PayPal Vs. Stripe: Which Payment Service Is Right for Your Business?

PayPal and Stripe are two of the largest online payment services. Both provide businesses with everything needed to accept payments online, including a payment gateway and merchant account. 

What’s more, PayPal and Stripe have an online payment processing fee of 2.9%, plus $0.30 for each transaction. But is one better than the other for small business owners? If you’re looking for the easiest setup and the friendliest user operation, PayPal may be the better fit.   

Gateways, Payment Service Providers, and Aggregators

Before we discuss the particulars, it will serve you well to understand gateways and service providers. By doing so, you will find it to be much easier to select the right payment service for your business.

Payment Gateways

Payment gateways are responsible for letting you authorize payments online. Think of the payment gateway as the middle man between the payment service and the card companies. The great thing about Stripe and PayPal is that they include this service as part of their purchase price.

Payment Service Providers

Service providers, on the other hand, are responsible for connecting business owners and merchant accounts. They also provide the technology that’s needed to process and receive customer payments. This service is good for both online and brick-and-mortar stores. 


Payment services like PayPal and Stripe are considered aggregators. This essentially means that all clients are grouped together into one big merchant account. This benefits small business owners, as aggregators are more easily approved for processing credit card payments, allowing you to start processing payments quickly and efficiently.

This wouldn’t necessarily be the case if you were operating as a dedicated merchant account. However, there is a downside to Stripe and PayPal being aggregators, as aggregators have less stringent tolerance for chargebacks and fraudulent activity.

As such, you could experience delays by using an aggregator in your business. However, the prompt approval, affordability, and ease-of-use in having PayPal or Stripe far outweigh this one caveat.

Now that you better understand what goes on behind-the-scenes of these two payment options, let’s explore each in greater detail so you can compare and choose which one is right for your business.


Stripe is one of the most used and trusted payment services. In fact, many brands and businesses entrust Stripe to handle all of their online payments. This is primarily due to Stripe’s commitment to providing a safe and secure payment service.

What’s more, Stripe is remarkably comprehensive in its offerings. When you choose Stripe, you can easily set up and integrate a payment platform for your online store. From there, you can process, accept, reconcile, settle, and manage all online transactions that come through your website.

It’s all done via the Stripe platform. Payments are typically processed within two days, meaning you get the funding in your bank account with little delay. With Stripe as your payment service, you will be able to accept all major credit cards, including more than 100 types of foreign currency.

Furthermore, Stripe offers additional products and services to help you streamline your online payments, including:

Stripe Elements

Elements is a custom UI toolkit that lets you create your own payment form. It is compatible with use on your desktop, smartphone, or tablet.

Embeddable Checkout

This is an embeddable payment form that works with your desktop, smartphone, or tablet and functions through your website.

In-Person Payments

If your main method of accepting payments is in-person, you might want to choose a different payment service, as Stripe isn’t the best for processing physical payments. That said, Stripe does have plenty of card readers that you can use via your mobile device for in-person payments. 

In addition, Stripe offers development tools that allow you to create your own POS (Point-of-Sale) system for streamline integration that fits your needs. 

Stripe Billing

With Stripe Billing, you can send custom invoices and request payment from customers, including ACH payments. Stripe Billing also allows you to create recurring, usage-based, tiered, promotional, and scheduled payments.

Stripe Sources

This Application-Programming Interface (API) lets you accept payment methods from all around the world using a single integration. With it, you can accept Alipay, Bancontact, and Giropay. 

And if you prefer a more customized approach, Stripe lets you build your own checkout system to complement your business.

You’ll also find several payment features, such as Stripe Connect. This is a payment platform designed for large marketplaces, which are, in fact, used by Kickstarter and Lyft. With Stripe, you can easily manage virtual and physical credit cards for streamlined and comprehensive operation. 

Another big plus is that Stripe lets you connect and integrate with other software. Companies like Shopify and FreshBooks are supported for seamless integration. This is useful when Stripe doesn’t offer a feature you want, yet its supported software does.

Stripe uses Radar to combat fraudulent activity. This AI-based software is trained to distinguish between fraudulent and legitimate payments.

As we previously mentioned, Stripe charges 2.9% of each transaction’s value, plus $0.30 per transaction. If an international credit card is used as payment, an additional 1% is tacked on. 

You’ll also be passed on the payments to ACH (Automated Clearing House), which is responsible for delegating electronic payments and transfers. As such, you’ll see an additional 0.8% fee with all payments. The good news is that this fee is capped at $5, so ACH fees are kept to a minimum if you get a large payment.

In addition, recurring Stripe Billing payments will charge you 0.4%. However, this fee doesn’t kick in until you’ve processed your first $1 million in payments. And lastly, if any payment is charged back, you’ll be hit with a $15 chargeback fee.

If your business requires Enterprise access, which includes migration assistance, account management, volume discounts, and dedicated support, you’ll need to contact Stripe’s sales team for pricing.

With Stripe’s basics in the bag, let’s move on to PayPal to see what the competition brings to the table.


PayPal is a payment service mainstay that continues to be an industry leader. With years of managing online marketplace payments, it’s no wonder why nearly 290 million active users trust PayPal. As a business owner, getting started with PayPal is a breeze. 

Simply sign up for a free business account and purchase PayPal’s Payflow Pro for $25 a month. This proprietary payment gateway lets you host a checkout page on your company’s website so that customers can easily purchase products and services from you.

Via Payflow, you can accept most credit cards, including several types of foreign payments. Once payments are made to your PayPal account, you can expect funds to arrive in your business’s bank account within 48 hours.

PayPal’s service fees are the same as Stripes; 2.9% of each transaction’s value, plus $0.30 per. This is in addition to the $25 a month Payflow Pro fee. If you’d rather go the free route, you can opt to use Payflow Link instead. However, your customers will have to use a PayPal-hosted template when checking out, rather than one from your business. 

By using PayPal, you are treated to a litany of other payment solutions, such as PayPal Payouts and PayPal Here. Payouts let you send group payments via a single transaction. If you have a large team working for you, for example, you can send payroll to as many as 5,000 people at the same time.

PayPal Here is designed to accept in-person payments. You will need a mobile debit/credit card reader to use Here, though. The processing fee per transaction is 2.7%. 

You can send and process payment invoices at a rate of 2.9%, plus $0.30 per transaction. Another nice feature of PayPal is that you can customize these invoices to display your company’s branding and logo. And if you prefer to use other software in conjunction with PayPal, dev kits are available for programming integration. Just be aware that you’ll need to know how to program.


Stripe is likely to be the better option for startup businesses looking for a quick and easy payment solution. That’s not to say PayPal doesn’t hold its own, as it is plenty capable of fulfilling your business’s payment needs. But if you don’t want to get your hands dirty, Stripe provides a cleaner user experience.

If you found this guide helpful, we encourage you to check out the rest of our articles. We have a vast compilation of tips and guides that will help you in your business ventures.

If you have any questions in the meantime, feel free to contact us so we can assist you. We look forward to serving you and hope to hear from you soon.



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