If you want your business to accept payments online, then you’ll need to partner up with a payment processing company that can reliably handle your digital transactions. As you research, two providers you’ll likely encounter are Authorize.Net vs. PayPal. But how do you know which of these platforms (or neither) is right for your business?
Before we answer that, let’s answer this: What do Authorize.Net vs. PayPal actually do? For these purposes, PayPal and Authorize.Net are both payment gateway providers that facilitate the process of accepting payments online. While this process can get a little complicated, at its most basic level your payment gateway is responsible for handling two key steps after your customer makes a credit card payment online: First, they’ll communicate with your customer’s bank to authorize whether they have sufficient funds to complete the purchase. Then, once your customer’s bank approves the transaction, the payment gateway handles the transmitting of funds between your customer’s bank and your merchant account.
However, both PayPal and Authorize.Net can do more than only handle online transactions. Here, we’ll give you a more detailed look into both Authorize.Net’s and PayPal’s features, and how much each service would cost you; then, we’ll break down how to choose whether Authorize.Net vs. PayPal would work best for your business.
Authorize.Net is a payment gateway provider that enables business owners to process several types of payments online, including all major credit and debit cards, e-checks, Apple Pay, PayPal, and Visa Checkout. (Authorize.Net is a wholly owned subsidiary of Visa, FYI.)
When you sign up for an Authorize.Net account, you can choose between a plan that includes a merchant account, or you can integrate your Authorize.net payment gateway with your existing, third-party merchant account provider. As a reminder, a merchant account is simply a type of bank account into which funds obtained through credit card transactions are held.
If you do decide to opt for a merchant account through Authorize.Net, that merchant account is individual to your business. When you apply, your business will undergo an underwriting process so that Authorize.net can assess your level of risk, and accept or deny your application.
Accepting online payments through your business website or ecommerce store is Authorize.Net’s major offering, but the company also offers mobile credit card readers—which are available through their partner, POS Portal—that can turn your computer or smart device into a POS system. That’ll enable you to accept credit card payments in person or over the phone, as well.
In addition to your payment gateway (and merchant account, if you opt for that service), you’ll also have access to the following Authorize.Net capabilities:
For additional costs, you can also accept e-checks, and have Authorize.net automatically update customer accounts in your Customer Information Manager and Automated Recurring Billing profiles.
Authorize.Net offers three service plans, so your price will depend upon which of these tiers you choose. Regardless of which plan you choose, though, you’ll be responsible for paying both a monthly service fee and a per-transaction fee.
With this option, Authorize.Net will provide you with both a payment gateway and a merchant account:
As the name suggests, this option works for customers who already have a merchant account with another provider, so they don’t need to open one with Authorize.Net:
Authorize.net’s tailored payment processing solution is the best option for businesses that process more than $500,000 in credit card payments annually. Pricing for this option is dependent upon the service that Authorize.net designs for you.
You’re probably aware of PayPal from a consumer perspective. But as your business’s payment processor, PayPal can allow your business to accept payments online, via invoicing with PayPal Invoicing or in person through PayPal Here, which is their combination of software and card-reading hardware. Whichever payment processing solution you choose, PayPal can accept several types of payments, including all major credit and debit cards, Venmo, and (naturally) PayPal and PayPal Credit.
But let’s start with how PayPal can let you accept payments online—which PayPal makes pretty simple. With PayPal Checkout, you can integrate a payment button into your business website or ecommerce store to provide your customers with a simple checkout process. If you’re on the PayPal Payments Standard plan, then you’ll use PayPal’s readymade payment button; and if you’re signed up for PayPal Payments Pro, then you can create a fully customizable, branded checkout experience. (We’ll tell you more about both of these PayPal plans next.)
Unlike Authorize.Net, however, PayPal doesn’t provide businesses with unique, individual merchant accounts; rather, PayPal aggregates all of their sellers into a single, large merchant account. Although this means that your business won’t need to undergo an underwriting process for approval, it also means that PayPal is on higher alert for signs of risk and, as result, they may be more likely to freeze or terminate your account if they detect unusual behavior.
As we mentioned, PayPal offers users two service plans: PayPal Payments Standard, or PayPal Payments Pro. Here’s what’s included in each plan:
As PayPal’s basic, free plan, PayPal Payments Standard is the simplest method of accepting credit and debit card payments on your ecommerce store: You’ll either copy and paste an HTML code for PayPal’s checkout button, or you’ll integrate their plugin with your shopping cart. PayPal is compatible with all major ecommerce platforms, including WooCommerce, Shopify, Magento, and BigCommerce.
For an additional monthly fee, business owners can opt for PayPal Payments Pro, which provides increased capabilities and a fully customizable checkout experience. Unlike PayPal Payments Standard, which reroutes customers to a PayPal-hosted checkout page, PayPal Payments Pro keeps your customers on your own, branded page.
With this advanced plan, you can also accept more types of payments than you can with their standard plan, including bank transfers. Their virtual terminal also enables you to manually accept credit card payments via your laptop, tablet, or smartphone, without needing to use an external card reader.
PayPal charges standard, flat-rate fees that vary depending on the type of payment you’re processing, and whether you’re accepting payment online or in-person. All of PayPal’s merchant fees are clearly delineated on their website.
If you’re a U.S.-based business, it’s likely that the major fees you’ll be dealing with are through mobile, in-store, and online payments, whose fees are as follows:
If you use PayPal Here card readers to process payments in person, you’ll need to pay an additional, one-time fee for PayPal’s external hardware:
Also note that PayPal Payments Standard is free to use, but PayPal Payments Pro will cost you an additional $30 per month.
Ultimately, whether you opt for Authorize.Net vs. PayPal is entirely based upon your business’s transaction volume and selling behaviors.
If you’re an ecommerce business with a fairly low transaction volume, consider PayPal over Authorize.Net, as their arsenal of online business tools are among the most comprehensive you’ll find. PayPal Here, their suite of physical credit card processing tools, are a bit lacking in comparison, as they’re limited to mobile POS terminals—though they do partner with reputable POS systems, like Vend and Lavu, which can afford you the robust hardware you need to process payments in person. Signing up for PayPal is incredibly easy and fast, too, and because you don’t need to undergo a vetting process, even higher-risk businesses can have a shot at approval.
Generally, though, individual merchant accounts—like those provided by Authorize.Net—are more stable than aggregated payment processors like PayPal. Because the merchant account company provides accounts and rates based on your individual business’s credentials and risk level, they may not be as sensitive to perceived red flags—like a suddenly high volume transaction or other unusual behavior in your account—than a payment processor would.
That said, customers of both Authorize.Net and PayPal warn against unexplained account terminations and held funds; in fact, each company’s Better Business Bureau profiles are rife with customer complaints. So whichever payment processing solution you choose—whether Authorize.Net vs. PayPal or another platform entirely—we recommend researching those providers as much as possible before signing on. Better to sink time into due diligence now than to deal with an unexpectedly frozen account down the line.
With all that in mind, neither Authorize.Net nor PayPal will lock you into years-long commitments: Authorize.Net charges a monthly fee for their services, and PayPal is a pay-as-you-go service (unless you opt for PayPal Payments Pro, in which case you’ll need to pay $30 monthly in addition to your transaction fees). Although cancelling an account is never ideal, if you do find that you’re unhappy with either service, you can do so without incurring a hefty early cancellation fee.
Meredith Wood is the founding editor of the Fundera Ledger and a GM at NerdWallet.
Meredith launched the Fundera Ledger in 2014. She has specialized in financial advice for small business owners for almost a decade. Meredith is frequently sought out for her expertise in small business lending and financial management.