Stripe and PayPal are the two most popular ways to accept payments online for goods and services. For most new store owners, deciding on which payment gateway to use is usually the last decision before going live and no one wants to make a financial choice that they could regret. Truth is, once you get down to these two contenders you will have a rough time if you are looking to choose as the real benefits are not as clear cut as you hoped, adding to the confusion.
We also may came to that point when we were deciding on which payment gateway to utilize for our WordPress Support Services after a solid reboot. Let’s see if our experience and research knowledge can help you.
Oh, if you should know We chose to work with both Stripe and PayPal
What exactly do Stripe and PayPal Do?
Stripe:
Stripe is a payment gateway solution that allows businesses to collect payment online. Ever since its launched in 2011 the company became rapidly popular and is now considered by many as a number one solution to e-commerce, which is why you are reading this post now and trying to make a decision. Stripe is loved by small businesses but developers also love working with its API, which allows them to create customized checkout processes.
PayPal:
PayPal allows users to make and receive payments online and is widely popular worldwide. The company was launched in 1998 and they have built quite the reputation since for online transactions. Almost everyone who does regular transactions online has a PayPal account and anyone who does not, also knows of it because a lot of online businesses utilize the service.
Stripe Vs. PayPal
During our decision-making process, we looked closely at 8 critical factors that were ultimately the determinant of our decision. These factors will be common among almost all businesses looking to get started online.
- Cost and Transaction Fees
- Security
- Ease of use
- Accepted Payment Types
- Invoicing
- Checkout Experience
- Customer Support
- Time to Get Paid
- The Verdict
Cost and Transaction Fees
Cost is the first thing that every business will consider. Both platforms allow for signup and implementation of payment gateways for free. Therefore, there is no cost incurred if there was no transaction done. Let’s look at the transaction fees.
The base fees on both platforms are very similar. Both Stripe and PayPal have a base fee of 2.9% + $0.30 per transaction cost, and this is the number one reason why it is difficult to choose between the two platforms. However, if we should dig deeper into the fees we will find some small differences.
PayPal determines its fees based on a number of factors. PayPal offers a nonprofit discount of 2.2% + $0.30 for online payment processing and 5% + $0.05 for micropayments or low-value transactions. In addition to this, PayPal fees go up to 4.4% for international transactions. If Paypal is used from a card reader then the transaction cost will be 2.7% which is a little lower than online transactions so it’s a small benefit but not very advantageous if all your transactions are being done online.
Wait , still not done yet. PayPal also determines its fees based on a number of other factors such as recurring billing, chargebacks and refunds and currency conversion and more.
Stripe’s transaction fees are not as elaborate which simplifies things. Stripe charges 3.9% +$0.30 for international card processing, which is lower than PayPal international fees. Stripe also charges the same flat rate for micropayment fees as PayPal (5% + $0.05).
Now, let’s check out disputes and chargeback fees – the part that everyone hates. There is a $20.00 fee associated with chargebacks on PayPal if the buyer wins the dispute. Stripe has a lower fee and simplified process for disputes and charges a $15.00 fee on chargebacks. Which like PayPal is also refundable.
Comparing fees between the two can get a little confusing, but it is clear the winner here is Stripe
Security
Security is one of the biggest concerns for anyone looking to start a business online. Customers will be entering their personal and financial data on your checkout pages and not only do they need to feel that their information is safe but it needs to be. Security is extremely important and it could be one of the factors that permanently break a business.
Both PayPal and Stripe are PCI (Payment Card) compliant. PCI is the governing body that makes the policies regarding how credit cards should be processed online to ensure safe and responsible transactions, mostly to prevent fraud and protect user data. PCI compliance is, however, mostly a 2-way responsibility as these platforms can only do so much in-house. Therefore, you also need to make sure that your website is PCI compliant. For example, install SSL certificates to encrypt user data and do not store credit cards. They will try to enforce these in their integration modules, but it still leaves a business owner with some responsibility.
In addition to this, both Stripe and PayPal also offers industry-standard user protection like 2-Factor Authentication. Which is basically the authentication process where two of the three possible factors of authentication are combined.
It is worth mentioning though that if you work with PayPal and use their non-hosted solution (where the checkout takes place on the PayPal site instead of yours) then you will have less PCI responsibility since it is handled by PayPal.
Stripe and PayPal both employ the use of 24/7 fraud monitoring and detection tools, with blacklist features and automatic ways to block fraudulent transactions. Therefore, if you are worried about security with these two platforms then rest assured both of them are very secure, which is one of the reasons both companies are so popular.
Therefore, we call this a tie.
Ease Of Use
Every business owner wants to know their way around their financial tools and is especially valued by new business owners. We also factored this in our decision making process when we had this debate as efficiency is key to maintain good productivity levels in any organization.
Both Stripe and PayPal offer integration tools for merchants who use common e-commerce systems. For example, if your website was built with WordPress and uses WooCommerce then there is a host of implementation options for both payment platforms that can get you set up and ready for business quickly while adhering to the PCI policies. I should mention though, if you are planning in starting a store, then WordPress and Wocommerce is the perfect solution.
That said, what about administrative tasks? To decide on this, we looked at one question. What are the things that business owners will be doing most often? and how easy is it to get these things done?
To start, PayPal is all about details, everything that you could be looking for is in the activity feed feature as it relates to your accounting information and customer specific data. You just need to filter what you are looking for using the activity filter. Once found, these data can then be easily downloaded for your own records.
Stripe, on the other hand, is simpler. All transactions data is available in one place and is easier to access and download. You simply filter by date range or use the search option to find specific records. Also, as opposed to PayPal you can access, edit and verify customer specific data. Like PayPal, there is also a filter feature but it simplifies the process by only using the common items that people search for, which is basically all the data that a typical business person would need.
Both platforms are pretty good and robust when it comes to ease of use. There is a very small learning curve but due to the simplicity of the Stripe interface, they will get the extra winning point.
Stripe wins this one
Accepted Payment Types
Convenience is key here. As an online business, you want to make sure that customers have a variety of ways to make payments. By covering as many bases as possible you minimize the chance of losing a sale to an unsupported payment option.
Stripe accepts payments from every major credit card solution. No wonder they are so popular, it’s a one-stop shop. This includes:
- Visa
- MasterCard
- Discover
- American Express and many more.
Additionally, Stripe offers many local payment solutions, including:
- ACH Credit transfer
- Alipay
- ACH Debit and many more.
And you think we would be done. Stripe also supports wallets. Wallets allow customers to check out faster by eliminating the need to manually enter their card and billing information by digitally storing credit and debit cards. A few supported wallets are:
- Google Pay
- Apple Pay
- Microsoft Pay
- Alipay and many more.
Like Stripe, Paypal Accepts Payments from every major credit card solution and in most countries, customers do not need to have a PayPal account at all. Paypal accept payments from:
- Credit/Debit Cards
- PayPal
- Pay by phone
- PayPal Credit
With the many payment methods supported by Stripe, one would think it is suddenly the best of the two options. However, PayPal does a great job with their PayPal Credit feature that allows customers to buy on credit through PayPal and pay later. This does not affect the merchant as that agreement is between PayPal and the buyer and the merchant is paid instantly. Of course, the upsides of this are also weighed on target markets and industry.
We will call this a tie
Invoicing
E-commerce sites selling one time paid products or subscription most likely won’t need this feature. However, a lot of service-oriented businesses and freelancers don’t charge clients in advance. Instead, the task or project is done and then the client is billed. In our case, it was a necessity as we offer Website Development Services and in most cases, the complete cost is not known until the project is ready to go live. In house accounting software could do this, but not all accounting software integrates with Stripe and PayPal.
Stripe offers a sleek customizable invoice interface for its customers. The feature is free to use until a company bills over $1 million in invoices. The interface allows you to add a logo for branding, insert a thank you message and set the language. You can even set how you want the client to pay, that is if you are not automatically charging the customer via a previously saved payment method, cool right?
In addition to this, taxes can also be included and defined for transparency along with a deadline. That’s cool, but what tops it off is the reminder feature, that automatically notifies the client as the deadline draws close or as you define which can even be after the deadline has passed. Before any of this can happen though, customer records need to be added to the system, which some first-timers will realize when they try to create an invoice
For developers or businesses who want to further customize the Stripe invoice template, this can be done by using Stripe comprehensive set of webhook events. The regular stripe template is enough though for almost everything since it contains business information and can be easily branded.
PayPal does a good job at invoicing too. Invoicing is also free on PayPal and allows for customization such as adding a logo. At a minimum, you only need a customers email to complete an invoice which can be convenient. PayPal allows for invoices to be sent to multiple customers at once which is not the case with stripe but could be a great feature for businesses with a lot of clients. To add to this, customer data does not need to be added to the system in advance as it can be done in the same invoice billing process.
The invoicing system on both platforms are great, both Stripe and PayPal has small pros and cons that even things out.
We will call this one a tie
Checkout Experience
This is an important factor to consider. It’s one of the main reasons for cart abandonment. A checkout process needs to be seamless, fast and appear professional. Most people will leave a website checkout simply because they don’t feel confident enough that their information is going to be secure, and they decided that just by how it looked. Which is in fact, logically not good judgment, but it is what customers do so it must be taken seriously.
Stripe has a highly customizable checkout process. You will have the options of using a hosted or non-hosted checkout. Non-hosted checkout means the customer is redirected to stripe to complete payment and Hosted checkout means the customer completes the payment on your website. Most merchants will go with the non-hosted solution which can result in beautiful checkout experiences. In order to make payments, all that is required of users is their credit/debit card details, extremely simplified. The stripe checkout process is simplified and requires minimum details on part of the customer. The entire process is shown in 3 steps below.
PayPal also offers two solutions for hosted and non-hosted checkout. However, in order to use PayPal hosted checkout, you will need to sign up for PayPal Pro which will cost $30.00 per month, along with their standard fees discussed previously. Making the non-hosted solutions way popular among users. There are two options, PayPal Express Checkout and PayPal standard, both options cause the customer to leave the site and go to PayPal to complete their purchase. All customers must have a PayPal account to use PayPal standard but not all countries require a PayPal account to use PayPal Express
The PayPal checkout process is has way more steps than the Stripe checkout. Therefore there is a greater chance of cart abandonment
Having customers leave your site at checkout is never really a good option especially if they meet a complicated process right after that. No doubt many will abandon, simplicity should be key.
It is very clear here Stripe is the winner
Customer support
There are more than a few reasons why you should want to know that you can reach the gateway provider that processes your customer’s credit cards.
A few months ago Stripe made a big move. They started offering 24/7 support with really short wait times of about 1-3 minutes. This is available via Phone and Live Chat and email. This placed Stripe ahead of its competitors and customers are now more satisfied with the service. Generally speaking, client who can reach support in the least time are usually happier, Dan Gingiss wrote specifically on live chat over at Forbes. Other ways to get stripe support include
- Stripe knowledgebase: The knowledgebase is a great place to start if you have minor issues or like fixing your own problems.
- Developer Documentation: Stripe has extensive developer documentation, which is expected since Stripe was originally aimed at developers.
- Freenode-Based Chat Support (#stripe): Another avenue for developers to get support. But directly from other developers, awesome!
- Social Media: Although stripe has no twitter support account customers can tweet @Stripe or check @StripeStatus for outage notices and updates, they are also available via Facebook.
PayPal, on the other hand, offers good enough support for their customers but it is nowhere as good as Stripe support. I mean, what beats 24-hour support? PayPal has dedicated support hours, and phone waiting times can be long before you reach an agent or if you get put on hold for transfer. Apart from email and phone support other avenues include:
- Help Center: PayPal actually has a great help center, they cover a lot of bases and most issues can be found there with a solution.
- Developer Center: PayPal also has developer documentation. It is not as extensive as what Stripe has done but it helps.
- Social Media: This is a simple option. You can contact PayPal via facebook or twitter or even comment on posts or tweets and they will reach out.
Stripe took this one home with a solid win
Time To Get Paid
Stripe does payouts 2-3 days after a transaction and the funds are automatically deposited to the connected bank account. However, funds collected in PayPal are made available almost immediately if you wish to use the money directly from the PayPal account. If you choose to do a bank transfer it can take about 1-2 days.
PayPal wins this one
Finally, a Verdict
Stripe has copped most of the above titles, but, it will be a tie. The reason for this is both platforms are great at what they do and sometimes one can only get the edge because of a specific target market or the needs of a specific business industry. There are really no huge margins between offerings. Expect for the support, however you are probably less likely to have issues with a non hosted checkout gateway so it probably makes up for it.
It is indeed a difficult decision to make if you are looking to choose one. I would recommend you use both. They are both easy to implement and you get the best of both worlds, really nothing to lose there.
In fact, even when developing e-commerce websites for our own clients we encourage them to use both options.
