Stripe VS PayPal: Comparison

Both PayPal and Stripe offer special microtransaction rates to select merchants with low average ticket values. These per-transaction rates consist of a higher percentage fee but a lower fixed fee, which means less money is taken out of transactions under $10.

However, with both PayPal and Stripe, not all merchants will qualify for microtransaction rates (Stripe barely mentions them at all), so I hesitate to emphasize them as you may well be disappointed if you attempt to qualify. Merchants with small average tickets should certainly ask Stripe/PayPal about the possibility, though.

Stripe and PayPal both offer some (but not all) merchants the ability to opt into interchange-plus pricing. This type of pricing can be more cost-effective than flat-rate pricing for businesses processing upwards of $5K-10K/month in sales.

Stripe offers interchange-plus pricing to high-volume businesses, though it does not define which businesses it considers high-volume for this purpose. PayPal, by contrast, allows any business that has successfully applied for Advanced Credit and Debit Processing to choose a form of interchange-plus pricing (a form it calls “interchange plus plus”) if it wishes.

Additionally, while Stripe doesn’t disclose any sample rates regarding its interchange-plus program, PayPal’s listed rate (interchange + 0.49% + $0.39 per transaction) is a bit higher than the interchange-plus rate offered by many competitors. Another wrinkle in PayPal’s interchange-plus program is that it uses “gross settlement” — instead of paying the processing fee on a per-transaction basis as with flat-rate pricing, your processing fees will accumulate and be auto-debited from your bank account on the 10th of every month.

Both PayPal and Stripe make it easy for new merchants to sign up for their services without undergoing a lengthy application/screening process. As for the details, let’s start with PayPal.

As we detail in our guide to creating a PayPal business account, the process is quick, easy, and free. Here’s what you’ll need to provide during signup:

There are three PayPal service plans to choose from:

• Checkout: PayPal Checkout works well if you just want to sell using simple buy buttons or if you want to add a supplemental payment option to your existing online store. PayPal will offer your customers an option to check out with PayPal as well as PayPal Credit and Venmo, based on what user data it has available. Merchants worried about PCI compliance may appreciate that PayPal Checkout takes the issue out of their hands by redirecting customers to its site to complete transactions.
• Payments Advanced: With PayPal’s intermediate option, Payments Advanced, you can build your payment buttons and simply copy/paste some code onto your site to enable PayPal as your shopping cart. You’ll also get hosted checkout templates, allowing customers to stay on your website during their purchase instead of rerouting to PayPal’s site. The Advanced plan costs $5/month and is customizable but doesn’t require a lot of technical knowledge.
• Payments Pro: Get your standard PayPal features, hosted checkout pages, and a virtual terminal for a monthly fee and processing costs. Payments Pro costs an additional $30/month. Payments Pro is the only PayPal plan that includes the virtual terminal for no additional charge — if you implement a virtual terminal without Payments Pro, the virtual terminal alone will cost $30 a month.

PayPal’s other services include:

• PayPal Zettle mPOS (integrations with leading POS systems for retail and food businesses are also available)
• Recurring billing
• Online and in-app invoicing
• Donation buttons
• Mass payouts

As for signing up with Stripe, it’s a bit more involved than PayPal’s signup process, but it’s still quicker and less complicated than signing up for a traditional merchant account.

The first part of the signup process is similar to PayPal’s, and you’ll need to supply the same information about yourself and your business.

The second part of the process involves relaying information to your web developer that enables your website to connect to your Stripe account.

Stripe doesn’t have “service plans” the way PayPal does. Your access to Stripe’s payment processing features remains the same regardless of which other features and tools you choose to use. These online payment processing tools include:

• Support for credit cards, ACH, and localized payment methods
• Support for online and in-app checkouts
• A prebuilt embeddable checkout form (Checkout), plus the ability to either build a form from scratch or use prebuilt components (Elements)
• Invoicing, recurring billing, and subscription tools

Stripe offers numerous add-ons you can tack onto your service à la carte, such as Stripe Billing, which includes Stripe’s invoicing, recurring billing, and subscription tools.

Both Stripe and PayPal allow for programmatic customization, as is typical for most payment processors. That said, while PayPal Commerce’s developer tools are good, Stripe (more or less) is a developer tool, assuming you aren’t using it through a white-label service, such as Shopify.

PayPal has taken some pains to flesh out its developer environment. Documentation is now broken up according to the type of business you’re coding for, so you can easily find tutorials for small businesses, marketplace platforms, or large enterprises. In the last case, PayPal will nudge you toward one of its subsidiary services, such as Braintree, Hyperwallet, or Simility.

Stripe’s API, on the other hand, is its major selling point. Stripe is a RESTful API that uses API keys to authenticate requests. Stripe provides official libraries for various programming languages and mobile platforms. You can code your features from scratch, follow one of the detailed guides, or clone an existing project to build off of.

Both Stripe and PayPal feature robust international support, though Stripe has the overall edge here. It supports a variety of payment methods and over 135 currencies. Stripe’s supported payment methods are broken down into two categories: universal and local. Local payment types are only available in the regions in which they are most popular.

Stripe supports too many currencies to list here, but you can find them on Stripe’s website. Additionally, Stripe allows businesses to avoid exchange fees by specifying “presentment” currencies when you set Stripe up. Stripe will accumulate separate balances for each currency you’re paid with, which it can then route to different bank accounts. If your presentment currency differs from the settlement currency, Stripe will automatically make the conversion for you, but this comes at an additional 1% fee.

PayPal handles things a little differently. To accept international payments, you simply toggle on the feature from your account. You can then specify whether you want all foreign sales to be automatically converted to US dollars or do so manually. You can hold foreign currencies in your PayPal Commerce account until you want to convert them. PayPal currently supports 24 currencies and also supports numerous local payment types, though not as many as Stripe.

Which is better? It depends on how much coding you’re willing to do. Stripe allows for an extraordinary amount of precise control over how you want your international payments handled. PayPal makes it pretty easy so long as you don’t need to do anything fancy. The edge goes to Stripe in terms of potential (the most important factor for an ambitious eCommerce operation) and to PayPal for ease of use.

Stripe and PayPal have slightly different approaches to their invoicing features.

With Stripe, you can select between Starter and Plus plans for invoicing. Starter gives you 25 free invoices per month, after which you’re charged 0.4% per paid invoice. The Plus plan provides some automation and advanced collection features and costs 0.5% per invoice. In addition, you’ll pay Stripe’s standard transaction fee based on the customer’s chosen payment method — 0.8% for ACH or 29% + $0.30 for a credit card, for example.

PayPal has no limit on the number of invoices you can send, and no fees per invoice sent, but you’ll pay the standard online transaction fee of 3.49% + $0.49 for each paid invoice.

Recurring Payments

Stripe Billing is an additional feature that’s available if you’re dealing with recurring charges. This feature is available at 0.5% per recurring charge. There’s also a Scale plan for 0.8% per recurring charge that connects to NetSuite and sends customers an initial quote before they start a subscription. Custom pricing is available for large volumes.

With PayPal, you can enable recurring billing for no additional charge if you’re using PayPal Checkout. If you have Payments Pro or Advanced (in which case you’re already paying a monthly fee), it’ll cost you an additional $10/month.

Overall, Stripe’s invoicing and billing tools are more flexible and less expensive than those of PayPal. Also, PayPal does not support ACH payments under its name-branded label.

We’re focusing on eCommerce in this article, but I also wanted to mention Stripe and PayPal’s respective POS capabilities.

PayPal’s service is the stronger of the two. PayPal Zettle may be far from fully-featured, but it’s robust enough to allow you to take card-present transactions when you need to reliably. The basic app is free, but you’ll need to pay a monthly fee of $39-$49/month if you want inventory tracking. Card-present transactions are charged 2.29% + $0.09 per instance, while your first card reader costs $29 ($79 for each subsequent reader).

Stripe now has a beta for what it calls Stripe Terminal, an SDK that allows you to build Stripe’s payment processing into a point of sale app, either on a mobile platform or on the web. It comes with precertified hardware and additional features to make the integration process as simple as possible. Please keep in mind that this is not a ready-to-go POS or mPOS and will require some coding to bring online. Stripe’s card-present rate is 2.7% + $0.05, making it a bit more expensive than PayPal Zettle. As for card readers, Stripe offers the basic Stripe Reader M2 for $59 and the touch screen BBPOS Wisepos E for $249 (these prices apply to the US only).

Stripe has been the leader in the sheer number of payment types accepted almost since the company’s founding. Recently other online payment processors, including PayPal, have begun to catch up.

Even though Stripe and PayPal now offer a similar range of accepted payment methods, there are some key differences: First, PayPal lacks an ACH option, and its digital wallet equivalent is significantly more expensive to process than ACH payments. Second, PayPal doesn’t support as many third-party digital wallets as Stripe, though PayPal has recently started catching up with its newfound support for AliPay, Apple Pay, and Google Pay.