Zelle vs Paypal for Business: Which Is Better?

From payment method limitations to high fees that eat into profits, choosing the right (or wrong) payment platform can make or break your business. Big-wig peer-to-peer (P2P) names like Zelle and PayPal often circle in the wings—but are they right for your business needs? When it comes to these two options, the differences are stark, as they cater to vastly different needs.

In this guide, we’ll compare Zelle and PayPal to help you determine which is better suited to your business requirements. From standout features and fees to security and limitations, here’s what you should know.

Zelle vs Paypal: An Overview

From their initiation and business model to their offerings, Zelle and Paypal lie on opposite sides of the payment service spectrum. Founded in 1998, PayPal has a significant head start in the industry. Meanwhile, Zelle was only founded in 2017—though it’s made speedy headway since, due to seamless integration with most US banking institutions and a climate ripe for payment convenience.

Zelle for Business allows consumers to pay you for goods or services via the Zelle app or Zelle integration in their banking app. Consumers and businesses alike use Zelle largely for its speed, and because it’s free to register an account. Zelle does not serve as a digital wallet, which means funds transfer directly between bank accounts in the Zelle network. This network includes more than 1800 banks and financial institutions in the US.

To open a Zelle business account, you need to have a business bank account. However, not all banks that support Zelle P2P payments also offer Zelle for Business. So, it’s wise to confirm beforehand whether your financial institution supports business use.

As a business owner, you can use Zelle to request payment from a customer. The customer then initiates the transfer with the linked email address, mobile phone number, or QR code provided. Then, Zelle will notify you when you receive the payment.

Zelle can also be useful for small businesses to pay employees and vendors. In this case, you will need to manually add the transactions to your accounting records, as Zelle doesn’t integrate with any accounting software platforms.

Business Features

As far as other business features go, Zelle won’t get you very far as it doesn’t support credit card payments. The platform also doesn’t provide additional features or integrations for business functions, such as inventory management, gratuities, or eCommerce. Zelle is likely best for small businesses and freelancers who need a fast and cost-effective way to send and receive money without the extra bells and whistles that generally come with a hefty price tag. Additionally, you should note that Zelle is only available in the US and between US bank accounts in the network, so if you need to accept international payments, you won’t be able to do so.

PayPal, on the other hand, offers a few different account options for merchants. With a free PayPal business account, there are no monthly subscription fees to worry about—only transaction fees. This option also allows you to accept debit and credit card payments through the PayPal platform.

Accepting in-person card payments with the Zettle POS by PayPal is also free. You will insure a one-off purchase fee for POS hardware but only pay transaction fees thereafter. Other options range from $5–30 per month for a virtual terminal and more advanced checkout features.

PayPal enables merchants to:

• Accept all major credit and debit cards, PayPal Credit, Venmo, and PayPal transactions
• Activate advanced fraud protection
• Integrate with third-party applications such as Shopify, DocuSign, and Mailchimp
• Track sales and manage inventory
• Integrate payment functionality into websites, eCommerce shopping carts, and mobile apps

In addition, whereas Zelle only works through the mobile app, PayPal works on most connected devices such as computers, smartphones, and tablets. PayPal also operates internationally, allowing you to conduct transactions across countries and different currencies. It is ideal for small to medium businesses that want to simplify eCommerce checkouts and offer many payment avenues to their customers.

Zelle vs PayPal: Comparing Fees, Features, and More

Transaction fees quickly add up and can make a dent in your profits. However, it’s worth comparing the services and features offered in exchange before you make the ultimate call. While PayPal offers significantly more payment options and features than Zelle, it comes at a notably higher cost. So if your business has a high transaction volume, you may find PayPal to become an unnecessarily costly option with a confusing fee structure.

Zelle, for instance, doesn’t charge any transaction fees. Some banks may add on a small fee—but in general, Zelle is completely free for business use. That allows you to maximize your profits. However, the catch is that Zelle’s business features and payment methods are extremely limited. So while you are saving on transaction fees, you may be losing customers because you can’t accommodate their preferred payment method.

PayPal allows customers to pay you in almost any way that suits them, but it comes at a cost. Here is what you can expect to pay when using PayPal for business transactions in the US. (All PayPal prices are in USD.)

• Transferring funds via PayPal for goods and services: 2.99%
• Standard online credit and debit card payments: 2.99% + $0.49
• QR code transactions above $10: 1.90% + $0.49
• QR code transactions through a third-party integrator: 2.29% + $0.09
• Pay with Venmo: 3.49% + $0.49
• Card-present or QR code transactions using Zettle: 2.29% + $0.09
• Manual card entry transactions with Zettle: 3.49% + $0.09

In addition to these fees, your bank may charge payout fees.

Please note: you may also have to pay for extra services such as recurring payments, fraud protection, chargeback protection, and a virtual terminal.

Zelle and PayPal transfer speeds vary greatly. The fact that Zelle transfers are so fast and free serves as the crux of the platform’s popularity, after all. Zelle transfers reflect almost instantly in the recipient’s bank account. This is because Zelle links to the existing bank infrastructure and connects directly to a user’s bank account instead of holding funds as a third party.

As a business owner, speedy transfers are beneficial to maintain cash flow consistency. It is, however, also a drawing card for scammers who know they can make a quick buck if they play their cards right.

On the other hand, PayPal’s standard transfer time can take anywhere between one to five days. This depends on the type of transaction as well as the time and day on which you initiate the transaction. PayPal does give you the option to fast-track payments at a fee—to do this where no currency exchange is involved, you’ll pay 1.5% of the transaction amount (minimum fee of $0.50).

There are a few reasons PayPal transactions take frustratingly long. The speed of a transaction between a bank and PayPal can vary according to the country’s financial technology. The US financial system relies upon the Automated Clearing House Network (ACH), which involves a multi-step process verifying the individuals and amounts involved—and sometimes requires manual input. Due to the number of transactions and thoroughness of ACH verification, transactions can take one to three business days to finalize.

In addition, ACH transaction processing systems are only operational Monday through Friday, 7:30 AM to 6 PM. So consider that if you initiate a transaction late on a Friday, you will wait up to five days in total for clearing. (Note, however, that transactions between PayPal accounts often happen instantaneously because they’re processed on PayPal’s own servers and algorithms instead of through ACH.)

Another reason for delays is that PayPal may place payments on hold for 24 hours as a security measure if your account has not been active for some time. During this time, the algorithm will verify the payment’s legitimacy and that you were the initiator.

Zelle vs PayPal Transfer and Sending Limitations

Zelle Business Transfer Limits

The limitations on Zelle transactions vary by bank. Most financial institutions don’t limit the receiving amount; instead, they will cap the sending amount, the number of transactions sent, or both.

You will need to confirm with your bank what their limitations on Zelle transactions are, but here is an idea of what you can expect from a few of the banks in the network:

• Bank of America has a daily limit of $15,000 or a maximum of 20 transactions. The weekly limit is $45,000, and the monthly limit is $60,000, or a maximum of 120 transactions.
• Chase Business sets a daily limit of $5,000 and a monthly limit of $40,000. The maximum single transaction value cannot exceed $5,000.
• Wells Fargo has a daily limit of $3,500 and a monthly limit of $20,000. Wells Fargo also imposes a receiving limit of $10,000 daily.
• Banks such as Capital One, Discover, and Citizens Bank all have fairly low daily limits at $2,500, $600, and $1,000 respectively.

Although you as the merchant, must enroll in Zelle to receive payments, customers can still send you up to $500 per week even if their bank is not a Zelle partner.

PayPal Business Transfer Limits

PayPal’s transfer limits are much higher than Zelle’s. One reason for this is that since Zelle payments are instant and go directly between bank accounts, there is a high risk of fraud. Limits can thus serve as a means of protection for users. With PayPal, however, payments go through a rigorous verification process before being actioned and showing up in your account.

Business transactions directly between PayPal accounts are capped at $60,000 per transaction. Meanwhile, instant transfers involving outside processors may be limited to $25,000 per digital transaction, and card transfers are limited to $50,000 per transaction. Card transfers also face the following restrictions:

• $100,000 daily limit
• $250,000 weekly limit
• $500,000 monthly limit

PayPal may also temporarily restrict a user from sending, receiving, or withdrawing money from their PayPal account if:

• They suspect fraudulent activity
• Your account is noncompliant with PayPal’s policies
• There are excessive claims and chargebacks linked to your account
• You start to sell a completely different line of products, especially high-end items
• There is a sudden and drastic increase in sales volumes or amounts

You will receive an email to notify you of the reason for the restrictions. When you log into your account, you can either click on the bell icon or visit the Resolution Center to find out how to remove the restrictions, if applicable.

Security and Privacy Capabilities

Zelle and PayPal security and privacy standards are fairly similar in that both platforms make use of encryption, strict access controls, and two-factor authentication. In addition, both platforms allow customers to make payments using their email address, which protects their account and personal information.

There is, however, one significant difference between PayPal and Zelle—PayPal offers seller protection, while Zelle neither offers seller protection nor does it allow refunds or reversals.

PayPal Seller Protection aims to protect you from chargebacks, reversals, unauthorized transactions, and “items not received” claims. Additionally, PayPal offers an optional advanced fraud protection service at an extra $10 per month.

PayPal or Zelle: Which is Right for Your Business?

Zelle’s no-cost service is ideal to maximize profits from the sales you make. But on the flip side, you may not be able to realize your full business potential with its limited features. PayPal, on the other hand, allows you to tap into every sales avenue possible and maximize your business potential—but the platform’s pricing structure is confusing, inflexible, and can dig deep into your profit.

A merchant services provider can find you a solution that meets in the middle. Forget bending your operations for a one-size-fits-all solution—customize what you need at a price that suits your business. Whether you need to process credit card payments, online payments, or QR code payments, your dedicated account manager can optimize a solution for your business. In addition, you gain chargeback mitigation software, account protection, and access to best-in-class fraud protection tools.