Stripe vs Paypal: Which Is Best for Your Business?

What is Stripe?

Stripe was founded by Irish brothers, Patrick and John Collison, in 2009. While the company’s primary focus is on digital retailers that need online payment solutions, it also offers in-person payment terminals for businesses that operate physical stores. In just over a decade, Stripe has become one of the most influential players in credit card payments.

What is PayPal?

PayPal is an online payment company that first made its reputation in the eWallet industry. It has been a major player in the payment sphere since its inception in 1998. While PayPal is still viewed primarily as an online invoice and payment platform, it acquired POS platform Zettle in 2018 for $2.2b to make its entrance into the in-person payments industry.

Focus on eCommerce

Both Stripe and PayPal are services that focus on online businesses. While both payment processors now offer in-person transactions, their bread and butter is eCommerce. PayPal and Stripe have spent many years developing quick, convenient ways for customers to pay for goods and services online.

Transparent Pricing

Stripe and PayPal provide clear, transparent pricing that is easy to understand and manage. Both payment processors offer a flat-rate pricing model for specific types of payments. With this pricing model, you will pay a fixed percentage on every transaction.

Easy Setup and Use

As with most payment service providers, PayPal and Stripe make it easy to sign up for an account and begin accepting payments. While there may be initial limits on how much you can process and withdraw, it’s never been more simple to set up an account, purchase POS equipment, integrate your website, and more.

No Monthly Fees for Basic Processing Features

With PayPal and Stripe, you don’t need to worry about paying a monthly service fee to access either platform. While there are some add-ons with monthly fees, it costs nothing to get started.

Developer Features

Stripe and PayPal are much different when it comes to developer capabilities. While PayPal is easy to integrate with a range of third-party platforms, Stripe is known for its open API, making it easy for businesses to build custom solutions.

PayPal also has APIs and other developer tools, but Stripe is a clear favorite when it comes to customization.

Withdrawing Funds

With PayPal, your funds will deposit into a PayPal Business account, which you can use to manually transfer funds to your normal business bank account. However, with Stripe, you can automate daily payouts that make the process of withdrawing cash much more convenient.

Processing Fees

Last but not least, the processing rates at Stripe and PayPal are different. While Stripe offers the best rates for online transactions, PayPal offers better rates for in-person payments.

Standard transaction fees

Here are the Stripe fees and PayPal fees for in-person, online, and card-not-present (CNP) transactions:

Stripe

• In-Person: 2.7% + $0.05
• Card-Not-Present: 3.4% + $0.30^[1]Stripe. “Price change for manually entered card payments“. Accessed November 14, 2022.
• Online: 3.4% + $0.30

PayPal

• In-Person: 2.29% + $0.09
• Card-Not-Present: 3.49% + $0.09
• Online: 3.49% + $0.49

Dispute & chargeback fees

• Stripe: $15 dispute fee for chargebacks
• PayPal: $15-30 dispute fee for chargebacks (regardless of whether it’s approved)

Micropayment fees

• Stripe: N/A
• PayPal: 4.99% + $0.09

Hosting, plans, and pricing

Stripe and PayPal don’t offer website-building tools to their customers. In this sense, these platforms are different from rivals such as Shopify, which allows users to build online shops. However, you can easily integrate both PayPal and Stripe with third-party website builders.

Refund fees

For both platforms, there are zero fees for refunding payments however, you will not receive a refund on the original transaction fees that you paid.

Card reader and terminal costs

Stripe offers various affordable hardware options, including the $59 Stripe Reader M2 and the $249 BBPOS WisePOS E.

On the other hand, PayPal offers a compact card reader that connects to smartphones for $29. However, you will need to pay $79 for additional readers.

Accepted payment types

Both PayPal and Stripe make it easy to accept a wide range of payments, including all major credit cards. You can also accept alternative payment methods like international credit cards, ACH payments, Apple Pay, Google Pay, and more. Both systems offer full versatility in this department.

Point-of-sale (POS) systems & card readers

PayPal offers a basic POS platform via Zettle but it’s not as comprehensive as many of the leading point-of-sale systems on the market. With Stripe, the primary focus is on integrating with external POS platforms. There’s no advanced, built-in point-of-sale solution available.

In terms of card readers, both PayPal and Stripe offer easy-to-use card readers, and Stripe also has a more advanced terminal at a higher price point.

Checkout experience

The in-person checkout experience at Stripe and PayPal will vary depending on which POS platform you choose to use. Both platforms prioritize ease of use, so your staff won’t need extensive training to understand how to use the readers and process payments.

With online payments, Stripe’s checkout process is quite straightforward, as users enter their card numbers and personal details to submit payments. With PayPal, users must log in to their PayPal account to complete the transaction, although there will be an easy-to-identify button on your checkout page that makes this simple.

Still, PayPal’s usefulness should not be underestimated – it is a widely used platform, which means that many consumers trust it.

International payment options

PayPal and Stripe allow for international payments. While PayPal has a 1.5% additional surcharge for international payments and a currency conversion spread that can range between 3-4%. Stripe charges an extra 1% + 30¢ (plus a 1% conversion fee). Accepting international payments is effortless, but it will cost you more.

Square

Square is another recent entrant to the online payment sphere. The company has a range of easy-to-use hardware options, including its signature magstripe reader that easily plugs into any iPhone or iPad. When it comes to Square’s fees, they are known for offering affordable processing rates, as well as a range of advanced POS options, such as Square for Retail and Square for Restaurants.

Merchant accounts

While Stripe, PayPal, and Square are popular payment service providers, businesses can also choose to apply for a merchant account instead. Merchant accounts allow greater control over your payment platform, as well as access to transparent and competitive rates.

Also, payment service providers like Stripe or PayPal, often have low initial processing limits and other inconvenient features, which you won’t find with leading merchant service providers.

Peer-to-peer payment services

Peer-to-peer payment services like Facebook Pay, Zelle, or Venmo are commonly used by small businesses that are just starting out in accepting credit card payments. However, these platforms have a reputation for data breaches and poor customer support.

Buy-now-pay-later (BNPL) options

BNPL platforms like Sezzle and Afterpay are consumer favorites. When an eCommerce business has a BNPL option on its website, it allows consumers to split up transactions into four interest-free installments. You, as the merchant, would receive the funds upfront and the consumer would make payments to the BNPL platform. Typically, these BNPL options charge merchants a hefty rate but it is simple to add to your list of accepted payment methods.