In the era of eCommerce, online payment processing has become crucial for any business looking to grow and succeed. As such, which platform to choose becomes a question that can’t be answered lightly. When it comes to online payments, Stripe and PayPal are two of the most popular platforms available.

But how can you know which one suits your business best? Do you choose based on their pricing structure or their features? While the choice will rest solely on your shoulders, this article will help make things easier by providing you with all the details you need.

In this article, you’ll find an overview of PayPal and Stripe, including their pricing and features, as well as their similarities and differences. Plus, you’ll even find a few alternatives to choose from.

PayPal vs. Stripe: An Overview of Each Option

To compare each of the platforms and their offerings, we’ll need to have a look at how they work, their features, and best use scenarios:

PayPal

PayPal offers a wide range of services, from digital wallets to loans, but its most well-known feature is its user-friendly payment processing. PayPal’s buy buttons can be added to your website for free, but there is a monthly fee for a virtual terminal, a hosted checkout page, and recurring billing. While PayPal Commerce is primarily geared toward eCommerce, third-party partners or PayPal Zettle can be used to accept POS payments. Developer tools are also available from PayPal.

To get started, sign up for PayPal on their website. The registration process is easy, and new users immediately access a digital wallet. It is also possible to link bank accounts to the site to transfer money on and off the platform.

After signing up for PayPal, you can choose how to use the platform to meet your needs, order equipment, or add tools and features. You can also get a POS system, obtain a company loan, or use the platform to receive and send individual invoices.

However, PayPal is considerably more expensive than other payment processors. 

PayPal could be the right solution if you need a tool that accepts payments but don’t want to set up a more complicated system like Stripe.

Here are some scenarios where you might prefer PayPal over Stripe:

• Your friends and family already use PayPal to send and receive money.
• You would like to accept PayPal payments.
• Your sales volume is low, and you are willing to pay more for greater simplicity.
• You have an online and physical store.

Features

• Invoicing with PayPal is a simple process. Merchants are charged a fee for invoices paid through the platform but are not charged for sending invoices.
• Those with a business account can apply for a PayPal Business Loan to help them meet their expenditures. Potential borrowers check their eligibility using PayPal’s web service, which does not affect their credit score. Several factors determine your eligibility, including your credit history and your company’s financial health.
• PayPal also offers flexible lines of credit if your company regularly needs access to small sums of money to cover expenses.
• With seller protection, you can protect your sales from fraud and reduce the chances of chargebacks.
• Tools that calculate sales tax owed on purchases based on geography and transaction type are available online.

Pros

• Payments with PayPal are easy to set up; no coding skills or outside resources are required. Furthermore, you can easily set up invoices and automated recurring payments.
• PayPal also functions as a digital wallet linked to bank accounts that can be used to send money.
• Several major e-commerce systems offer simple PayPal integration, including Shopify, WooCommerce, Depop, Wix, and Squarespace.

Cons

• Since August 2021, PayPal’s processing rates have increased for US merchants, making it more expensive than Stripe and other prominent payment processing solutions. 
• If you process a fraudulent transaction and the cardholder disputes it, you will be charged a $20 fee unless PayPal’s seller protection program covers the transaction.
• Your account could be suspended if you fail to pay your fees or process too many fraudulent payments.
• PayPal’s personalization features are limited. It is easier to set up but cannot be tailored to your specific needs.
• Some shoppers dislike using PayPal to send money because they believe it’s unsafe.
• The payment options accepted by PayPal are PayPal Cash, PayPal Cash Plus, bank accounts, PayPal Credit, debit or credit cards, and reward balances. Some popular payment methods, such as Apple Pay, are not supported by the platform.

Stripe

The Stripe payment platform combines both a payment gateway and a payment processor. Despite the fact that Stripe can be used for in-person transactions, it focuses on eCommerce, offering a wide range of developer tools to integrate Stripe’s payment functionality into your online store. As well as offering a variety of payment methods and currencies for international transactions, Stripe provides tools that help you handle VATs and exchange rates. A per-transaction fee is usually charged for advanced features.

Stripe lets you choose between the company’s regular offers and a tailored e-commerce package when you sign up. A dashboard will allow you to track your earnings, and you will be able to make payments by purchasing equipment or downloading plugins.

Besides payment processing, Stripe offers additional services, such as billing, invoicing, and identity protection. Depending on your chosen solution, you can use inventory-management tools or integrate Stripe directly with QuickBooks.

Stripe might not be easy to set up if you aren’t an IT expert and don’t have the funds to hire someone to do it for you because it has many bells and whistles. Stripe’s major disadvantage is that it may require some coding skills to set up because of its many tools and functionalities. You should implement PayPal or find a simpler solution if you find Stripe overwhelming.

Stripe is a good choice if any of the following apply:

• You rely heavily on e-commerce for your internet business.
• Online sales are a regular part of your company’s operations.
• An improved fraud-prevention tool is necessary for you. An entirely customizable platform is what you are looking for.

Features

• You can create recurring invoices and subscriptions for your business. Recurring charges are charged at a rate of 0.5%.
• You can invoice up to 25 customers per month for free; you have to pay 0.4% per invoice.
• Provide clients with bespoke gift cards to reward them and promote your business.
• The platform offers tax computation tools; each transaction costs 0.5%.
• Protect your consumers from identity theft by authenticating their identities; each verification costs $1.50.
• Stripe’s Radar service prevents chargebacks and fraud.
• Set up alerts to let you know when to order more of the items you have on hand.

Pros

• Most types of transactions are significantly cheaper with Stripe than with PayPal.
• Many integration options are available, including POS systems and merchant accounts.
• Because Stripe offers a low-cost trial period and doesn’t charge any set-up, cancellation, or maintenance fees, it’s ideal for seasonal businesses.
• Plugins, features, and tools are available for a variety of businesses.
• Setting up an account is simple with Stripe online, but it can take some time if you need equipment supplied.

Cons

• Your account may be suspended if you handle a bad transaction or have a technical problem.
• You may be responsible for a chargeback fee of up to $15 if you handle a fraudulent transaction.
• Readers for credit cards are required. While PayPal provides a free in-person card reader, Stripe requires you to pay for the reader. However, you can purchase a credit card reader from PayPal as well.
• You might have difficulty setting up extra features without an IT staff member or a friend to assist you.
• You may need to calculate your taxes or contact a CPA if you need tax services.

Similarities Between PayPal and Stripe

PayPal and Stripe have a lot in common, from their security tools to the platform integrations. Here’s what you can expect from both:

• Stripe and PayPal accept all major credit cards.
• Both apps let users take orders in person, check out online, or manually input payment card information (called a “keyed transaction” or “virtual terminal transaction”). However, PayPal charges a greater cost for keyed transactions.
• Both platforms cost $249 for card reader terminals. Stripe charges $59 for its mobile card readers, while PayPal charges $29 for the first reader and $79 for additional readers. Unless you need an absurd number of card readers, it more or less balances out. If you bought two card readers, Stripe would only cost $10 more than PayPal.
• The chargeback and dispute fees for both platforms are similar ($15 for Stripe and $20 for PayPal), as well as their refund policies (no additional charges for refunds, but original purchase processing fees are not refunded).
• Both PayPal and Stripe offer two-factor authentication, data encryption, risk monitoring, fraud detection and prevention, and other high-quality security features. 
• It is possible to generate basic transaction reports and payout histories with both systems. PayPal’s reporting capabilities are likely slightly superior to Stripe’s, but neither are impressive enough to serve as a tie-breaker.
• There is a wide range of natively integrated apps on both platforms, and both programs integrate with Zapier.

Differences Between PayPal and Stripe

While they have a lot in common, PayPal and Stripe have important differences in their pricing structure and features. Here’s a look at each of them:

Features

Despite the similarities between Stripe and PayPal, they also have significant differences. The majority of the differences between Stripe and PayPal arise from the fact that Stripe specializes in tailored solutions for online merchants, while PayPal emphasizes low-volume merchants wishing to begin selling quickly.

Depending on your company’s needs and interests, one provider may be more suitable than the other. Each platform has trade-offs that you need to consider when it comes to making a choice. Do you need ACH assistance or a virtual terminal? Do you need customized solutions or a system that is easy to set up?

Here are the exclusive features of each platform you need to consider:

PayPal Exclusive Features

• Acceptance of PayPal digital payments
• A virtual terminal
• The lowest in-person processing rate
• Non-technical users will find it easy to use.
• A robust ecosystem of features

Stripe Exclusive Features

• Online processing at the lowest rate
• Support for ACH payments
• A high level of customization at every stage
• Payments can be made in more than 135 different currencies (PayPal only accepts 25 currencies)
• Support for mobile wallets (including Apple Pay) and local payment methods when traveling abroad

Costs and Fees

The pricing structure of each platform is as follows:

• Monthly Fees: Neither has a monthly cost, but PayPal offers two premium plans, Payments Advanced and Payments Pro, at $5 and $30 per month.
• In-Person Transactions (PayPal Zettle and Stripe Terminal): PayPal charges 2.29% + $0.09 per transaction while Stripe charges 2.7% + $0.05).
• Online Credit Card Payments: PayPal has a rate of 2.59% to 3.49% + $0.49 per transaction, which varies according to your plan. Stripe, on the other hand, has a rate of 2.9% + $0.30 per transaction.
• Chargebacks: PayPal charges $20 while Stripe charges $15 for chargeback fees.
• Cross-Border Fee: PayPal’s fee for cross-border transactions is 1.5%, while Stripe’s is only 1%.
• ACH Payments: Stripe charges 0.8% per transaction for ACH payments, capped at $5. PayPal doesn’t offer this payment option.
• Currency Conversion Fee: Stripe’s fee for currency conversion is 1.5%, which PayPal doubles with a 3% to 4% rate.

The use of one processor over another will not be beneficial to every merchant. In general, Stripe fees are less expensive than PayPal fees for merchants who primarily sell online. Stripe’s pricing is preferable to PayPal’s for international merchants dealing with cross-border and currency conversion costs.

PayPal’s online per-transaction cost is now $0.49 (compared to $0.30 with Stripe), so online PayPal merchants with modest average ticket amounts would pay more with each transaction, giving Stripe the advantage.

However, PayPal’s transaction fees are lower than Stripe’s when it comes to physical sales. Along with PayPal’s superior POS capabilities, this demonstrates PayPal’s advantages over Stripe for brick-and-mortar businesses.

PayPal and Stripe can be expanded, allowing additional functionality to be purchased as add-ons.

4 Alternatives to PayPal and Stripe

Even though PayPal and Stripe cater to a wide range of businesses, both have flaws, and neither is an ideal fit for every small business. Here are some popular alternatives:

Square

Similar to Stripe and PayPal, Square is a third-party processor that provides several eCommerce features, card readers, and (unlike Stripe and PayPal) full-fledged POS systems. Aside from its competitive flat-rate pricing (2.9 percent + $0.30 per online transaction and 2.6 percent + $0.10 per in-person transaction), Square offers excellent multichannel selling features, an online store builder, and several in-house and third-party add-ons.

Skrill

PayPal and Skrill have few differences, but Skrill is better suited for overseas merchants. Paysafe operates this payment option similar to PayPal. It is particularly useful if you’re spending money in Europe and the United States through Skrill. Skrill prioritizes security, just like PayPal. Sign up for an account and start using the site right away.

Chargeback protection, API simplicity, and sophisticated fraud management are all provided by Skrill. Using the one-tap capability, you can make repetitive payments with a single touch, enabling frictionless payments. In addition, it offers multi-currency accounts, extensive reporting and analytics, and multilingual customer support.

Payoneer

Payoneer is another great option for international payments because it allows you to collect funds in many different currencies and bill clients worldwide. Opening local currency accounts is possible in the United States, Canada, the United Kingdom, China, Australia, Japan, and several European countries.

Money can be received and withdrawn with Payoneer, as well as a single or mass payout. The company has a network of partners and accepts integrated, third-party, and escrow payments. APIs are also available from Payoneer.

Shopify

Among the many excellent payment options for online merchants, Shopify Payments is one of the best. Shopify has extensive expertise in the e-commerce industry and can integrate with your store seamlessly. With Shopify Payments, you can start accepting online payments immediately without adding a third-party payment provider. Shopify Payments is easy to set up, and its overall accessibility makes it an excellent alternative to PayPal.

The Shopify Payments platform includes the standard payment features you’d expect from an e-commerce platform, such as inventory management and payment processing.

Final Takeaway

Stripe and PayPal are competing in similar market spaces, so it stands to reason that they would have many similarities. However, their key differences can be pretty consequential depending on the nature of your business. If you want to build your own eCommerce business without help, and in-person payments are important to you, choose PayPal. However, if you can hire a web developer to customize your platform and want lower fees for online processing, choose Stripe. If neither option suits you, you can always check other alternatives like Square, Amazon Pay, Google Pay, or Apple Pay.