PayPal vs. Stripe

PayPal vs. Stripe Comparison

As the online payments industry continues to grow, many newcomer e-commerce merchants find themselves facing a choice between PayPal and Stripe for their credit card processing needs. So, which of these companies offers better pricing, easier installation, fewer fund holds, and better customer support? We've compared them head-to-head to make the choice easier for you.

Even though PayPal serves multiple types of payment processing needs, this article will focus exclusively on PayPal and Stripe's online payment processing solutions for e-commerce merchants. For an overall review of each company's sales tactics, contract terms, customer service, and complaint record, visit our PayPal review and our Stripe review.

Jump to a section: Pricing | Ease of setup | Features | Fraud policy | Customer support

Pricing: Stripe Beats PayPal

The two companies are very close when it comes to pricing. PayPal is uncommon among merchant services providers in that it scales its pricing based on a merchant's monthly sales volume. As shown above, merchants who process under $3,000 in monthly sales will have identical processing fees under PayPal and Stripe. Once merchants start to process over $3,000 per month, they pay lower fees under PayPal's plan, while they pay the same 2.9% plus $0.30 rate under Stripe's pricing.

If transaction fees were the only factor to consider, PayPal would be the clear winner. But merchants should consider other issues that may affect their business. For instance, PayPal charges 3.5% per transaction to accept American Express under most of its plans, while Stripe charges its usual 2.9% plus $0.30 for AmEx. And for merchants who may need to accept money from a high number of customers using international credit cards, PayPal will charge an additional 1% for each transaction, while Stripe will not. Stripe also does not charge merchants for authorized transactions that fail to process through Stripe. As a final consideration, Stripe offers a slightly cheaper chargeback fee than the $20 charged by PayPal, and this fee is refunded in the event that the chargeback is resolved in the merchant's favor.

Neither company charges monthly fees for its basic service, although PayPal does offer upgraded service plans that include monthly charges (more on that below). It's also free to set up and cancel service with both companies.

Overall, merchants will have to carefully consider which processor better suits their needs. PayPal offers more competitive transaction fees for large or mid-size merchants, while Stripe is a cheaper option for smaller merchants that may accept a high number of American Express cards or international payments, or that may deal frequently with chargebacks. Since Stripe will cost the same as PayPal for small merchants and has a simpler overall pricing plan for all potential costs, it just barely gets the nod in this category.

Ease of Setup: PayPal Beats Stripe

“Buy Now” Buttons

From the perspective of a merchant with little or no development experience, setting up online payments can be daunting. Customers expect their transactions to be secure, simple, and fast. For this reason, PayPal's “Buy Now” button is a well-known and popular option to enable online payments. Merchants can copy the necessary code snippet from PayPal's website and paste it into their websites with relative ease. Since this button takes customers to the PayPal website to complete payments, it isn't necessary for a merchant to do more than just add the button and have a PayPal account. Stripe offers a similar “Pay with Card” button, but this option requires a merchant to have developed the necessary payment framework within his or her website. For this reason, PayPal's “Buy Now” button is much more appealing for a merchant with no coding experience and few items to sell.

There are several drawbacks to simply using PayPal's “Buy Now” buttons, though. By directing customers to the PayPal website, “Buy Now” buttons send visitors away from the merchant's site, making it impossible to determine whether payments have been securely made or what exactly went wrong with failed payments. Additionally, PayPal makes a fairly aggressive effort to sign up “Buy Now” customers for PayPal accounts, which may irritate customers who aren't interested. Customers who are opposed to using PayPal in general will probably not even click the recognizable “Buy Now” button.

Advanced Integration

Both PayPal and Stripe offer options for merchants to integrate the payment process into their websites. Under PayPal's Payments Advanced and Payments Pro plans, merchants can host the entire payment process on their sites, eliminating the need for the “Buy Now” button. However, these services come at a cost of $5 or $30 per month while Stripe offers on-site payments for free. Stripe is intended for use by merchants with programming experience or merchants who are willing to hire developers to integrate payment processing into their websites. To that end, developer reviews of Stripe praise the service's simple setup and developer support.

Overall, PayPal offers the simplest option in the form of the “Buy Now” button for merchants who have small, static inventories. For merchants with large, dynamic inventories who prefer to host their checkout process on-site, Stripe offers the cheaper solution with better developer support. Stripe also has an ever-growing base of plugins and integrated POS systems, so it may someday be much easier for non-programmers to install. At this time, though, PayPal just barely takes the edge in this category for providing the easiest possible integration option.

Features: Stripe Beats PayPal

Both Stripe and PayPal offer numerous additional features for e-commerce merchants beyond simple payment processing. The usefulness of these add-ons will depend on a merchant's business type, and it's therefore difficult to determine which company has the objectively “better” service suite. The one factor that is certain, though, is that PayPal charges for many of its additional features, while Stripe's customization is limited only by a merchant's available time, programming knowledge, or budget for custom development.

Additional Features and Costs

PayPal offers its “Bill Me Later” customer financing option, online invoicing service, and immediate access to processed funds for free under all of its pricing plans. It should be noted, though, that processed payments are only immediately available within the merchant's PayPal account and are subject to an average waiting period of three days for “withdrawals” to the merchant's bank account. For recurring billing, PayPal charges $19.99 per month, and its virtual terminal is only available under its $30/month Payments Pro pricing plan. The company also provides other services for various prices, but these are the most prominent features for e-commerce merchants.

Stripe, on the other hand, offers a wide array of options for POS system integration, website customization, and payment acceptance. The catch is that these features come in the form of Stripe-integrated APIs, SDKs, and community-generated code snippets. For a merchant to add comparable services to those offered by PayPal, he or she will need to be willing to manually integrate them. This may be intimidating or exciting, depending on a merchant's programming ability and access to a developer. The Stripe development community is active and helpful, and the company is rolling out new services with regularity for merchants who are willing and able to add them.

PayPal bundles many of its features into reasonably priced service packages and includes a small portion of its additional features for free. In general, though, Stripe allows for a greater deal of free customization and integration as long as a merchant has advanced programming knowledge or a developer on staff.

Fraud Prevention Policies: PayPal Beats Stripe

By far the most common issues cited in complaints about both PayPal and Stripe are account freezes and fund holds. Merchants with irregular sales patterns or high-risk business types are especially susceptible to these payment delays, which are usually enacted with little advance notice or explanation from the processor. Being the much larger company, PayPal has attracted far more complaints of this nature than Stripe has, but Stripe is beginning to receive its share of fund hold complaints on various consumer protection websites.

Fund Holding Policies

Stripe and PayPal appear to have remarkably similar policies when it comes to fraud prevention. Both PayPal and Stripe do little to warn at-risk merchants of potential future holds before signing them up for service. Both companies actively promote the fact that there is no initial processing limit when a merchant first sets up an account. More importantly, both companies include clauses that grant Stripe and PayPal the right to establish reserve accounts as they deem necessary, often by holding portions of a merchant's payments or by withdrawing funds held in the merchant's bank account or PayPal account. These reserve accounts may be established in reaction to potential or actual chargebacks, suspicious transactions, or a suspected breach of the companies' terms of use. Put simply, PayPal and Stripe both reserve the right to hold your money as they see fit in order to prevent fraud. With PayPal, these holds can last up to 180 days. With Stripe, there is no explicit limit on their length.

Stripe claims that its built-in seven-day wait for payouts helps it avoid any sort of weekly processing limit or ongoing reserve account. Whether or not this is the case, merchants will want to be sure that they can afford to wait seven days for all of their payments (e.g. a transaction processed on Wednesday will be available the following Wednesday). Presumably, if a questionable transaction or chargeback takes place in the intervening seven days between the sale and the deposit, Stripe may hold the funds in order to protect itself from potential losses.

PayPal avoids a seven-day hold because it sends a merchant's payments to his or her PayPal account, rather than directly to a bank account. Most withdrawals from PayPal accounts can take approximately three days, and these, too, may have limits imposed as PayPal deems necessary. Overall, both payment processors may hold merchants' funds with little justification or notice, and both companies are currently showing complaints indicating that this is a problem for some of their clients. The deciding factor in this category, therefore, is customer service (see category below). Although PayPal's free phone support is known to provide poor customer service, it technically provides the opportunity for a quicker resolution to fund holds. Stripe does not offer live customer support at this time, so it will likely take longer for a merchant to resolve a hold through Stripe.

Customer Support: PayPal Beats Stripe

Support Options

Neither PayPal nor Stripe is known for great customer support. On the surface, PayPal's free phone support seems like it provides a leg up on any competitors that don't offer live support, but merchants consistently report long wait times and unhelpful service via the company's free support lines. As an alternative, PayPal offers two advanced tiers of service through its $159/month “Enhanced 13×7″ support and $495/month “24×7 Premium” support, but these levels of service may be beyond the means of most merchants.

Like Square, Stripe prefers to initially conduct all customer support through email or the support section of its website. According to the company's FAQ section, “starting with email enables us to provide the fastest response,” but “if it makes sense to jump on the phone once we hear from you, we're happy to do so.” It therefore seems that some merchants may receive phone support if Stripe determines that their situation needs a greater level of support. Most merchants, though, will be stuck with the company's email support, which is showing some complaints online for a slow response time (three to seven days in the worst cases). Some developer reviews of Stripe have mentioned that the company's developer support is generally very user-friendly; this means that merchants with a developer on staff may see better results when attempting to correct software or hardware issues through Stripe. Non-tech-savvy merchants, however, may be frustrated with the lack of live support.

In this case, it really comes down to whether a merchant would rather deal with unhelpful free phone support, pay for quality phone support, or roll the dice with email support. As a general rule, merchants seem to opt for live support even when it may be frustrating or slow, giving PayPal the edge in this category. Although it is rare for PayPal's phone support to beat out another company when it comes to customer service, a live human being on the other end of the line during business hours may mean the world to some merchants.

Bottom Line: PayPal Beats Stripe Head-to-Head

Although it's very close, PayPal just barely beats Stripe as an e-commerce provider thanks to its easier setup and live customer support. PayPal comes with all of the benefits and drawbacks of a very large processor. The company provides a great deal of flexibility for merchants, allowing small or large businesses to pay for or decline services they do not need. And even though PayPal is notorious for placing holds on funds, its actual fraud policies are essentially identical to those of Stripe but with the added advantage of live support. PayPal's live phone lines are known for long wait times and poor service, but live support is still better than email support in the eyes of most merchants.

Stripe, on the other hand, is a much better option than PayPal for certain types of businesses that have a higher level of development resources. Stripe can provide a broader host of services than PayPal, almost all of which come at no additional cost to the merchant. Additionally, Stripe serves as the backend processor for a growing number of POS systems and online marketplaces (like Payments by Wave, Bigcommerce, and Shopify), meaning that merchants can skip the Stripe integration process altogether by processing through these services. The web developer community in particular seems excited about Stripe, and the company appears poised to capitalize on industry trends at a rate that PayPal will struggle to match.

Stripe is still a very young company and may someday be the better overall option for online payment processing, but PayPal is a safer, more capable, and potentially more affordable merchant account provider as of this review.

Which do you prefer, PayPal or Stripe? Tell us why in the comment section below.