enabling two-factor authentication. But, if you follow the normal flow with Stripe, you'll just automatically store your cards in their vault. You'll never touch the sensitive data. This encourages good security.

Is PayPal safe?

Similarly, we are always being asked, 'Is PayPal safe?' -- you may well have the exact same question! PayPal is also considered to be a secure platform for online payments. They employ a range of security measures to protect the financial information of users, including encryption protocols and advanced fraud detection.

PayPal has a way to store cards in a vault, but it isn't quite the same as Stripe.js. The sensitive card data still has to go through your server first, and this puts a big security burden (see PCI compliance above) on the software developer or the customer.

PayPal is a widely recognized and established company with a large user base, which adds to its credibility. However, as with any online service, it's important for users to take their own precautions, such as using strong passwords and enabling two-factor authentication.

International Transactions

For businesses that operate globally, international transactions are a crucial aspect of their operations. Stripe, PayPal, and Square all support international transactions, but their fees and exchange rates vary. Stripe supports over 135 currencies and has a flat rate of 2.9% + 30¢ per transaction, making it a popular choice for businesses with large transaction volumes. Additionally, Stripe charges an extra 1% for international cards and another 1% if currency conversion is required. Accepting major credit cards can enhance conversion rates for online stores by providing a variety of payment options, thus catering to consumer preferences.

PayPal, on the other hand, supports 25 currencies and has a variable transaction fee, depending on the type of transaction. PayPal’s fees for international transactions can be higher, with an additional 1.5% fee for cross-border payments. This can add up quickly for businesses with a high volume of international sales. The costs involved for online transactions with PayPal, Stripe, and Square vary, with each service offering different rates for online payments.

Square supports international transactions, but its fees are higher than those of Stripe and PayPal. Square charges a flat rate of 2.9% + 30¢ per transaction, with an additional 1% fee for international cards. While Square is a great option for in-person sales, businesses with significant international transactions might find Stripe or PayPal more cost-effective.

Merchant Account Requirements

A merchant account is a type of bank account that allows businesses to accept payments from customers. When choosing a payment processor, businesses need to consider the merchant account requirements. Stripe and PayPal both offer merchant accounts, but they have different requirements. Stripe requires businesses to have a valid US bank account and a social security number or employer identification number (EIN). PayPal also requires businesses to have a valid bank account and a social security number or EIN. However, PayPal’s merchant account requirements are more flexible, and businesses can use PayPal’s payment processing services without a traditional merchant account. Square, on the other hand, offers a more streamlined merchant account setup process, with minimal requirements and fast approval times.

PayPal API vs Stripe API

When Stripe first launched to the public, the Stripe API was a difference-maker. It's clean, well documented, and extremely easy to use. Payment processor APIs of the past were buggy, inconsistent, and poorly documented. In fact, PayPal was one of the worst offenders.

The Stripe API © Stripe.com

Stripe forced PayPal to up its game and it has. The documentation and organization of their RESTful PayPal API is vastly improved and modeled after Stripe (coincidentally). This is an example of competition benefiting customers. Stripe has set a new standard for a clean and well documented API, and the rest of the industry (including PayPal) is catching up.

Data portability

This is an area where PayPal falls flat on its face. Imagine you've built a successful membership site over the years, and you powered it with PayPal subscriptions. If you want to move to another payment processor (like Stripe), you can't transfer that credit card data. PayPal simply won't give it you. All your existing customers would have to sign up again and you'd probably lose some of them during the process.

Stripe, on the other hand, values data portability. If you decide to leave Stripe they'll help you migrate your credit card data in a secure and PCI-compliant way. This over accommodating stance on data portability is certainly worth noting. It's refreshing to know you have a choice, and won't be locked in forever.

Payment Customization

Payment customization is an essential aspect of any payment processing system. Businesses want to be able to customize their payment pages to match their brand and provide a seamless checkout experience for their customers. Stripe offers a high degree of customization, with its flexible API and customizable payment pages. This allows businesses to create a tailored payment experience that aligns with their brand identity. Additionally, Stripe simplifies the setup process by allowing users to create a checkout page without special coding skills.

PayPal also offers some customization options, but they are limited compared to those of Stripe. While PayPal provides tools to integrate its payment gateway into your website, the level of customization is not as extensive. This can be a drawback for businesses looking for a highly personalized checkout experience. Having a custom domain with PayPal incurs additional monthly fees, providing tailored options for payment solutions.

Square’s payment pages are user-friendly, but customization options are limited. Square focuses on simplicity and ease of use, which is great for small businesses and retail stores. However, businesses looking for more advanced customization options might find Stripe to be a better fit.

By understanding the strengths and weaknesses of each payment processor, you can make an informed decision that best suits your business needs. Whether you prioritize low transaction fees, extensive customization options, or support for international transactions, there is a payment solution out there for you.

Online Payment Services: Beyond Basic Transactions

Online payment services have evolved beyond basic transactions, offering a range of features and tools to help businesses manage their payments. Stripe, PayPal, and Square all offer online payment services that go beyond basic transactions. Stripe’s online payment services include features such as recurring payments, invoicing, and payment links. PayPal’s online payment services include features such as PayPal Payments Pro, which allows businesses to accept payments online and in-person. Square’s online payment services include features such as Square Online, which allows businesses to create an online store and accept payments online. When choosing an online payment service, businesses should consider the features and tools that best meet their needs, such as payment customization, payment options, and payment solutions.

Integration with WordPress, WooCommerce, and Other E-commerce Platforms

Integration with e-commerce platforms is a critical consideration for businesses when choosing a payment processor. Stripe, PayPal, and Square all offer integration with popular e-commerce platforms such as WordPress and WooCommerce. Stripe’s integration with WordPress and WooCommerce allows businesses to accept payments online and in-person, with features such as payment links and recurring payments. PayPal’s integration with WordPress and WooCommerce allows businesses to accept payments online, with features such as PayPal Payments Pro and PayPal Payments Standard. Square’s integration with WordPress and WooCommerce allows businesses to accept payments online and in-person, with features such as Square Online and Square POS. When choosing a payment processor, businesses should consider the integration options with their e-commerce platform, as well as the payment processing fees, transaction fees, and monthly fees associated with each payment processor.

Integration with WordPress and WooCommerce

At Memberful, we believe insight is most valuable when it’s specific and when we can add most value to our readers. Given that one of our main products is a WordPress plugin, we thought it also made sense to evaluate PayPal versus Stripe for those of you looking to use WordPress and its ecommerce plugin, WooCommerce. For both, you’ll need to install and activate the WooCommerce Payments plugin.

Using a payment link can facilitate transactions for businesses by allowing customers to make payments easily through digital invoices or standalone checkout links.

All you have to do to integrate PayPal with WooCommerce is verify your PayPal account with the API, through the WooCommerce settings page. If you use PayPal Standard, you don’t need to install another plugin. But there are extensions you can download to improve the user experience: for example, the PayPal Express Checkout plugin lets users purchase directly from your WooCommerce store instead of redirecting to PayPal first.

For Stripe, it’s easy to connect with WooCommerce. But it may take a little time to fully activate Stripe on WooCommerce platform, especially if you are building the website for someone else. The WooCommerce Payments plugin will ask you for the details (such as date of birth and postal address) of any major stakeholders in the company so you may need to speak to any directors and founders. But once the payment gateway is activated, you won’t need to do it again.

Note: For all WooCommerce payment gateways, even if your deposits are set to daily, your first deposit per processor is held for seven days. This means that, for example, even if you have been using PayPal on your WooCommerce site for a year, if you activate Stripe too you’ll need a wait a week for that first Stripe payment to go through to your bank, once a transaction has been completed.

Customer service

We here at Memberful haven’t used PayPal in years, so we don’t have any recent experience with their customer service. Back when we did use PayPal, email support was slow and unreliable, and it was nearly impossible to get someone on the phone. At one point, we had a running joke because PayPal’s phone system kept hanging up on us before we could ever talk to anyone. This went on for months. There are also countless horror stories of PayPal freezing funds for no reason. It's also important to note that PayPal's system lacks the robust in-person payments functionality that Square offers through its point-of-sale hardware.

Stripe has open channels for email support, and they also have an IRC channel (#stripe on Freenode) where developers can chat and get live help from real engineers. This is invaluable if you’re working through a tough problem and need some live help. Stripe also introduced 24/7 live chat and phone support, which should further improve the customer service experience. However, for businesses focused on in-person transactions, Square offers the most competitive rates, making it an attractive choice compared to online-centric platforms like Stripe and PayPal.

When I first wrote this post, PayPal was suffering from scale, age, and bureaucracy. Stripe was new and hustling for market share and they were working hard to differentiate with great customer service. The real test will be over time. Stripe will find it more and more challenging to provide top-notch customer service as they get larger and larger but the future still looks bright for the now very established payment processor.

Frequently Asked Questions (FAQs) for Stripe vs PayPal

Is PayPal safer than Stripe?

Both Paypal and Stripe prioritize security, offering encryption and fraud detection. It ultimately depends on your preference and the specific needs of your business.

Can I use both PayPal and Stripe on my website?

Yes, many businesses use both PayPal and Stripe to offer customers more payment options.

Does Stripe offer recurring billing?

Yes, Stripe supports recurring billing, making it suitable for subscription-based businesses.

Which payment gateway has better customer support?

Both PayPal and Stripe offer reliable customer support, with extensive documentation and resources available online.

Do I need a merchant account for PayPal and Stripe?

No, both PayPal and Stripe allow you to receive payments without a traditional merchant account.

How long does it take to set up PayPal or Stripe?

Setting up both PayPal and Stripe is quick and straightforward, with PayPal requiring minimal setup, usually taking a few minutes to get started. Similarly, a Square account also requires minimal setup and integrates seamlessly with various payment and e-commerce platforms.

Conclusion: Stripe vs PayPal - competition is good

For Memberful, we chose Stripe, and we couldn't be happier with that decision. It's made everything we do easier from an engineering perspective, and we've been thrilled with the service and support. With that being said, PayPal has taken steps to respond to upstarts like Stripe, and has already improved their API significantly.

It will be interesting to see how these two companies continue to evolve and compete. In the end, we'll all enjoy better service because of it.