In order to securely accept payments on your ecommerce store or small business website, you need to team up with a good payment service provider (also known as a PSP)—and big-hitters Braintree vs. PayPal are just two of your many PSP options.
But before we get into the details about Braintree vs. PayPal, let’s clarify our terms. A payment service provider will supply your business with two necessary tools in order to accept online payments: a payment gateway and a merchant account. Essentially, a payment gateway is the software application embedded into your online store that authorizes the secure transaction of credit card payments.
Merchant accounts are the next step in the payment process: It’s a type of bank account into which payments obtained through credit card transactions (whether rendered online, over the phone, or in-person) are held before the provider handling this transaction deposits those funds, minus their fees, into your business bank account.
Ideally, a good payment service provider—Braintree vs. PayPal among them—makes the checkout process seamless for your customers. Importantly, too, they should make it as easy as possible for small business owners, or their team of developers, to implement this technology onto their platforms. Here’s what you need to know about Braintree vs. PayPal, so you can decide which (if either!) of these PSPs are right for your online business.
Braintree Features, Pricing, Pros, and Cons
Braintree was acquired by PayPal in 2013, but they’re hands-down the more tech-forward PSP among the two. With their impressive suite of developer tools, you or your engineers can customize your shopping cart to the hilt and integrate it with your existing platform. It’s designed to scale along with your business, too, so you never need to worry about outgrowing this platform.
Through Braintree, you can accept PayPal payments, Venmo in the U.S., all major credit and debit cards, digital wallets, local payment methods, and ACH deposits in over 130 currencies from 45 countries around the world. And if you want to accept credit card payments in person—if you have a brick-and-mortar location in addition to your online store, or if you want to sell your goods or services on-the-go—then you can integrate the PayPal Here SDK into your POS app, which will enable you to use PayPal’s range of physical POS card readers.
What makes Braintree especially unique is that they provide their customers with their own, individual merchant accounts, rather than lumping them into a single, aggregated merchant account as most third-party payment processors do.
In addition to a payment gateway and merchant account, Braintree offers their small business customers tools and services to help streamline their internal processes, like customizable sales reporting, recurring billing, and integration with a ton of third-party apps. As you can imagine, too, Braintree is loaded with advanced fraud and data security tools, and ensures PCI compliance.
Braintree is an especially smart option for marketplace businesses, as Braintree actually offers a payment solution designed particularly for these platforms’ unique needs: With Braintree Marketplace, you’ll get the infinitely customizable, scalable payment solution of a standard Braintree account, plus an integration with Hyperwallet, which enables fast, efficient, and secure global outbound payouts.
Braintree’s pricing is incredibly simple: They charge a flat-rate fee of 2.9% + $0.30 per transaction. The exceptions are ACH deposits, which cost 0.75% per transaction, and PayPal and PayPal Credit payments, which incur no fee at all. (Verified charitable 501(c)(3) organizations receive discounted rates.)
For that pay-as-you-go fee, you’ll have access to Braintree’s major products and services, including a merchant account and payment gateway; fraud tools; third-party integrations; reporting; and recurring billing. You’ll also be able to contact Braintree’s customer service team via phone and email, and take advantage of their data migration assistance service.
Other than that, the only major fees you need to know about are:
- An additional 1% fee for transactions in non-U.S. currency
- An additional 1% fee for non-U.S. customer credit cards
- $15 chargeback fee
Any other fees incurred for certain transactions are clearly delineated on Braintree’s Pricing page. Alternatively, businesses that process larger volumes can contact Braintree to receive a custom pricing model, which might carry a customized flat rate or interchange-plus pricing. And as a major bonus, you can also request a free sandbox trial to test out how Braintree would work with your existing platform before committing to the service.
Braintree Pros and Cons
As we mentioned, Braintree provides every customer with their own, dedicated merchant account, rather than depositing your funds into a provider-held aggregate account. Having your own merchant account is a much safer and stabler solution for a few reasons. Firstly, the risk of fraud inherently increases with aggregated accounts, so providers are extra-sensitive to unusual behaviors—which may result in more frequent frozen accounts and held funds.
Also, merchant account providers must align with industry-set rules regarding the handling and disbursal of money in dedicated merchant accounts. On the other hand, aggregate accounts are fully governed by the provider itself, so they’ll set their own rules and terms that they can essentially change at any time.
Beyond that, Braintree’s pricing is simple and transparent, and their developer tools are some of the most robust and sophisticated in the market (perhaps competing only with Stripe, another behemoth in the world of tech-centric PSP providers). If you have the ability or the team to take advantage of Braintree’s developer tools, you can pretty much create whatever checkout experience you want.
On the downside, where Braintree’s developer tools are among their greatest strength, this option might not make sense if you don’t have the engineers (or the engineering skills yourself) to use them. In that case, you might want to consider a simpler PSP—and PayPal might fit the bill.
PayPal Features, Pricing, Pros, and Cons
PayPal offers a ton of merchant services, including the ability to accept and process payments in person (with PayPal Here) and through invoicing (with PayPal Invoicing). But today, we’re focusing on PayPal’s payment gateway.
PayPal offers two payment gateway services: PayPal Payments Standard and PayPal Payments Pro.
PayPal Payments Standard is best if you don’t have coding experience or a developer on your team, as you’ll simply need to copy-and-paste a line of code, or integrate their plugin with your existing shopping cart. According to PayPal, either option will only take you about 15 minutes to implement. As you can likely guess, PayPal Payments Standard doesn’t allow for customization; rather, it’ll embed a “Buy Now” button onto your website, which will then reroute your customers to a PayPal-hosted checkout page.
If you’d prefer a fully customized checkout solution that keeps customers on your own website, then opt for PayPal Payments Pro. This plan also gives you access to a virtual terminal, which allows you to accept credit cards through your computer, mobile phone, or devices without an external card reader. Do note, however, that this solution requires a developer to implement.
Both payment gateways enable you to accept payments in 25 currencies from 202 countries, send online invoices, and offer simplified PCI compliance. Also, both are compatible with major ecommerce platforms like Shopify, BigCommerce, WooCommerce, and Magento.
PayPal Payments Standard costs no additional monthly fee, but PayPal Payments Pro costs $30 per month. Whichever payment gateway plan you choose, you’ll pay 2.9% + $0.30 per transaction if the funds are coming from a U.S. account—which, as you can likely tell, is the industry standard—though nonprofit organizations can receive a discounted rate.
The exception here is American Express card usage, which incurs a 3.5% transaction fee. And if your customer’s funds are coming from outside the U.S., then you’ll need to pay a fee of 4.4% plus a fixed fee based on the currency.
You’ll need to pay extra for certain PayPal’s add-on features, too. PayPal’s recurring billing services costs an additional $10 per month, and their Advanced Fraud Protection Services cost $10 per month plus an additional $0.05 per transaction. Any other fees you may need to know about, including chargeback fees and mobile card reader fees, can be found on PayPal’s merchant fees page. Do know, however, that you’re not locked into long-term contracts, so you can cancel your PayPal payment gateway plan at any time without incurring cancellation fees.
PayPal Pros and Cons
Small business owners who are worried about the complexities involved in setting up a payment gateway will definitely benefit from PayPal Payments Standard, as it’s designed specifically to make integration simple for non-programmers.
However, PayPal doesn’t provide users with their own merchant accounts. Instead, PayPal deposits your money into their single, aggregated account, then delivers your funds into your bank account minus fees according to the terms delineated in your contract.
It’s also worth noting that PayPal’s (and, by extension, Braintree’s) in-person POS terminals are fairly limited—right now, they only offer mobile card readers, and they don’t have a countertop register. However, they do partner with other reputable POS systems, like Vend and Lavu, so a more robust POS solution is available through the PayPal network if you need it.
Braintree vs PayPal: Which PSP Is Right for Your Business?
Ultimately, Braintree vs PayPal are both reliable PSP providers. But we’d say that if you want the most customization possible for no additional fee—and join the ranks of some of the world’s biggest tech companies, like Uber, Dropbox, and Jet—then opt for Braintree, because to get a similar level of customization through PayPal, you’ll need to pay an extra $30 per month for a PayPal Payments Pro account. We’d also recommend Braintree for marketplace companies, as Braintree Marketplace is designed especially to meet your unique needs.
On the other hand, PayPal (or, more specifically, PayPal Payments Standard) is likely a better option for business owners who need a simple online payments solution that’s easy to integrate into their ecommerce platform.
Keep in mind, though, that Braintree vs. PayPal are hardly the only players in the PSP game. So if you’re unsure whether Braintree or PayPal is right for your business, explore your other options—Stripe is another favorite, especially among tech businesses—so you can feel absolutely confident in your choice of payment service provider.
Meredith Wood is the founding editor of the Fundera Ledger and a vice president at Fundera.
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.