PayPal vs Stripe – Which One to Choose For Your WordPress Site
If you’ve ever done any online shopping, there’s a fair chance your payment went through one of the two most popular payment gateways – PayPal or Stripe. And if you’re planning to become an online merchant or need a way to handle payments on your WordPress website, you are probably facing a dilemma about which one is a better choice for you. These two payment service giants have been dominating the market for a long time now, and for many good reasons.
PayPal has been operating since 1998 while Stripe emerged in 2011 and quickly managed to position itself as a serious competitor. Both are designed to be tools for handling online payment processing but they are actually very versatile when it comes to the services they offer, and very different too.
In this article, we’ll explain in detail what PayPal and Stripe have in common and what their differences are so that you can easily decide which one to choose for your WordPress website.
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The good news is that both PayPal and Stripe allow you to set up a basic merchant account for free. The not-so-good news is that you will need to pay a fee for every transaction on your site, whichever payment gateway you go for. There are many types of fees applied that differ depending on many factors such as the type and amount of payment, your overall monthly profit from payments, the region you are doing business in, and so on. We’ll start by comparing the three most important categories: transaction costs and fees, microtransaction costs and fees, and chargeback and refund fees.
Transaction costs and fees
The basic transaction fee used to be the same for Stripe and PayPal, but as of August 2021, PayPal updated its prices and now it is slightly more expensive than Stripe. Stripe charges 2.9% + $0.30 per transaction while PayPal charges from 2.59% to 3.49% + $0.49 per transaction depending on your plan & other factors.
When it comes to international transactions, there’s a slight difference in favor of Stripe at first glance, but if you get into details the picture is not so clear. Stripe charges an additional 1% for international cards which amounts to 3.9% plus $0.30 fixed fee for all transactions. But in the case of a different currency, you’ll also be charged an additional 1% for currency conversion, which in total may amount to 4,9% (plus the $0.30 fixed fee).
PayPal charges a 2.99% + fixed fee for domestic payments plus 1.50% additional percentage-based fee for international payment transactions, while no additional fee is applied for American Express cardholders.
Microtransaction Fees
As for the microtransactions (transactions below $10), Stripe support varies from market to market. What’s interesting is that in those markets where micropayments are not supported, Stripe offers the option to batch multiple transactions from one customer into a single charge.
Both Stripe and PayPal offer enterprise volume discounts. Stripe’s discounts begin at $80,000 monthly sales while PayPal’s start at $3,000 which clearly indicates that PayPal may be a better choice for smaller businesses.
Chargeback and Refund Fees
A chargeback happens when a customer contacts their bank, reports an unauthorized transaction on their card and requests charge reversal. The purpose of a chargeback is to protect the cardholder from suspicious and fraudulent transactions. Each time a chargeback is initiated your business pays a fee. Both Stripe and PayPal charge a fixed fee per currency. Stripe charges $15 and PayPal charges $20 chargeback fee in the US.
As for the refund fees, neither PayPal nor Stripe will return the fees you originally paid as the seller. But, the good thing is that neither will charge any additional fees for making the refund.
Bear in mind that all these numbers are subject to change as both Stripe and PayPal can update their pricing policies. Before making any decision make sure to explore the latest updates of the pricing for Stripe merchants as well as the pricing for PayPal merchants too.
Stripe and PayPal take totally different approaches to invoice and billing. Although officially PayPal doesn’t charge per invoice, having your invoice paid is considered an online transaction, and the standard online transaction fee of 3.49% + $0.49 is charged per each paid invoice.
Stripe offers two invoicing plans – Starter and Plus. The Starter plan includes 25 free invoices per month, after which you’re charged 0.4% per paid invoice while Plus comes with some type of automation and advanced collection features, and charges 0.5% per invoice.
In case you are handling a lot of recurring charges, you may like the additional Stripe Billing feature that is available at 0.5% per recurring charge. Stripe also offers a Scale plan for 0.8% per recurring charge that connects to NetSuite and gives customers an initial quote before they start a subscription. One more benefit offered by Stripe is custom pricing that is available for large businesses.
When it comes to availability, there is no doubt that PayPal is the winner in this category. It is supported in more than 200 countries and accepts 25 currencies. Not all countries can use all the features that PayPal has to offer though, but the essential features are available in all the listed countries.
Stripe is available in a significantly smaller number of countries – 46 to be precise. One way it compensates for this lack of availability is the ability to process 135 different currencies. This of course still can’t measure up to the sheer availability of PayPal all over the globe.
If for any reason it is of great importance for you to use Stripe although it is not available in your region, it is possible to set up a U.S bank account, form an LLC or C Corporation, and process payments with Stripe using Stripe’s Atlas feature. Bear in mind though that you will be charged a one-time fee of $500 plus the ongoing costs of running a company if you decide to use this feature.
Although both Stripe and PayPal support a variety of payment types, they do so in a completely different way. Stripe’s payment types are divided into two categories – local and universal where local payment types are only supported in the regions in which they are predominantly used. They include Bancontact, ACH, Giropay, EPS, iDEAL, SOFORT, Multibanco, Klarna, SEPA Direct Debit, P24, and many more. Generally, Stripe supports almost every card type, wallets, bank redirects, buy now / pay later option and many more, which combined with a large number of supported currencies allow you to come to very flexible solutions for accepting payments. The only thing Stripe can’t do when it comes to payments is to accept PayPal. There are also a variety of Stripe payment plugins for WordPress that make setting up Stripe payments on your site even more simple.
PayPal offers a totally different concept in this regard. Some payment types are only available based on the pricing plan you choose when you sign up. Generally, with PayPal, you can accept the following payment types: PayPal balance, PayPal Credit, debit or credit cards, and rewards balance. Buy now / pay later option is also supported. You can also use some of the PayPal plugins for WordPress to add specific features to the payment process on your site.
Hosting in the context of payment processors refers to where the payments are processed on these platforms. This is one of the rare cases when Stripe offers a more simple solution – the checkout process takes place on your website only. You can customize how the checkout will look to match your site seamlessly by using a premade embeddable checkout form or by building a form from scratch.
PayPal offers more variety in this department, you can choose between:
PayPal Checkout – places a button on your website that directs the customers to PayPal to finish their purchase. It is possible to add it to your existing payments page to accept payments through other processors. Additionally, it provides your customers with the option to check out with PayPal, PayPal Credit, or Venmo.
PayPal Payments Advanced – allows you to create buttons and copy/paste some code to your website to enable PayPal as your shopping cart. It also includes hosted checkout templates that allow consumers to stay on your site during the purchase. The price of this plan is $5/month.
PayPal Payments Pro – allows you to host a checkout page from your website using the Payflow Pro payment gateway. The advantage of this plan is that it adds a virtual terminal so that your customers don’t have to leave your site during the checkout process. The price of Payments Pro is $30/month.
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Depending on the types of transactions you expect to happen most on your website, both payment gateways offer some benefits. PayPal Marketplace is PayPal’s solution made for websites that involve more than one party in the transaction process. That’s the case with platforms like Envato for example, where payment needs to go between the website, theme, or plugin developer/seller and customer. Stripe Connect is Stripe’s marketplace solution that allows you to choose the configuration based on how you need the transactions to take place – on one to many, many to many, or one to many basis.
PayPal integrates with all the popular platforms like WooCommerce, Salesforce, and Quickbooks, covering the three most common business needs – e-commerce, CRM, and accounting. If you want to keep it simple and don’t need anything more than what’s listed above, you’ll probably do fine with PayPal. Stripe on the other hand definitely offers more possibilities in this area – it offers integrations across multiple categories including customer support, CRM, email marketing, fundraising, recurring payments, e-commerce, inventory management, and many more. If you need your payment processing technology to cater to the other extensions and third-party applications that you’re already using, Stripe could make your life much easier.
Customer loans offered by payment processing services are a relatively new feature that is becoming increasingly popular.
As of September 2019, Stripe came up with a solution for customer loans called Stripe Capital. Stripe Capital can be compared to PayPal Working Capital which has been on the market for longer and has a more developed lender infrastructure.
Both Stripe Capital and PayPal Working Capital can be used only by their customers, both are repaid through the percentage of credit card sales. In that sense, they are very similar to a merchant cash advance. The main differences are in the time needed for the request for funding to be approved which in the case of PayPal is a couple of minutes and in the case of Stripe, approval typically takes a day. Stripe automatically gives you the offer for a loan, and PayPal requires a manual application from your side.
Freelancers may be interested in the possibility of getting paid for their work via Stripe or PayPal. Both offer pretty similar services in this area and none requires having a merchant account. All you need is an active bank account that you will connect to the selected platform and you can receive payments. Both PayPal and Stripe offer the possibility of depositing the funds into a debit card but charge a fee for that service. The biggest difference between the two is the time needed for the transfer to take place. PayPal transfers payments within a day, and with Stripe it can take up to two days.
PayPal is generally created with the idea to be accessible and easy to use for everyone. It doesn’t require a lot of work to set it up and if you want to stay away from technical configurations, PayPal is a reasonable choice. It does offer some developer tools and resources, but it is generally more recognized as a simple solution for business owners, marketers, freelancers, and entrepreneurs who don’t want to deal with too many technicalities.
Stripe, on the other hand, was built with developers in mind and offers a very high level of customizability, third-party integrations, and extensive documentation. Though anyone can use Stripe too, a professional developer is certainly more likely to enjoy more of its advantages.
It is really hard to beat 24/7 customer support through phone, live chat, and email and that’s just what Stripe offers to its users. PayPal also offers support via various channels – you can send an email, consult the large community on the forum or make a phone call, but only within a limited time frame during the customer support service working hours.
While fees and prices are probably on the top of your mind when you think about which one to choose, your customers’ major concern is security, and therefore it should be your priority too. However well secured your website may be, online payments demand an entirely new level of security that you need to be aware of.
Both PayPal and Stripe use the highest web security standards and meet the Payment Card Industry (PCI) compliance without charging you any additional fees in that regard. But, Stripe went the extra mile and included the Stripe Radar, an additional security feature for free. The main advantage of this feature is that it identifies legitimate purchases and separates fraudulent and suspicious ones through applying machine learning that analyzes data across millions of transactions. This could be very useful for larger companies who receive a huge number of payments on a daily basis.
Using both PayPal and Stripe is not a rare case with large enterprises, but you should be aware that it can cause extra administrative work from your side. For smaller businesses using more than one payment gateway can be quite complicated and challenging, especially if you are the only one dealing with payments. It could also get extremely confusing each time something goes wrong with either of them, not to mention the time you would have to invest to ensure both payment processors are functioning smoothly. So, unless it is of extreme importance for you to be able to offer both payment gateways for your customers, it is recommendable to choose only one of these two. Of course, this doesn’t account for bigger businesses that can afford employees who would take care of the administrative side of the business.
Final Thoughts
PayPal’s most recent increase in prices can be taken as a kind of statement that this payment processor counts on its unique features and long-held reputation as its strongest competitive advantage. Stripe could use this as a great chance to grab a bigger piece of the market share simply by keeping its prices at bay. If the price is what concerns you the most, PayPal made the choice much easier for all who were weighing pros and cons. Stripe could now advertise itself even as a more affordable alternative to PayPal.
Apart from prices, it is important to take into account the type of business you plan to run. The types of companies that may find PayPal more convenient include very small businesses, businesses with international customers, brick and mortar businesses, freelancers, and small non-profits as they usually don’t require a lot of development support. Stripe is ideal in case you don’t need a worldwide reach and have a skilled developer in your team who will know how to use Stripe’s advantages to the full extent. Stripe may also be a better choice for scaling businesses as it can support the growing needs of a new business. When making a choice, don’t just focus on the features that you need now, but also on the features that you might need in the future.
