Stripe vs. Paypal: Which Is Right for Your Business?

Maddie Shepherd

Contributing Writer at Fundera
Maddie Shepherd is a former Fundera senior staff writer and current freelance writer. Maddie has an extensive knowledge of business credit cards, accounting tools, and merchant services, but specializes in small business financing advice. Maddie has a bachelor's degree in Spanish and Latin American cultures from Barnard College.

As you go about the process of figuring out how to accept payments online via your small business’s website, two big names are likely to pop up: Stripe and PayPal. When it comes to Stripe vs. PayPal, you’re looking at two payment processing companies that deliver their services in vastly different ways, but will ultimately do the same thing for your business—allow your customers to purchase your products or services digitally. 

But what’s the difference between Stripe vs. PayPal? And, if you’ve narrowed down your online payments options to Stripe or PayPal, how do you choose between the two?

We’ve compiled a guide to help you distinguish between Stripe vs. PayPal. Plus, if you’ve narrowed down your options to these two online payments companies, we’ll help you decide whether Stripe or PayPal—or another alternative—is the right choice for your business.

Understanding Payment Gateways & Payment Service Providers

Before we get to the details, we need to iron out some fundamental concepts that understanding Stripe vs. PayPal will require. Having an understanding of both payment gateways and payment service providers (PSPs for short) can seriously clarify your search for the right online payments solution for your business.

Payment gateways provide those with an ecommerce platform the ability to authorize online payments—sort of like a middleman between a card network and your business’s payment processor. Both Stripe and PayPal offer payment gateways as part of their service, which is essential for those looking to accept payments online. 

Payment service providers connect business owners with the merchant accounts and technology needed to fully process and receive customer payments both online and via a variety of other methods. In the context of ecommerce, payment service providers provide both payment gateways and merchant accounts for processing online payments. Both Stripe and PayPal are payment service providers, so rest assured you can get everything you need to begin processing payments online from both of these services. 

When it comes to Stripe vs. PayPal, there is one other factor that is important to understand in terms of the way they both deliver their services. Stripe and PayPal are considered “aggregators.” This means they group all of their clients into one large merchant account, rather than providing each client with their own dedicated merchant account. The benefit for business owners is that it is easy to get approved to begin processing online credit card payments with either Stripe or PayPal, given that aggregators have a lower threshold for accepting new clients than a dedicated merchant account provider.

However, be aware that aggregators have a spotty track record when it comes to account holds and terminations. Generally speaking, you are more likely to experience delays in your service working with an aggregator, given they have a lower tolerance for fraud and chargebacks. But if you’re looking to begin processing payments quickly, aggregators like Stripe and Square are among your best and cheapest options.

Now that you’ve got a grasp on these two concepts crucial to the question of Stripe vs. PayPal, let’s compare and contrast these two online payment options to see which is the best choice for your business. 

stripe vs. paypal

Stripe Payments: The Basics

To get an idea of how to choose between Stripe vs. PayPal, you’ll also need to know the details on the two options. First up, we’ll dig into what Stripe payments can offer your business.

Of all of the top PayPal alternatives to choose from, Stripe is one of the most trusted and widely used. Brands like Slack, Lyft, and Glossier trust Stripe with their online payments integrations, and for good reason—along with their unwavering compliance and security, Stripe offers remarkably comprehensive payments services.

Stripe will allow you to set up an online payment platform for your site in a single integration. But even after you get your Stripe checkout process ready to go, Stripe will keep working for your business: It will allow you to accept, process, settle, reconcile, and manage all of your business’s online transactions, all through your Stripe platform (processed payments typically arrive in your business bank account within two days). In addition, Stripe accepts all major credit cards, as well as over 100 different types of foreign currency. 

Here are the various products Stripe offers for accepting payments:

  • Stripe Elements: A custom UI toolkit that allows merchants to build their own custom payment form for desktop, tablet, or mobile.
  • Embeddable Checkout: An embeddable payment form for desktop, tablet, or mobile that works within your website.
  • In-Person Payments: While physical payments aren’t Stripe’s bread-and-butter, it offers a host of different mobile card readers and terminals that allow you to accept payments in person. Furthermore, Stripe provides you with the development tools to build your own point of sale (POS) to integrate with your hardware.
  • Invoicing: With Stripe Billing, you can send custom invoices and request payment from customers, including ACH payments. Stripe Billing also allows you to create recurring, usage-based, tiered, promotional, and scheduled payments.
  • Stripe Sources: The Sources application-programming interface (API) allows merchants to accept payment methods from all around the world with a single integration. Supported payment methods include Alipay, Bancontact, and Giropay. You can also use Stripe.js to build your own checkout form with their set of APIs.

Stripe also provides a handful of payment features, including Stripe Connect, a payment platform for large marketplaces (used by both Lyft and Kickstarter). Stripe Sigma is a customizable reporting suite. Stripe Relay is an API used to power mobile in-app purchases, and Stripe Issuing is a platform for creating, distributing, and managing physical and virtual cards.

Plus, if you want to integrate other software with your Stripe account, you can do so with relative ease. Stripe supports third-party integrations with companies like Shopify, FreshBooks, and Wufoo. So, even if Stripe’s online payments platform doesn’t support a capability you need it to—like creating a store or invoicing customers—you can likely connect a software that does to your Stripe account.

In terms of security, Stripe protects customers against fraud with Radar, a machine-learning fraud system that trains on data across millions of global companies to help differentiate between fraudulent and legitimate purchases. If you ever need help with your Stripe system, you can access their customer help team 24/7.

All in all, Stripe’s payment services will cost your business 2.9% of each transaction value, plus $0.30 per transaction for their pay-as-you-go account structure. Payment using international credit cards will cost an additional 1%, while ACH transfer payments incur a 0.8% fee (capped at $5).Other charges to be aware of include a 0.4% fee on recurring payments with Stripe Billing after your first $1 million in payments processed, and a chargeback fee of $15. If you want access to the account management, migration assistance, volume discounts, and dedicated support that Stripe Enterprise offers, then you’ll have to contact their sales team for more info on pricing.

PayPal Payments: The Basics

As you can see, Stripe payments offers a high-tech and highly customizable solution for small business owners. PayPal, on the other hand, offers an oftentimes simpler solution. However, that’s not to say it cannot be equally as powerful. After all, PayPal payment processing is one of the most widely used services for accepting credit and debit card payments.

To start accepting payments online with PayPal, sign up for a free PayPal business account and purchase Payflow—PayPal’s proprietary payment gateway. With Payflow, you can create a hosted checkout page on your business’s website. Payflow makes it possible to accept most major credit cards as well as a variety of foreign payment methods. Funds from processed payments typically arrive in your business bank account within a matter of 48 hours. For an additional cost, you can add features like advanced fraud protection, recurring billing, and buyer authentication. As it stands, the cost to use Payflow with your small business is $25 per month plus 2.9% + $0.30 of every online payment processed.

Aside from payment gateways, PayPal also offers a variety of other payment solutions, including PayPal Payouts, which allows you to send payment to up to 5,000 people at once. If you also need to accept payment in person, PayPal’s mobile payments app—PayPal Here—can process credit and debit cards in conjunction with a mobile card reader (2.7% processing fee). Invoices can be sent and processed at a rate of 2.9% + $0.30, and PayPal offers business account holders an interface where they can customize their invoices to match their business’s branding.

Outside the realm of payment processing, PayPal also offers business financing solutions, debit cards, and even shipping services. Similar to Stripe, PayPal also has a software developers kit that you can use to integrate PayPal with over services. However, to take advantage of this service you need to have some background in programming.

All in all, PayPal’s online payment options aren’t as in-depth as Stripe’s, but they are certainly good enough for most businesses.

stripe vs. paypal

Stripe vs. PayPal: Where Stripe Is Better

Having solidified what Stripe and PayPal have to offer in their own right, it’s time to consider them relative to each other to get to the bottom of Stripe vs. PayPal.

First, let’s take a moment to highlight what Stripe wins out when measured against PayPal. To start, when compared to Stripe, PayPal online payments are actually pretty basic technology—if you can believe it.  Because Stripe offers a fully integrated online payment service setup, it’s streamlined a bunch of previously disparate, low-tech processes into one, tech-enabled package.

Plus, Stripe is more developer-friendly than PayPal. That is, Stripe will always be customizable and engineer-facing, whereas PayPal won’t necessarily be customizable or geared toward tech professionals. As a result, Stripe will be ripe for branding—and can even be considered a white-label service. Plus, you won’t have to pay a lofty fee for this white-label option. 

All in, if you’re a tech-forward company that has or can access engineering resources, Stripe offers a more streamlined, branded experience for your customers.

Stripe vs. PayPal: Where PayPal Is Better

On the other side of the Stripe vs. PayPal debate, PayPal online payments also have a lot to offer small businesses. If you’re expanding your brick-and-mortar business into an online store, then we suggest you start your ecommerce presence with PayPal Payflow. This online payment option is one of the easiest to install and most affordable on the market. Unlike Stripe, PayPal Payflow won’t require a dedicated tech professional for setup—the the transaction fee you pay is exactly the same as with Stripe.

That said, if you’re interested in branded checkout for your website, then we suggest you look to Stripe rather than PayPal, as both will likely require a developer, and Stripe will come with no base fee or setup fee.

Finally, if you’re already working with a pre-existing merchant services account for your business—and you want to use that same account for your online payments processing—then PayPal will be a clear winner for you.

When you zoom out, PayPal will win in Stripe vs. PayPal for businesses that aren’t necessarily web-based. If you’re eager to offer your goods or services online—but you’re primarily a brick-and-mortar business—then PayPal’s online payment systems are a good match for your needs.

Stripe vs. PayPal Alternatives

Not quite convinced that either Stripe or PayPal is the right online payments solution for your business’s needs? Not to worry—there’s a whole market of online payments systems out there. So, even though these two options might be the biggest names to look into, you don’t by any means have to choose between Stripe vs. PayPal.

In fact, there are actually some other huge names in the online payments industry—you just might recognize them for their services other than their online payments infrastructure. Here are two more online payments solutions for you to consider if you haven’t found your perfect fit with Stripe vs. PayPal.

Amazon Pay

If you’re already a merchant on Amazon, then a top payment option to consider is Amazon Pay, which will allow customers to use their stored Amazon payment information when they checkout on your website. Amazon Pay is a payment gateway, so it will require you to come to the table with your own merchant services account to fully process payments.

That said, it offers an API that will allow you to customize the checkout process so it can be both convenient and on-brand. Plus, it will simply cost your business 2.9% of every domestic transaction value or 3.9% of every international transaction value, plus $0.30 per transaction, with no setup or monthly fees at all.

Square

Finally, you’re likely familiar with Square thanks to their seemingly ubiquitous iPad POS systems. But did you know that they also offer online payment services? That’s right—Square is a full payments services provider, and they now offer ecommerce services through Weebly that start at just $8 a month. Plus, if you want to simply integrate a checkout experience into your pre-existing website, then you can opt for a Square API. Every payment that you process online via Square will cost your business 2.9% of the transaction value, plus $0.30 per transaction.

Stripe vs. PayPal: The Final Verdict

So, what’s the verdict on this Stripe vs. PayPal showdown? Well, that’s for you to decide, of course. You know your business better than anyone, and you should choose the online payments solution that best lends itself to what you’re imagining your business’s online checkout process to be. That said, if you’re looking for an affordable, entry-level online payment gateway, then PayPal Payflow will be an easy choice. However, if you want an easy-to-customize, white-label online experience, then Stripe could very well beat out PayPal.

Don’t forget that you have lots of options though—Stripe vs. PayPal is far from the end-all and be-all of online payments solutions, so be sure to shop around if you’re hesitant to move forward with either of these two options.

Editorial Note: Fundera exists to help you make better business decisions. That’s why we make sure our editorial integrity isn’t influenced by our own business. The opinions, analyses, reviews, or recommendations in this article are those of our editorial team alone. They haven’t been reviewed, approved, or otherwise endorsed by any of the companies mentioned above. Learn more about our editorial process and how we make money here.

Maddie Shepherd

Contributing Writer at Fundera
Maddie Shepherd is a former Fundera senior staff writer and current freelance writer. Maddie has an extensive knowledge of business credit cards, accounting tools, and merchant services, but specializes in small business financing advice. Maddie has a bachelor's degree in Spanish and Latin American cultures from Barnard College.

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