Stripe vs. Paypal: How to Choose the Best Online Payment Option
When it comes to Stripe vs. PayPal, we’re looking at two of the largest online payment service providers on the market. Both can provide your business with everything it needs to start accepting payments online, including a merchant account and payment gateway. Plus, both charge an online payment processing fee of 2.9% + $0.30. However, PayPal will be the better option for small businesses, given their simple setup and ease of use. Stripe is a good option for larger businesses, as they offer more customization and additional features.
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 payment 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 and 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 payment solution for your business.
Payment gateways provide those with an ecommerce platform or brick-and-mortar store 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. 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 and in-person from both of these providers.
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 Payments: The Basics
To get an idea of how to choose between Stripe vs. PayPal, you’ll need to know the details of each of these 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 payment 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 system (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). Other features include Stripe Sigma, a customizable reporting suite; Stripe Relay, an API used to power mobile in-app purchases; and Stripe Issuing, a platform for creating, distributing, and managing physical and virtual cards. Stripe also recently rolled out a variety of additional features, including a financing product and corporate credit card.
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 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 Stripe pricing.
PayPal Payments: The Basics
As you can see, Stripe offers a high-tech and highly customizable solution for small business owners. On the other hand, PayPal 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 Pro—PayPal’s proprietary payment gateway. With Payflow Pro, 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 Pro with your small business is $25 per month plus 2.9% + $0.30 of every online payment processed. You can also opt for Payflow Link, which has no monthly cost but has your customers check out on PayPal-hosted template, rather than one on your own website.
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: Similarities
As you can tell from their summaries, when it comes to Stripe vs. PayPal, there are actually quite a few similarities. They are both payment service providers, they both have payment gateways, they both allow you to accept payments online, and they both provide additional perks like invoicing and recurring billing.
But there are some additional ways in which these two services are similar that we didn’t yet mention. First of all, both Stripe and PayPal handle PCI compliance for their merchants. PCI compliance is a set of security standards designed to ensure that all companies that accept, process, store, or transmit credit card information maintain a secure environment. With both Stripe and PayFlow Pro, PCI compliance is administered on your behalf at no additional charge—which can save your business a lot of time.
Another positive similarity is that neither PayPal nor Stripe requires you to sign long-term contracts. Instead, you can pay as you go and cancel at any time, without paying an early termination fee. In addition, because both are payment service providers, it’s fairly easy to qualify for a Stripe or PayPal merchant account. However, payment service providers also scrutinize your transactions a lot more, so this is a double-edged sword.
If you’re a high-risk merchant, you’ll also have a hard time getting a merchant account with Stripe or PayPal. This goes back to them being payment service providers who assume a greater amount of risk because they don’t perform underwriting.
Finally, both Stripe and PayPal offer excellent customer support services. On both Stripe’s and PayPal’s websites, you can access a help center with useful tutorials and guides. There are also community forums, developer documentation, and email, live chat, and phone support (although only Stripe offers 24/7 phone support).
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 the Stripe vs. PayPal debate.
First, let’s take a moment to highlight where 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. In fact, major marketplace and shopping cart operators like Shopify use Stripe as their white-label payments solution. What’s more, you won’t have to pay a lofty fee for this white-label option.
Another area where Stripe is superior is reporting. PayPal does come with a lot of built-in reports, but only Stripe allows you to customize reports to get the exact kind of information you need. With Stripe Sigma, you can ask a question using SQL and get a report on it
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 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 payment 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 exclusively 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: User Reviews
Our opinions on Stripe vs. PayPal only provide you with one perspective. That’s why we searched the web to see what others had to say about Stripe vs. PayPal. Interestingly, the main knock against both PayPal and Stripe is the same: account freezes, holds, and terminations. Unfortunately, this is a common issue amongst all payment service providers. That’s because they don’t require underwriting to sign up. So to manage liability, they reserve the right to freeze or terminate your account if they suspect suspicious activity that could impact their bottom line.
In terms of positive reviews about Stripe, users praise the easy signup process, as well as Stripe’s developer tools and customization capability. PayPal gets kudos for their ease of use, transparent pricing, and the fact that their brand recognition means most customers trust them.
Here is some additional feedback by small business owners who have used both services:
“Unfortunately, with PayPal, you’re very limited in high ticket closes (contracts worth $10,000+) because using PayPal might be seen as a sign of unprofessionalism, as it’s not used for singular large transactions very often. We use Stripe to handle our marketing contracts because it’s a lot easier for us on the back-end, and fees are less.” — Nathan Sykes, Howdy Interactive
“When I set up my online store with WordPress, I naturally leaned toward accepting credit cards and was comfortable with Stripe, having used them when I was on Shopify. But the truth is, when I shop from home, on the couch, I don’t usually have my credit card with me, so I turn to PayPal. Click, password, yes, and done. So I realized that if I was using the service to make my purchasing easier, my customers were too. That is when I added that additional feature to my site. I think PayPal tends to be more user-friendly and therefore makes it easier for shoppers to click the ‘buy’ button.” — Roberta Perry, Scrubz Body Skincare Products
“SEOJet uses both Stripe and PayPal to process transactions inside of our software. The reason we use both is because some people will only pay by PayPal. Stripe is much easier to use, to customize, and to build on. PayPal is old, clunky, and not developer-friendly. The one thing PayPal has going for it is the millions of users. All else being equal, I would much rather only use Stripe for all transactions but I know I would lose some revenue if I stopped allowing PayPal transactions.” — Adam White, SEOJet
Stripe vs. PayPal Alternatives
Not quite convinced that either Stripe or PayPal is the right online payment solution for your business’s needs? Not to worry—there’s a whole market of online payment 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 payment infrastructure. Here are two more online payment solutions for you to consider if you haven’t found your perfect fit with Stripe vs. PayPal.
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 check out 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.
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 payment 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.
The Final Verdict on Stripe vs. PayPal
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 payment 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 payment solutions, so be sure to shop around if you’re hesitant to move forward with either of these two options.
Maddie Shepherd is a former Fundera senior staff writer and current contributing writer for Fundera.
Maddie has an extensive knowledge of business credit cards, accounting tools, and merchant services, but specializes in small business financing advice. She has reviewed and analyzed dozens of financial tools and providers, helping business owners make better financial decisions.