October 29, 2019

PayPal vs Stripe

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PayPal and Stripe offer similar payment processing services but with key differences. Read this comparison to see which is better for your business.

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PayPal and Stripe both provide the gateway and merchant account necessary to process credit card payments.

Which processor should you choose? We dig into the details below.

Payment Processing Features

Top Choice: PayPal (for ease of use)

The main service that both PayPal and Stripe provide is e-commerce payments processing. However, they also both offer additional features. We discuss how they compare below.

  • Mobile App Payments
    Use PayPal's simple technology to create a custom checkout flow for in-app purchases. Adding a Buy It Now button is as easy as copying and pasting the code right onto your site.

    Stripe allows clients to code their own in-app payment process from scratch, though this may not be helpful to those without coding experience. They also accept Apple Pay and Google Wallet payments.

  • Mobile Payment Processing
    PayPal offers a mobile point-of-sale system that turns your phone or tablet into a card reader. You must purchase a card reader, but they're usually affordable or sometimes free with a promotion.

    Stripe Terminal offers mobile payment processing, but you have to use one of Stripe's pre-certified card readers, which you can buy directly from Stripe.

  • Virtual Terminals
    PayPal allows merchants to accept over-the-phone and fax orders by manually entering a customer's credit card information.

    Stripe offers a virtual terminal but encourages the use of a marketplace software or invoicing service instead. This is mostly due to PCI compliance issues.

    The platform recently released Stripe Terminal, which is in beta through 2019. Using Stripe's pre-certified card readers, you can accept payments on the go as well as in-store.

How Much Does a Virtual Terminal Cost?
If you have a free PayPal account (PayPal Checkout or PayPal Standard), a virtual terminal costs $30 per month. With PayPal Pro, it's free. However, PayPal charges higher payment processing fees for keyed-in transactions for any account.

Pricing & Fees

Top Choice: Tie (Stripe for international payments)

PayPal and Stripe don't charge monthly fees or have monthly minimum requirements. You pay a flat fee per transaction, but the type of transaction determines your actual cost.

For PayPal:

  • 2.7% for swiped transactions
  • 3.5% plus $0.15 for keyed-in transactions (card not present)
  • 2.9% + $0.30 for sales within the US.
  • 4.4% for international payments.
  • 2.7% for mobile payments

For Stripe:

  • 2.9% + $0.30 for sales within the US.
  • 2.7%, plus $0.05 per transaction for card transactions with the Stripe Terminal
  • 1% for international payments, plus a 1% conversion fee for different currency

Types of Payments Accepted

Top Choice: Stripe accepts more payment types with any account, including:

  • Major credit cards
  • Debit cards
  • American Express
  • Apple Pay
  • Google Pay
  • Microsoft Pay
  • WeCHAT Pay
  • ACH transactions

PayPal accepts:

  • Major credit cards
  • Debit cards
  • PayPal
  • Venmo
  • PayPal CREDIT

Major Credit CardsOO
Debit CardsOO
American ExpressOX
Apple PayOX
Google PayOX
Microsoft PayOX
WeChat PayOX
ACH TransactionsOX
Pay Pal CreditXO

But you can't process all credit card with PayPal Checkout—only PayPal, Venmo, and PayPal CREDIT. If you want to accept credit cards, you need a PayPal Standard or PayPal Pro account.

If you don't accept many online payments or want a more straightforward system, PayPal can work. If you expand moving forward, though, you may want something like Stripe.

Invoice Options

Top Choice: Tie (Stripe if you need international billing options)

If you offer a regular service or have recurring charges, invoicing is a crucial component of your business. Both PayPal and Stripe offer billing services, each with different features.

PayPal offers the following billing features:

  • Customizable invoices with logo and custom fields
  • Send invoices from any device
  • Simple dashboard to manage invoices, track payments
  • No fee to use the invoice system
  • Create and save invoice templates
  • Set up recurring invoicing automatically
  • Send automatic reminders for unpaid invoices

Stripe offers the following invoicing features:

  • Set up one-time or automatically recurring invoices
  • Use the Stripe Billing API as is or customize it
  • Track all billing information in one dashboard
  • Accept payments from more than 130 countries
  • Customizable invoices
  • Email reminders for past due invoices
  • 13 different language options
  • Automatic card updates for expired credit cards on file

Third-Party Integrations

Top Choice: Stripe

Third-party integrations help turn your payment processor into a multifunctional tool rather than just a way to collect payments. And keeping your business processes in one place helps simplify your business model.

Stripe offers integrations for most e-commerce and CRM platforms, as well as platforms used for:

  • Analytics
  • Business management
  • Email marketing
  • Finance and insurance
  • Gift cards and promotions
  • Inventory management
  • Fundraising
  • Marketplace

Stripe offers an extensive list of third-party integrations including FreshBooks, Invoice Ninja, Sitecore, and Dovetail.

PayPal's list of third-party options includes:

  • Wix
  • BigCommerce
  • Shopify
  • Magento
  • Squarespace
  • WooCommerce

PayPal is compatible with many e-commerce and marketplace platforms as well. If all you need is accounting and customer relationship management systems, chances are PayPal has a suitable option.

PCI Compliance

Top Choice: Stripe

Do you want to shoulder the responsibility of PCI compliance or let your payment processor handle it?

Stripe makes PCI compliance simple by walking you through the process yearly. You should remain compliant as long as you:

  1. Choose one of Stripe's chosen payment integrations.

  2. Use Transport Layer Security on your payment pages.

  3. Provide the necessary documentation that Stripe recommends on your dashboard.

PayPal also offers PCI-compliant tools, but only the free and standard versions manage PCI compliance for you. If you choose PayPal Pro, you self-host your e-commerce platform.

This puts the PCI compliance responsibility on you. You must provide quarterly audits, create a secure network, and pass security tests. Unless you have experience with PCI compliance, this could be risky.

Payment Frequency

Top Choice: PayPal

PayPal offers almost immediate access to your funds within your PayPal account. Once a client pays, you can use the funds within PayPal or request a transfer to your bank.

Keep in mind that the time it takes for funds to be transferred will vary from bank to bank.

Stripe works a little differently. Your first payout takes between 7 and 10 business days after accepting your initial payment. After your first payment, Stripe operates on a payout schedule.

Like many U.S.-based businesses, the platform operates on a 2-day rolling schedule, meaning all payments are in "pending" status for two days. However, after that period, Stripe makes payouts daily.

Stripe also allows clients to set their own payment date and payment frequency (weekly or monthly payments). However, your balances are still subject to the standard waiting period.

High-Risk Businesses
If you operate a high-risk business according to Stripe's standards, your payments may go on a 7-day rolling schedule. Your payments sit for seven calendar days before Stripe makes a payout for those amounts.

Customizable Checkout Options

Top Choice: Stripe

Your checkout flow helps customers feel comfortable with sharing their credit card information on your website. Customizable checkout options help brand the checkout process and keep customers engaged.

With Stripe, you can either use the checkout options that come with the platform or program your own. If you decide to program your own, experience with coding will help. Stripe does offer tutorials on their website, but having a developer tackle it is probably preferable.

PayPal only offers customized checkout options with its PayPal Pro account, which costs $30 a month. This puts the PCI-compliance on your shoulders. It also has minimal customization options for merchants using PayPal Standard.

These include:

  • Automatically return the buyer to your website after they pay with PayPal in a separate window.

  • Allow those without a PayPal account to pay with PayPal.

  • Provide your customer service number after your customer makes a payment.

  • Obtain the customer's telephone number as a part of the mandatory checkout process.

Any further customization requires the purchase of a PayPal Pro account.

Customer Support

Top Choice: Both Stripe and PayPal offer decent customer support options.

Stripe offers 24/7 phone or chat support for its users. Like PayPal, you must log into your account in order to get the appropriate phone numbers. Keep in mind that Stripe may first direct you through the knowledge database to make sure your question isn't already answered there.

PayPal offers multiple avenues for customer support, including phone support. Logging into your account will give you the fastest options for customer support. You can choose to chat online, search the resolution database, email PayPal, or call them directly.

Bottom Line

With similar fees and services, both PayPal and Stripe are viable payment processor options.

If you want more customizable or advanced features, Stripe gives you more options and better security. If you want to accept PayPal payments or over-the-phone payments, PayPal is the way to go.

Write to Kim P at feedback@creditdonkey.com. Follow us on Twitter and Facebook for our latest posts.

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