Stripe vs. PayPal - Payment gateways at a glance

Many online stores offer different payment methods to choose from. For all these payments, so-called payment gateways are relevant. These form the interface between the online merchant and the payment processor.

Thousands of payment transactions are processed over the Internet every day. Payment gateways play a key role in this process. These are the interface between online stores and the payment processor. The payment gateway ensures that all the necessary data is entered by the customer. In addition, it encrypts the sensitive information and thus guarantees its protected transmission. In this way, operators of online stores can be sure that their customers’ payments are authorized, and users do not have to worry about the security of their data.

There are many different payment gateway providers; they are also called acquirers. These are often companies or even banks that handle the payment processing on the merchant’s side. They charge small fees per transaction. Some payment gateway providers also offer a white-label service. This allows online stores or banks, for example, to market the payment gateway as their own technology. Probably the best-known provider of a payment gateway is the American company PayPal. But other providers, such as Stripe, also offer a lot of interesting features too, which we will present below.

PayPal is the largest provider of payment gateways. The very simple setup of a PayPal account laid the foundation for over 277 million users worldwide. In the meantime, it is hard to imagine e-commerce without the company.

Over time, a number of PayPal alternatives established themselves. One alternative that we would like to introduce here is Stripe. The San Francisco-based company has been offering an online payment service since 2009. The startup is promoted from many sides not least because of its self-learning fraud prevention system. In addition to credit card providers Visa and American Express, Tesla CEO Elon Musk is also an investor.

Although the two payment gateway providers are similar in many ways, there are some differences in the specifics of each of their offerings.

Stripe charges 1.4 percent of the transaction amount for credit card payments within Europe, as well as a general service fee that amounts to 0.30 dollars per transaction. For international payments, 2.9 percent of the payment total is charged in addition to the same flat rate. With PayPal, the fees are slightly higher in total. For credit card payments, PayPal retains 2.49 percent of the transaction total, plus currency-specific fixed fees. For the US, these are 0.30 dollars per transaction. Unlike Stripe, PayPal offers an additional rate for microtransactions, which can be advantageous if many small payments are to be expected.

In terms of chargeback fees, the differences between Stripe and PayPal are greater. The fees come into play when credit card payments are refunded (chargeback). The integrated Chargeback Protection on Stripe, which charges a fee of 0.4 percent of the transaction amount, ensures that Stripe covers the disputed amount as well as the dispute fees in any case. The merchant does not even have to be able to provide evidence. PayPal, on the other hand, has been using a dispute fee since April 2021 if the merchant and the buyer fail to reach an independent agreement. Per case, the amount of the fee is 15 dollars.

PayPal is available almost around the globe. 202 supported countries mean that PayPal payments can be processed anywhere in the world. In comparison, Stripe is only available in 46 countries so far, including primarily Europe and America. However, the startup supports far more currencies than its competitors: While PayPal is limited to 25 currencies and there are currently no plans to expand the number of currencies, Stripe can boast over 135 implemented currencies.

With PayPal, you can easily integrate the four most popular payment methods into your web store. Payments by credit card, direct debit, PayPal itself and also purchase on invoice can be implemented. Customers who use PayPal for their part can select whether the amount should be debited from their PayPal balance or their bank account. In addition, PayPal internally offers customers an installment plan as well as payment after 14 days. Stripe also supports the most common payment methods worldwide. In addition to the options also offered by PayPal, Stripe provides access to Google Pay and Apple Pay mobile payment services. Furthermore, the two Chinese e-wallets Alipay and WeChat Pay are available for selection.

Checkout experience is used to describe the user-friendliness of the actual payment process. While payment with PayPal is done via a separate button that redirects the user to PayPal, payment with Stripe is directly integrated into the web store. PayPal’s checkout process is, all in all, much more time-consuming due to the additional login with PayPal.

Stripe will soon offer its users the option to choose between two different pre-certified card readers, which can be purchased directly from Stripe. Prices here range from 62 dollars for the BBPOS WisePad to 249 dollars for the BBPOS WisePOS E reader. Both feature end-to-end encryption and accept contactless payments. The more expensive variant also supports payments via swipe. PayPal’s card readers are slightly less expensive. The first Zettle card reader from PayPal costs $29, with each additional one available for $79. Zettle also supports contactless payments as well as PayPal direct payments.

For many e-commerce entrepreneurs, customer relationship management software is indispensable. It can be used to create and manage customer profiles, making it easier for business owners to stay connected with their customers. Ultimately, CRM software should help online stores increase their profitability. Stripe boasts partnerships with 36 CRM software providers - including HubSpot, one of the most popular free CRM tools. By comparison, PayPal only has few partnerships. Its CRM offerings are particularly small. Users can only benefit from a partnership with Odoo, an all-in-one management software.

Both payment gateways have their advantages and disadvantages. Which one is right for your e-commerce business depends largely on what your focus is. For vendors who plan to do a lot of microtransactions, PayPal is worth considering because of the special rate. Also, when large amounts need to be paid, which are much easier to settle using flexible payment plans, PayPal is the better alternative. Since Stripe’s fees are much lower, especially for domestic transactions, it is worth considering choosing the startup if your online store is primarily aimed at domestic customers.