The beauty of eCommerce is that your store can accept payments at anytime from customers that are based anywhere.
Of course, this means you can't use the traditional methods, such as accepting physical cash. We are now in the era of digital payments, which means when eCommerce sellers set up their store, they need to choose a payment gateway that can be trusted to accept payments on their behalf.
Choosing a payment gateway is an important decision. While nothing is permanent in eCommerce and it is possible to switch payment gateways later, WooCommerce's blog brings up a valid point - you will need to consider "the impact on your payment options, your finances, and your customers". This is why it's best to spend time considering your options.
With payment processing evolving within the last decade, sellers now have many options to choose from. There's Apple Pay, Amazon Pay, Ali Pay, Bitcoin, Payoneer, Skrill, and more. But, the most popular payment processors amongst eCommerce sellers is PayPal and Stripe.
In this post, we'll do an in-depth comparison that will help you understand which online payment platform is the best fit for your business.
PayPal vs Stripe - What exactly do they do?
Both PayPal and Stripe are payments gateways, which are software that allows you to accept payments safely and securely. Their online payment processing services include providing technical support, fraud prevention, and the required virtual banking infrastructure needed to make and accept online payment.
PayPal has been around for almost 20 years, while Stripe is a relative newcomer as it was founded in 2011.
Despite its age, Stripe has proven to be a worthy rival to PayPal. However, PayPal still has the majority of market share, with other gateways like Authorize.net, 2Checkout and Braintree being owned by PayPal.
Stripe is right behind PayPal at the second position in terms of market share. Either might be good for your business, depending on the dynamics of your eCommerce store.
Comparison: Stripe Vs PayPal
Let's take a look at transaction costs, availability, customer support, checkout flows, and integration choices, shall we?
- The basic transaction fee is 2.9% plus $0.30 per successful transaction, but this might differ a bit depending on the country you are doing business in
- PayPal charges 3.9% on top of the fixed fee for international transactions
- The chargeback fees are 20%
- They don’t charge for failed transactions
- If there is a refund, PayPal keeps the fixed fee
- The fees for American Express is 3.5%
- For micropayments (transactions under $10) PayPal charges 5% plus $0.05
- The basic transaction cost for Stripe is same as PayPal – 2.9% plus $0.30 per successful transaction
- Stripe doesn’t charge for any of the major cards, including American Express
- There is no fee for international cards either
- Stripe doesn’t charge anything for failed transactions or refunds
- Bitcoin, Apple Pay, Android Pay, Google Pay, Ali Pay are accepted by Stripe
- The chargeback fee is $15
- For micropayments (transactions under $10) Stripe charges the basic transaction cost
Stripe is available in the United States, most of Europe, Canada, and Australia. Some countries in East Asia are also covered. You can see the full country list here.
PayPal has coverage throughout the world including all emerging eCommerce markets. However, there are certain high-risk areas where, due to government policies and international sanctions, payment processing is not allowed. If you are in the US, you won’t be able to accept payments from these countries.
Customer support for both payment gateways are very good and efficient. However, the hours and availability of Stripe are better than PayPal. Stripe offers 24/7 chat and phone support, while PayPal only offers customer support during their own business hours seven days a week.
The checkout flow refers to the series of events that happen once you click the "Buy Now" or "Checkout" button on your shopping cart. After that, the most important process is how easy it is to make and accept payments.
Both Stripe and PayPal are very easy to use for the customer. The checkout processes are seamless for the person making the payments. However, when it comes to the merchant or the person receiving the payment, it's a whole different story.
PayPal is definitely easier to set up and implement. You don’t need a developer to help you out, making it a good choice for those just starting out in eCommerce.
However, Stripe is a bit different as it was initially made with developers in mind. If you know a little bit of coding, you'll find Stripe will be a more extensive and flexible option. If not, you might be able to use it at a basic level, but you won’t be able to do much.
Integration with other platforms and systems
The good news is that many major eCommerce platforms support both Stripe and PayPal. BigCommerce, Shopify, and WooCommerce lets you accept payments using both payment gateways. Setting up Stripe or PayPal accounts on these platforms is fairly easy and can be done in a couple of minutes.
Similarly, both Stripe and PayPal can be easily integrated with popular customer relationship manager (CRM) systems like Xero, Agile, Zoho, and more.
Should you use one payment gateway or two?
Using two payment gateways has its advantages and disadvantages.
On the one hand, you will have to pay more monthly fees to register to both payment gateways, with the possibility of having twice as many problems in setting them up and using them. It can be challenging for a new small business to afford the fees for two payment gateways, while also managing issues of both (should they arise).
But on the other hand, using both the gateways will let you get more countries covered and give your customers more payment options. This can be a positive thing for your business as attracting more customers will be easier.
Final verdict: Who is the winner?
Well... we're going to play it safe here and say it's a tie. It really depends on your business, target market, and demographics - are you looking to focus on a few markets first, or do you want to start selling globally right away?
The good news is that if you're on a major eCommerce platform, they usually offer both payment gateways as a choice and installation is fairly simple.
Additionally, one can say that the features that make Stripe is stronger balance the ones that make PayPal stronger. By identifying which features work best for your business, you can choose the right payment gateway for your eCommerce store.