Stripe vs. PayPal

Small company owners that are interested in online payment processing solutions should read this article.
Your clients’ payments are processed by Stripe and PayPal, two credit card processing companies. In its core, Stripe is a merchant services company that lets you personalise its products for offline or online purchases. In its core, PayPal is a digital wallet.

Stripe is a better choice if your company conducts a lot of sales, both offline and online, and you want to be able to take a variety of payment methods. If you already use PayPal to send invoices and collect payments for your small business, it could be a better option.

Stripe vs. PayPal at a glance

The best payment processor for high-volume online enterprises with web development capabilities is Stripe.

What is Stripe?

Financial services firm Stripe primarily serves as a merchant services provider. The business offers a top point-of-sale (POS) system and e-commerce tool plugins that enable your firm to accept payments from clients.

For a charge, Stripe, a payment processing firm, may help your business take payments in a variety of ways. Payments are then automatically sent into your company checking account as early as the next day after being placed into a merchant account that Stripe provides.

How Stripe works

You can select a bespoke e-commerce bundle or one of Stripe’s basic packages when you join up. You can choose to buy tools or download plugins to process payments, and you can utilise a dashboard to keep tabs on the money you get.

You will have access to Stripe’s additional services, such as billing, invoicing, and identity protection, in addition to payment processing for your online business. You may use inventory-management tools or link Stripe directly with QuickBooks, depending on whatever service you use.

An illustration of a Stripe dashboard is shown below:

Additional Stripe services
Stripe provides the following services in addition to processing payments:

Create recurring invoices and subscriptions for your business; the fee is 0.5% of each charge.
Invoice up to 25 clients for free each month; after that, pay 0.4% for each settled invoice.
Card issuance: Use personalised gift cards to thank and promote your customers.
Tools for calculating taxes Use the platform’s tax computation tools; there is a 0.5% transaction fee.
Services for identity protection: Use identification technologies to confirm the identity of your consumers; each confirmation costs $1.50.
Fraud defence: Use Stripe’s Radar service to defend against fraud and stop chargebacks.
Inventory control: Keep track of the supplies you have on hand and set up alerts to notify you when you need to place an order for more.

Stripe costs
Expect to pay fees starting at 5 cents per transaction plus 2.7% of the transaction value – 30 cents per transaction plus 2.9% for e-commerce – if you pick Stripe to handle your in-person or online payments. All credit cards and digital wallets, including Apple Pay, Google Pay, Mastercard, Maestro, American Express, Discover, and JCB, have the same pricing. Integrations are also offered for Giropay and other universal payment systems.

When to use Stripe

Stripe shines because it provides a variety of options and affordable prices for your company. If any of the following apply to you, think about utilizing Stripe:

E-commerce is a key component of your internet business.
You want a platform that can be entirely altered.
Your company regularly does internet sales.
Improved fraud prevention techniques are required.
Because there are so many tools and capabilities available with Stripe, setting it up could need some technical knowledge. The software’s bells and whistles might be intimidating if you don’t know an IT expert and don’t have the money to hire someone to assist you with setting up Stripe. Instead, you might choose to utilize PayPal or locate a simpler method.

What is PayPal?

PayPal is a provider of financial services, just like Stripe. But the main purpose of PayPal is to serve as a digital wallet for private users or small businesses. It is typically used for accepting payments, billing clients, and giving money to friends and relatives.

PayPal concentrates on sending invoices to clients and collecting money for services rendered, whereas Stripe places a lot of emphasis on processing credit card payments for merchants. PayPal also provides merchant services including POS hardware and credit card processing, but compared to Stripe suppliers, its merchant services are significantly more limited and pricey.

How PayPal works

Visit the PayPal website and register to get started. Simple registration gives new users immediate access to a digital wallet for sending and receiving money. In order to move money on and off the site, you may also link bank accounts.

Once you’ve created an account with PayPal, you may choose how to make the most of the service to fulfill your requirements, purchase tools, or add features. Additionally, you may utilise the site to transmit and receive payments for individual bills, get a POS system, and get a company loan.

Additional PayPal services

In addition to accepting payments, PayPal also provides the following services:

Invoicing: The invoicing feature of PayPal is user-friendly. While there is no charge for issuing an invoice, the business charges merchants for all invoices paid via the platform.
Loans for businesses: Customers with business accounts can apply for a PayPal Business Loan to aid with costs. To determine their eligibility, potential borrowers use PayPal’s web service without having their credit score affected. Your credit history and the general financial condition of your business are two elements that determine your eligibility.
Working capital: If your company frequently requires access to small amounts of funds to pay expenditures, PayPal also provides flexible lines of credit.
Seller protection shields you against fraud and lowers the possibility of chargebacks.
Tools for calculating taxes: Depending on the location and kind of transaction, these tools assist you in figuring out the sales taxes that are due.
An illustration of how simple it is to construct an invoice using the PayPal platform is shown below:

PayPal costs

The kind of payment being processed and whether the transaction is domestic or international determine the PayPal transaction costs. Rates range from 1.9% (plus a set charge) to 3.49% (plus a fixed fee) for conventional PayPal checkout, invoicing, Venmo, and other business transactions. Rates for QR code transactions costing over $10 also includes a fixed fee. There is no additional set cost when paying with American Express using PayPal guest checkout; however, there is a 3.5% fee.

When to use PayPal

Compared to other organizations that handle payments, PayPal is significantly more costly. You need a straightforward method to send bills fast, so your service-based business—like a consultant or landscaper—is an excellent user.

PayPal could be your best option if you want a tool that can also accept payments and you don’t want to set up a more complicated system like Stripe.

These are some typical scenarios for using PayPal:

You already transfer and receive money from friends and family using PayPal directly.
You’d want to accept PayPal payments.
You don’t sell a lot, but you’re prepared to spend more in fees for simplicity.
Both online and offline sales are conducted by your multichannel business.
Pros and drawbacks of stripes
Consider Stripe’s benefits and disadvantages when choosing a payment processing solution for your company.

Stripe pros

Low cost: For every sort of transaction, Stripe is significantly less expensive than PayPal.
Complete integration: There are various alternatives available on the platform, including POS systems and merchant accounts.
No setup, cancellation, or account maintenance fees: Stripe offers a reasonable trial and is economical for businesses that are only open for a short time.
Customization to the hilt: There are plugins, features, and tools for different businesses.
Quick account creation: Setting up an account with Stripe is simple online, however it may take some time if you need to have equipment delivered.
Stripe cons
Suspended user accounts: You may need to fix the problem before taking payments in the future if you execute a faulty transaction or have a technical problem.
Chargeback fees: You can be required to reimburse a fraudulent purchase and pay a cost of up to $15.
Credit card readers that are required: A physical card reader will cost money, however a card reader provided by PayPal is free. (PayPal offers compensated card readers as well.)
Complex setup: If you don’t have access to IT staff or a buddy to help you customise Stripe, you can struggle to set up additional features.
Limited tax services: You could have to do your own tax preparation or engage a CPA.

PayPal pros and cons

pros of PayPal

PayPal is simple to set up; you don’t need any programming knowledge or outside assistance to utilise it right away.
Optional merchant account: PayPal functions as a digital wallet where money may be stored and transferred between bank accounts.
Simpler invoicing: The PayPal invoicing tool is uncomplicated and simple to use.
Easy integration: PayPal works with a number of well-known e-commerce platforms, including WooCommerce, Shopify, Wix, Depop, and Squarespace. Simplified payments: It’s simple to set up automatic recurring payments, even in multiple currencies.
Cons of PayPal
High price: In August 2021, PayPal raised its processing costs for American businesses; as a result, it is now more expensive than Stripe and other leading payment processors. Considering a PayPal substitute? See our Square review.
Chargeback fees: Unless the transaction is protected by PayPal’s seller protection programme, you will be charged a $20 fee if you execute a fraudulent transaction and the cardholder challenges the transaction.
accounts of suspended users: You might not be allowed to handle payments if you process too many fraudulent transactions or don’t pay fees.
need a little personalization Although PayPal is easier to set up, it cannot be tailored to meet your unique needs.
Consumer preferences: Some people dislike using PayPal to transmit money or may believe the service is not secure.
Limited payment options: Your business can utilize PayPal to accept bank accounts, PayPal Credit, debit or credit cards, PayPal Cash or PayPal Cash Plus account balances, and rewards balances. However, the platform is unable to accept several popular payment options, including Apple Pay.