Whether you run a blog, membership site, or eCommerce site, if you want to collect online payments from your customers, you’ll need a payment processor.
There are plenty of options out there, but which one should you choose?
Well, most people would start by considering the two big-hitters of the industry: PayPal and Stripe.
Having been around for years, and with worldwide availability, I’m sure you’re familiar with PayPal. PayPal uses an off-site checkout method, redirecting your customers to a dedicated checkout page to take payments.
Stripe is the newer option, and has a more limited availability—US, Canada, UK, Australia, and Ireland at present, with a beta rollout ongoing in many European countries. If you’re wanting to take card payments directly from your website, Stripe is a great solution.
Both services are supported by the popular WooCommerce WordPress plugin, and both provide a secure, convenient checkout experience for customers.
Today, we compare PayPal vs Stripe from a purely business perspective to help you make an informed decision when choosing your payment processor.
Cost will always be a primary consideration when doing business, and choosing your payment processor is no different.
Both PayPal and Stripe’s services are free to setup and come with no monthly fee. You only incur a charge on each successful transaction, which is instantly deducted from the money received. These charges vary between the two services, but only marginally.
Stripe goes with a completely flat pricing structure—well, at least for anyone processing less than $1 million in annual revenue—charging 2.9% + 30¢ per successful transactions for its US customers.
PayPal takes a slightly different approach, offering better rates as you scale up. For the smallest users, they match Stripe’s 2.9% + 30¢ charge, but if you push over $10,000 of business through your account each month, then you can benefit from fees as low as 2.2% + 30¢.
Charges do vary from country to country, but the formula remains the same: Stripe uses a flat structure, whereas PayPal operates a sliding scale based on volume. It’s well worth checking out the fees in your country, as the fees you’re charged could vary drastically from those charged to US customers.
For example, in the UK, Stripe offers a much more competitive 2.4% + 20p charge. PayPal fees start at a steep 3.4% + 20p, but the transaction fees fall quickly, reaching 1.4% + 20p per transaction for monthly sales over £55,000.
Quick takeaway: If you are solely interested in price, charges are identical for US customers receiving less than $3,000 each month. For those of you making more than $3,000 in monthly business, go with PayPal.
For a business model based on high-volume, low-value transactions, the charges outlined above will seriously eat into your margins.
For example, if a transaction was for $3, you could be paying a fee as high as 38.7¢ using the standard charges, which equates to a whopping 12.9%. That’s far from ideal.
For those of you processing lots of these low-value transactions—under $4—PayPal offers a far more competitive rate. Micropayments are charged at just 0.5% + 5¢ per transaction. Back to the example above, a $3 transaction would equate to a 7.5¢ charge, saving you 31.2¢ on each transaction.
Unfortunately, at this point in time there are no discounted rates for microtransactions using Stripe.
Quick takeaway: If you sell things for under $4, you’ll save a lot by taking advantage of PayPal’s micropayments.
In this increasingly globalized world, there’s a good chance you’ll want to accept payments from territories other than your own—this is especially true if you’re selling digital products.
As well as the fees outlined above, there are also additional charges for international transactions with both PayPal and Stripe.
With PayPal, US customers are charged a flat 1% cross-border fee for international transactions. This varies from country to country—for example, UK users are charged a more competitive 0.5% cross-border fee.
If you are accepting a payment in a currency other than your own, you will face a further 2.5% currency conversion fee.
These fees quickly add up, and means that if someone in the US wanted to accept a payment from a UK-based customer in GBP, they could face a staggering 6.4% + 30¢ fee. You can keep costs down by only accepting payment in your own currency, but this could put some international customers off.
With Stripe, there are no cross-border fees. To accept payment in another currency, you will face a 2% conversion fee, though.
Quick takeaway: A clear winner this time: Stripe.
Cash out Duration
You can face a countless number of unexpected costs when running a business; having a liquid cash flow is always advantageous.
Put another way, the quicker the money you make reaches your bank account, the better.
A great benefit of using PayPal is that your funds are available to withdraw instantly, and can be available in your bank account within one day—this applies regardless of the country you’re in.
Stripe was notoriously bad for cash out times, but has made some big improvements in this area—for US customers at least. US customers face a two-day wait for their funds, which are automatically paid into your bank account on a rolling basis.
If you’re outside the US, unfortunately you’ll have to wait a full 7 days. Disappointing, to say the least.
Quick takeaway: If you want quick access to your funds, PayPal is the obvious choice.
Now, on to perhaps the most important considerations when choosing your payment processor: User Experience. It’s a big decision, and one that is hugely influential when it comes to those all-important conversion rates.
After all, if people don’t like your checkout procedure, they won’t become paying customers—it’s that simple.
When it comes to making the checkout procedure as frictionless as possible, there’s only one winner: Stripe.
PayPal has a clumsy, dated user interface, and also redirects users away from your website to pay. Because of this, if something goes wrong with their payment, you don’t have access to the analytics to figure out what happened.
There’s also the small matter of the PayPal brand, which will be plastered across your checkout—both a blessing and a curse. PayPal is a huge, well-known brand, and a PayPal payment option is secure and trustworthy, to some at least.
Some people flat out don’t like it, though. If PayPal is their only option, some people would rather shop elsewhere.
The Stripe interface is far more user friendly, and seamlessly integrates into the design of your own website. Everything is done from your site—there’s no sending users elsewhere—and this makes for a painless checkout procedure, as well as giving you complete control over the entire process.
With Stripe, you can also design your own checkout, allowing you to get the look and feel just right, and even optimize for conversions. The checkout is unbranded, too, giving it a distinct advantage over PayPal.
Quick takeaway: Both PayPal and Stripe are completely secure, but the checkout procedure is just easier with Stripe.
Note: you can upgrade to PayPal Pro for $30 per month, which allows customers to checkout without leaving your site. The transaction fees for PayPal pro are unchanged.
Love it or hate it, PayPal is the clear winner, everything considered.
But the two services aren’t mutually exclusive—there is nothing stopping you from getting the best of both services, by using PayPal and Stripe. In fact, I’d recommend it.
Most of you will already be aware of PayPal—perhaps you’re already using it—but Stripe gives you something different: it allows customers to pay directly from your site.
Giving customers more ways to pay can only be a good thing.
What payment processor do you use? What are your experiences with them?
Shaun Quarton is a freelance blogger from the UK, with a passion for online entrepreneurship, content marketing, and all things WordPress.