Are you looking for a payment processor for your business? If so, you may be wondering which payment processor to select based on your needs. PayPal and Stripe are one of the most popular payment processors.
To decide which payment processor is best for your business, you will need to consider your specific needs and requirements. If you need a processor that offers a wide range of features, PayPal may be a good option. If you need a processor that is easy to use and integrates with many software platforms, Stripe may be a better option. In this article, we’ll compare PayPal and Stripe and help you understand the key differences so you can make the best decision for your business.
How does a payment processor work?
A payment processor is a company that provides the technology and infrastructure necessary to accept and process credit card payments. When a customer makes a credit card purchase, the payment processor sends the transaction information to the acquiring bank, which then deposits the funds into the merchant’s account.
The payment processor also handles chargebacks and fraud prevention on behalf of the merchant. Chargebacks occur when a customer disputes a charge with their credit card issuer. The payment processor will investigate the claim and, if found in favor of the customer, will refund the customer’s money and deduct the amount from the merchant’s account.
Now that we’ve explained how payment processors work, let’s take a closer look at PayPal and Stripe to see which is best for your business.
What is Paypal?
PayPal is one of the world’s largest online payment processors and POS providers. Founded in 1998, PayPal allows customers to make purchases online using their credit, debit cards, or bank accounts. PayPal also offers a mobile app that allows customers to make in-store purchases using their phones.
In addition to processing payments, PayPal also offers other financial services, such as peer-to-peer payments, business loans, and credit products. PayPal has more than 277 million active users and handles $251 billion in payments annually.
What is the stripe?
Stripe is relatively new to the world of online payments, but it has quickly become a popular choice for businesses of all sizes. Stripe was founded in 2010 with the goal of making it easier for anyone to accept payments online. Stripe now powers payments for over 100,000 businesses in over 25 countries.
One of the key features that sets Stripe apart from its competitors is its easy-to-use software development kit (SDK). This allows businesses to integrate Stripe’s payment processing capabilities into their existing websites and apps with just a few lines of code. Stripe also offers a variety of plugins for popular eCommerce platforms, such as Shopify and WooCommerce.
Key differences
1. Ease of use:
Stripe is more complicated to set up and must integrate with your site. Requires technical knowledge for setup but provides a pop-up window in the app. Stripe is developer-focused and offers a robust set of APIs that can be used to integrate into your website.
Paypal has customizable gateways, which is a simple way to configure and integrate into websites and applications.
- Fee:
Stripe offers a simpler and cheaper fee structure compared to Paypal.
Stripe charges a flat fee of 2.9% + 30 cents for transactions. There may be additional payment methods or currency conversion fees.
PayPal’s specific fee structure may vary depending on factors such as method, transaction volume, currency, and location. Here are the rates:
- International support:
Stripe has a low cost for international transactions. It is primarily available in all regions, but availability may vary. Payments can be made via credit cards, ACH, and bank transfer.
PayPal has a higher transaction fee, but is widely available in major regions of the world. Payments can be made via credit cards, ACH, and bank transfer.
- Later payment option:
Stripe doesn’t have a native Pay Later option, but can integrate with third-party options like Klarna. Klarna rates can vary between 3.3% and 6% + flat rate of 30 cents.
PayPal allows individual customers to defer their payments and make purchases with the flexibility to pay at a later date. PayPal Pay Later typically charges no additional fees to customers and offers the convenience of making interest-free payments within a specified period.
- Brand recognition:
Stripe doesn’t have the same brand recognition as PayPal. However, it is very popular nowadays and the in-app pop-ups make it easy to make payments.
PayPal is a standard name all over the world. It has great trust as a payment provider.
When to use Stripe?
Stripe has a versatile, developer-friendly payment processing solution that offers customizable payment experiences, supports international payments, and provides a simple fee structure. Stripe is often considered more flexible and robust than PayPal for businesses looking for advanced payment capabilities and a seamless user experience.
Use cases like e-commerce depend on feature-rich and fully customizable payment processing, and require robust fraud prevention tools.
When to use PayPal?
PayPal is a simple billing tool and much less complex than Stripe. It has a high cost associated with it, however it still makes sense to use it:
• If you are already used to PayPal.
• Low transaction volume and priority on simplicity
• Requires online and in-person sales
What to choose: Stripe or PayPal?
Choosing between Stripe and PayPal depends on your specific needs and priorities:
• If you value a well-known brand with easy setup and reliability, even with higher fees and complex pricing, PayPal is the recommended choice.
• If you prefer lower rates at scale, are comfortable with basic coding or outsourcing implementation, and don’t mind less brand recognition, Stripe is the best option.
For businesses that make only a few monthly sales, the fee difference between Stripe and PayPal is manageable. However, at scale, PayPal will likely cost more, making Stripe the cost-effective option.
Business insights and analytics
Stripe and PayPal offer business analytics tools to help you monitor and analyze your sales and payments data, but they serve different needs.
Stripe provides a powerful solution through Stripe Sigma, enabling highly customizable reporting and deep insights into payment data. It offers real-time data and is known for its developer-friendly approach, making it ideal for companies with complex reporting requirements or those that need to create custom analytics solutions.
On the other hand, PayPal offers more basic reporting tools, focused on providing information about PayPal transactions and account activity. It is easy to use and suitable for businesses that need simple analytics without extensive customization.
Your choice between Stripe and PayPal for business analytics should depend on the level of customization and complexity you require. Stripe is better suited for advanced, custom analytics, while PayPal is a simpler option for basic reporting and tracking account activity. Many companies use both together to provide multiple payment options and manage analytics accordingly.
Payment automation
Automation can significantly streamline your business operations, and both Stripe and PayPal offer several tools to help you achieve this. With Stripe, you can automate subscription billing and recurring payments, thanks to its robust subscription management features. It also offers an API for integration into your website or app, and webhooks for real-time event notifications, which can be used to trigger automated actions. Stripe’s custom checkout workflows let you automate your checkout process for a personalized user experience. Additionally, you can connect Stripe with other apps using third-party integration tools like Zapier to automate various workflows.
PayPal also offers automation capabilities, particularly in the area of recurring payments through its subscription services and automated billing for services or products. You can add PayPal buttons to your website for easy one-click payments and use the PayPal REST API for more advanced automation needs. For eCommerce businesses, PayPal often integrates seamlessly with popular eCommerce platforms, making it easy to automate payments in an online store. Your choice between Stripe and PayPal for automation should align with your specific business requirements, the level of automation needed, and your preferred payment processing platform. In some cases, you can even choose to use both platforms simultaneously, as each offers different features and integration options.
Automation is easy with software like Flow Nanonets, which can handle the end-to-end accounts payable process and help you increase your efficiency 10x. You can automate your invoices, approval and payment process. Synchronize real-time data with your ERP like Quickbooks to reconcile, monitor and perform analysis on your AP process.
With payment options like ACH and bank transfer, you can automate your payments seamlessly. To learn more, schedule a call with us.
