Stripe vs PayPal: Which Should You Choose (and Why)

2019-08-06T16:31:52-05:00

 

Are you trying to decide whether to choose Stripe vs PayPal for payment processing? You’re in the right place.

Over the last 10 years, we’ve used both PayPal and Stripe as payment gateways for our small businesses. We’ve collected millions in online credit card payments using each payment processor and can confidently recommend which platform you should choose.

In this article, we’ll compare the two platforms and tell you the benefits and drawbacks of each. How they work, what the transaction and monthly fees are and how you, the business owner, can use these payment processors to grow your small business.

That’s not all though. We’ll also focus on which payment gateway can provide the most VALUE for your business. Because it’s not all about price when it comes to card payments.

Now, on to the good stuff.

PayPal

It’s safe to say you’ve heard of PayPal. It’s been around for a long time and is one of the biggest payment providers. And it keeps growing.

According to Statista, there are over 250 million registered PayPal accounts. So, yeah, it’s safe to say PayPal is a well-known brand.

And that’s what makes it such an attractive option to process payments. It’s trusted and a lot of people have heard of itChances are, some of your customers will already have a PayPal account with an “Express Checkout” option which allows them to checkout with the balance in their PayPal account (or to use PayPal Credit)

That’s what PayPal is banking on. That you’ll gravitate to them because they’re so well known. In fact, they claim that using PayPal will increase the number of visitors you’ll convert into paying customers.

Below we’ll dig into some of these claims and look at the whole picture.

Stripe

Stripe, a lot of people claim, is the new kid on the block. But really it’s not. It’s new (founded in 2010), but it’s so different from PayPal that comparing the two is like comparing McDonalds and Panera BreadThey both serve food, but their approach to doing that, and their resulting customer base, is much different.

So, yes, both PayPay and Stripe are payment processors or payment gateways. You can use either to collect credit card (or direct bank account) payments from your customers.

But that’s where the similarities stop. Stripe was founded with developers, not consumers in mind. It was founded to give developers the tools to create custom checkout experiences.

And to this day, it’s still very much that. A tool that those who know how to code can use to add payment processing to their applications.

But it’s also moved beyond that in the last few years. For one, it’s no longer just for developersIn 2014, when we added payment processing through Stripe to one of our businesses (having switched from Authorize.net, a traditional merchant account), it was a big undertakingI don’t code, but I remember it took our developer at least a week to set things up and for us to begin accepting live payments.

That’s not for everyone. But in the last five years, Stripe has grown beyond that initial base of users to become more user-friendly (for everyone) and easier to integrate.

So let’s jump in and compare the two platforms in more detail.

International Coverage

Before we jump into talking about fees and the like, let’s begin by covering who can actually use PayPal or Stripe.

If you run a high-risk business, (e.g. anything in the adult, gambling, lending, or virtual currency industries), neither PayPal or Stripe is a good option. Both companies restrict what you can do on their platform with these types of businesses. You can sign up for an account, but you’ll soon find your account restricted (or closed altogether) with either company. You can read up on that more here for Stripe and here for PayPal.

Additionally, if you’re located in a country not supported by one of these services, you might also be out of luck.

For the most part, PayPal is available everywhere. It’s supported in 200+ countries. That’s something it has going for it. So even if you’re running a business from Barbados, you can use PayPal.

That’s not true for Stripe. Stripe is mainly supported in the most developed countries in the world. Think the United States, Australia, etc. The full list for each region of the world is:

  • Europe (Austria, Belgium, Denmark, Finland, France, Germany, Ireland, Luxembourg, Netherlands, Norway, Spain, Sweden, Switzerland, United Kingdom, Italy, and Portugal)

  • North/South America (Canada, United States)

  • Asia (Australia, Hong Kong, Japan, New Zealand, Singapore)

Those are the main countries. But Stripe is also available in “beta” in the following countries:

  • Europe (Estonia, Greece, Latvia, Lithuania, Poland)

  • North/South America (Brazil, Mexico)

  • Asia (Malaysia, India)

So what does “beta” mean? Well, you can request to create an account in one of those countries, but there is no guarantee you’ll be able to get one. In some countries, such as Mexico, Stripe goes through the waitlist much faster than in others. In others, like Estonia, the process is much slower.

You can email Stripe and ask them when a particular country will be out of the beta period, but they’ll give you a non-committal answer. In other words, who knows? I know for one that in countries like Estonia, Stripe is over-subscribed. They have more interest than space and are give out invites slowly.

One other thing to mention about beta countries. Not all Stripe features are available in each country. For example, in Mexico, users can only accept payments in Mexican Pesos. No other currencies are currently supported. In India, no 3rd party services are currently supported and you can’t accept American Express cards.

So while you may be able to get a Stripe beta account, you may not be able to take full advantage of features available in fully-released countries.

PRO TIP

If you’re in a country that’s currently in beta, let us know. As a Stripe-verified partner, we can usually get a bit more info on when you can get off the waitlist (and, maybe, help you get an account)Contact us here.

If you’re not located in any Stripe-supported country, you can try Stripe Atlas. Atlas allows you to set up a limited liability company (LLC), in the US to begin accepting payments through Stripe. The set up also includes a US bank account. It costs $500, which is more expensive than setting up an LLC on your own, but worth it if don’t know how to do it on your own.

Keep in mind that if you’re not a U.S. citizen and set up an LLC in the U.S., you may be asked to pay personal taxes on company income.

SUMMARY

PayPal is supported in more countries, but Stripe is slowly catching up and should be soon available in its beta countries.

Transaction Fees

Both PayPal and Stripe charge similar transaction fees for online payments: 2.9% + $0.30 for credit card paymentsInstead of going over every single price difference between PayPal and Stripe, however, let’s talk about value instead.

We could write a long post on chargeback fees, cross-border processing fees, refund fees, instant transfer fees, and currency conversion fees.

Let’s not complicate things, though, and instead focus on the main price differences between the two platformsAt the end of the day, little price differences will not matter if you’re getting enough value from either platform.

Here’s what you should know about Stripe vs PayPal pricing and supported payment methods:

1. Both platforms charge 2.9% + $0.30 for credit card or debit card payments (Mastercard, Visa), but PayPal charges you 0.6% (3.5% + $0.30) in additional fees for American Express card payments.

  • Stripe does not. Amex payments are a pretty small part of all credit card transactions, but if you’re collecting large payments, that 0.6% will make a difference.

2. PayPal does not accept ACH payments.

  • Stripe charges 0.8% to process ACH payments (capped at $5 per transaction). PayPal does not accept ACH payments, which are a great way to save money off of the regular credit card processing rate.
  • PayPal also does not accept ApplePay or wire transfers.

3. PayPal charges you $10 in extra monthly fees for recurring billing.

  • Stripe offers recurring payments for free. If you run a business that uses subscriptions, that $10/month fee (via PayPal Payments Pro, which is itself $30 per month) is a bit annoying.

4. PayPal charges you $30 in extra monthly fees if you want to design and host your checkout page.

  • If you want to embed something on your website or create a button to send people to a checkout page, you’ll have to pay for it. Stripe includes checkout pages, though not a virtual terminal, as PayPal does.

PRO TIP

Stripe gives high-volume for any merchant processing $1 million or more per year. That’s not a hard ceiling though and will depend a bit on what country you’re located in and how many Amex transactions you process. In the United States, we’ve seen accounts with rates as low as 2.2% per transaction.

Can you see where I’m going with this? Stripe gives you a lot of value – an all-inclusive 2.9% + $0.30 rate, recurring billing, checkout pages, etc. – for the same basic rate. PayPal charges an extra $40/month to add those features.

SUMMARY

Both PayPal and Stripe have the same payment processing rates, but Stripe does not charge any monthly fees for extras.

Payouts

Stripe pays out within 2 business days in the United States and Australia, within 4 business days in New Zealand, and on a 7-day rolling basis in all other countries.

PayPal pays out within 1 business day. If fast access to your payments is important and your business is not located in the United States or Australia, keep that in mind.

Ease of Use

The stuff you read online about Stripe makes it seem like it is more difficult to set up than PayPal. These are outdated user experience observations.

Sure, PayPal is very easy to set up. It was designed with that in mind. If you know how to cut and paste, you can integrate PayPal into your website.

But these days Stripe can do that as well, and more. First, setting up an account and authorizing it for use is very straightforward. Second, connecting it to platforms such as WooCommerce, WordPress, Wix, Shopify, or Squarespace is a matter of pressing a button or cutting and pasting.

Where Stripe shines is in all the customization the platform offers. The Works with Stripemarketplace is a great way to extend the platform’s reach beyond simply payments.

Fomo, for example, allows you to display recent Stripe transactions on your website as social proofChargeKeep, our own tool, allows you to create custom payment forms.

PayPal’s developer tools do allow for customization, but they are clunky and a pain to work with. And PayPal’s marketplace tools are limited to merchants who apply to use them.

For the most part, your customers will be limited to making payments on PayPal’s website. And they may or may not have to create a PayPal account to do so.

SUMMARY

Stripe has a bigger ecosystem of integrations. PayPal does not because the API is still a bit more difficult to work with.

Customer Support

PayPal lacks great customer support. Period. Just Google “PayPal customer service review” and the first result you’ll see is from TrustPilot.

PayPal gets a whopping rating of 0.9/10 for its customer service experience. Wow, that’s bad.

Why? Well, first, it’s generally unavailable to its users – you can only call, email them, or ask a question in one of their forumsSecond, they hold on to payments, makes onerous verification demands, and dispute resolution is slow.

You can read all the reviews on Trustpilot and make up your mind.

On the other hand, Stripe doesn’t have wonderful reviews on TrustPilot either. It is rated2/10.

But here’s the difference. The large majority of bad reviews for Stripe focus on them disabling or freezing accounts that violate their terms. You see very few reviews that focus on bad customer service.

So, yes, if you’re running a business that is in the gray area between being ok and not ok according to Stripe’s permitted list of business, your account may be frozen. You may also encounter problems if you have a large number of disputed payments.

If on the hand, you’re running a legitimate business with few disputes, you’ll have no issues.

Unlike PayPal, Stripe is easy to get a hold of online (via email or live chat) or you can always give them a call.

In 5+ years using Stripe and having processed millions in payments with them, we’ve never had any issues with their customer service. We find them to be available, responsive, and pleasant to deal with.

SUMMARY

PayPal is generally difficult to get a hold of and does not have live chat. Stripe’s live chat and “call us” features has wait times of only 3 minutes.

PRO TIP

As a Stripe-verified merchant, you have access to faster customer service. Live chat is answered within 2-3 minutes on average.

Security

Both PayPal and Stripe PCI compliant. That’s to say they both handle PCI compliance for you. With certain more complicated integrations with both platforms, you’ll have to do a bit of extra work to stay PCI compliant, but for the most part, this is handled for you.

Maybe even more importantly, both platforms are also ready for Strong Customer Authentication (SCA) which will come into force on September 14, 2019.

If your business is registered in Europe or you’re doing business with European customers, you need to have an SCA-ready checkout process to prevent payments from being rejected by the customer’s bank.

SUMMARY

You don’t have to worry about security with either Stripe or PayPal.

Data Portability

Before we switched to Stripe, we used PayPal and a different payment processor to handle credit card transactions. When we decided to switch to Stripe, we asked that processor to give us our customer’s credit data. They would not, leaving us high and dry. Our customers had to sign up again.

That was a huge pain in the butt, for us and our customers.

PayPal does the same thing. You can’t transfer your credit card data. They won’t give it to you.

Stripe, on the other hand, values data portability. If you decide to leave, they will transfer your credit card data to whatever new PCI-compliant payment processor you’ve chosen.

To me, that’s a huge plus. You own your customers. Why shouldn’t you also own the credit card data they’ve willingly given you?

SUMMARY

PayPal does not allow you to “bring” your customer’s credit card data to another payment processor.

Fraud Protection

Both PayPal and Stripe offer robust fraud protection features. PayPal offers something called PayPal Seller Protection and Stripe has Stripe Radar.

Unfortunately, the PayPal plan only covers physical goods, not digital product or services. But to be honest, we’ve experienced very few fraudulent transactions with PayPal. We don’t see a lot of purchases with stolen credit cards. While there is little documentation on what PayPal uses to prevent these types of transactions, we can say that the PayPal fraud protection features are very solid.

Stripe Radar’s features are also good and I think have become better with time. Radar comes pre-packaged with rules meant to weed out fraud. One thing we like is being able to customize those rules to our specific use case.

So if you see a lot of fraudulent transactions coming from a particular IP address, for example, you can go into Radar and block that specific IP address. You can also block an email address or set a rule about how many payment attempts a person can make. The sky’s the limit. What rules you set will depend on your particular use case. But we really like the fact that you have control over this process.

SUMMARY

Both PayPal and Stripe offer good fraud protection features. Stripe’s are customizable.

User Reviews

Let’s finish up by talking about what actual users think of using PayPal vs Stripe. We already talked about the overall TrustPilot ranking of the two platforms, so let’s get into a few more details about what those type of rankings mean, and why users prefer one platform over the other.

Here are the most common gripes you hear about PayPal:

  1. The customer service is terrible
  2. Funds get withheld or frozen
  3. The checkout experience is clunky
  4.  It’s not flexible enough
  5. The fees are high

And here’s why users like PayPal:

  1. It’s a brand that customers trust
  2. It’s available in a lot of countries

So, basically, PayPal is an outdated product with not-so-great customer service, but it’s a brand that people are familiar with.

Stripe users, on the other hand, have these negative things to point out:

  1. Payouts take 2-7 days
  2. High-risk accounts are closed without much notice

The interesting things to point out here is that a lot of negative sentiments were made in 2018 or before. The most recent feedback is positive.

And speaking of that positive feedback, Stripe gets lauded for:

  1. Great customer service
  2. It’s flexible
  3. It integrates with a lot of services
  4. East set up
  5. Well-documented developers tools and API

So with Stripe, you sacrifice some speed and can’t use it if your business is considered to be (or gets flagged) as high-risk. But in return, you get lots of flexibility, lower fees, and easy setup.

At ChargeKeep (and in our other online businesses), we choose Stripe and we could not be happier with our decisionIt’s made all our payment collection easier and the service and support we get from the Stripe team has been wonderful.

While that’s been our decision, you can make your mind by reading the most recent user reviews of either platform here for PayPal and here for Stripe.

SUMMARY

Both platforms have their detractors. PayPal is a brand that people trust and Stripe is a platform that is easier to work with.