PayPal or Stripe, Which is Better for eCommerce?

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PayPal or Stripe, Which is Better for eCommerce?

The path for someone starting a new online store for the first time is often filled with a lot of questions. As the e-commerce world has grown by leaps and bounds in the last decade or so, there are just way too many related products and services available.

For instance, Magento and WooCommerce are both very popular CMS for e-commerce and both have their pros and cons. Once you make a decision between Magento and WooCommerce development after a lot of learning and understanding, the next important consideration is the payment processor.

But just like every other thing that you’d like to have for your e-commerce website, there are several options when it comes to payment gateways too. PayPal and Stripe are currently two of the most popular payment processors for online stores. While PayPal has been around for a long time, Stripe has garnered a lot of attention in the past few years.

If you are start a new online store or already have one but are struggling between PayPal and Stripe, this post can help you make a decision. Both the reputed payment gateways will be compared on the basis of several important factors to enable store owners to pick one that best suits their requirements.

Before the showdown, let us first get a basic idea about what PayPal and Stripe are-

What is PayPal?

Founded in 1998 by the likes of Peter Thiel, Elon Musk, and others, PayPal can be defined as a payment solution which can be used for making and receiving online payments. It claims to have more than 250 million customers all over the world and is accepted in 200+ markets by over 20 million merchants.

As a matter of fact, anyone and everyone who receives or sends money online now mostly has a PayPal account. This has made it one of the most popular names in the e-commerce industry and several eCommerce website developers also recommend the same to the clients.

What is Stripe?

Headquartered in California, USA, Stripe is also an online payment solution. It was founded in 2010 and is now more popular than many of the other popular payment gateways used by e-commerce stores. A major reason for the rising popularity of Stripe is the customizable development tools it offers.

Due to this, online stores that have an in-house team of programmers and code-savvy store owners prefer using Stripe over other payment processors. From smallest of businesses to world-renowned companies such as Lyft and Pinterest now use Stripe for collecting payments.

PayPal vs. Stripe

Now that you have a basic idea about both these payment gateways, let us quickly compare them to help you pick the best for your online store.

1. Transaction and Service Fees

One of the biggest reasons why PayPal and Stripe have been able to stay ahead of others in the payment gateway market is due to their transparent pricing. Both the payment processors charge a flat rate of 2.9% + $0.30 for every successful transaction.

They have adopted the “pay-as-you-go” pricing model which means that you are not required to pay any monthly fees and the charges are only applicable to successful transactions. So, for a $100 sale, you will be paying $3.20 irrespective of whether you use Stripe or PayPal.

But while the base fee is the same, PayPal has some additional service charges. For instance, PayPal charges a 1% fee on international cards while Stripe offers it for free. Similarly, there is a fee for recurring billing, authorizing card and advanced fraud protection with PayPal. Stripe offers all these services for free.

Some other cost-related aspects of both the payment gateways are as follows-

    • Micropayments- For transactions less than $10, PayPal charges at a flat rate of 5% + $0.05. Stripe, on the other hand, charges the same base rate for micropayments as well. This makes PayPal a better option for micropayments.
    • Chargebacks/Refunds- Chargebacks are when customers contact the card provider for canceling a transaction. For every chargeback or refund, PayPal charges a flat fee of $20 while Stripe charges a fee of $15.If the customer receives a refund, Stripe will not refund the processing or service fee. PayPal also will not return the percentage fee but will refund the fixed fee.
    • Receiving Payment- While all of this is fine, when will you get paid? When a customer makes a purchase on your website, the payment gateway you have receives the payment from the customer and then pays the same to you after deducting the fees.Paypal generally clears the payment within a single business day. In the USA and Australia, Stripe has 2-day rolling transfers and 7-day rolling transfers in other countries.

2. Currency Support and Availability

Apart from affordability, you also need to make sure that the payment processor you select is available in the most number of countries and supports several currencies. You should discuss all the options with your Magento 2 development agency for building an international e-commerce website.

As mentioned in the beginning, PayPal is available in more than 200 countries and it supports around 26 currencies. On the other hand, Stripe is a fairly new company when compared to PayPal and is currently only available in around 25 countries. But it is important to note that Stripe supports more than 130 currencies.

Moreover, even if you have your business located somewhere where Stripe is not available; it offers Stripe Atlas service with the help of which you can easily set up a US bank account for your business. This will allow you to use Stripe even from a country where Stripe is currently not available.

But as PayPal is readily available in 200+ countries and supports major currencies, it has a slight edge over Stripe in this department.

3. Security

It is also very important for the payment gateway to be secure. Even a single customer suffering from any kind of security threat while making a payment on your website could spoil your reputation. PayPal and Stripe lay a major emphasis on security and have made the gateways highly secure and stable.

However, the introduction of Stripe.js provides Stripe an edge over PayPal. When you hire Magento 2 developers, they can install Stripe.js on the website. With this, all the sensitive customer data like credit card information will not be sent to your website server. Stripe will directly receive all the data so that you are not required to handle any kind of sensitive customer information.

Even PayPal now allows storage of sensitive data in a safe vault with OAuth 2.0. However, its working is as such that the data passes to the vault from your server. If at all your servers are compromised during data migration, there are chances that sensitive credit card information of the customers can be stolen.

So, while both the payment gateways offer top-notch security, Stripe encourages better security intrinsically with Stripe.js.

4. Customer Support

If you are running an online business, you should be able to quickly get in touch with the support team of your payment gateway as and when required. A major reason why Stripe was losing customers to other payment gateways was their unreliable support. However, this was a thing of the past.

There are now multiple ways to get in touch with the support team of Stripe. There is 24×7 support through live chat and phone, along with an online help center, email support, and social media. But even though the support has improved significantly, many customers still continue to suffer and their reviews range from good, satisfactory to poor.

To better meet the needs of the customers, Stripe has also recently launched Premium Support which comes at a small fee.

Unfortunately, even PayPal support is not really up to the mark with regards to support which is surprising as it is already an established brand for several years now. It has an online community forum, help center, email support, phone, live chat, and social media. However, a lot of customers have mentioned that it is often very difficult to get in touch with a PayPal support executive.

5. Ease of Use

Last but not the least is the ease of use. With Stripe, the checkout process for customers is super simple. A customer simply needs to enter their credit card number and click the submit button to reach your follow up or thank you page. You are in full control of the flow and design.

However, if you want to use advanced features of Stripe like its “Pay with Card” button, things can get a little tricky if you are from a non-technical background. But as long as you’d be hiring a reputed eCommerce development partner, there shouldn’t be any difficulty for you or your customers.

While using PayPal is simple too, there can be a few additional steps based on how you set your gateway and the types of payments you accept. There are also other integrations and solutions which can allow you to offer credit card payment directly from your website with PayPal.

But if the studies based on online customer behaviour are to be believed, the smallest delay in the payment process could impact your bottom line. So, if you do select PayPal, make sure that you use the additional integrations and solutions available to speed up the checkout process.

What Should You Select?

Now that you know where both these popular payment gateways stand with regards to factors that are most important for online stores, it shouldn’t be difficult for you to select one. Understand the needs of your website and that of your customers to select a payment gateway that better meets the requirements.

Alternatively, if you want to hire a reputed web development team for your online store, you can always get clear answers to all your queries from them. As professional developers understand the e-commerce industry better, it shouldn’t be difficult for them to help you decide between PayPal and Stripe.


Bhavin M

Bhavin M, co-founder of Icecube Digital, spends much of his time creating simple but valuable content which helps ecommerce entrepreneurs to grow their online business.

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