Stripe vs. PayPal. What is better?

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Consumers want convenience and this is one of the reasons that online shopping continues to grow in popularity. Moreover, Millennials and Gen Xers are two generations that spend six hours a week shopping online. Consumers want convenience and this is one of the reasons that online shopping continues to grow in popularity. Moreover, Millennials and Gen Xers are two generations that spend six hours a week shopping online.

This is a huge opportunity for a business to expand its brand presence and significantly increase its revenue. You simply have to invest in an electronic payment system if you are just starting a business or are a key player in your industry. Here we will try to highlight the main points that you need to know about electronic payment systems.

What is an electronic payment and how the systems work?

Electronic payments allow customers to pay for goods or services online. Electronic payments are what allow you to buy clothes through your favorite online store or pay bills for cable networks online. Therefore, if you plan to create an online business, you need to gateway an electronic payment system and know how it works.

Even if you do not plan to invest in e-commerce, it is important to understand how electronic payments work as a customer, and what role they play in the evolution of the payment processing ecosystem.

Understanding how electronic payment works can become technical because it has many moving parts. Here is the distribution of the main participants required for an electronic payment transaction:

  • The cardholder is identified as a consumer who purchases a product or service online.
  • A seller is a person or business that sells a product or service to a cardholder.
  • The issuer is a financial institution that provides a cardholder with a payment card. This is usually the cardholder’s bank.
  • The buyer or supplier of a trading account is a financial institution that creates an account with the seller. The acquirer authorizes the validity of the cardholder account.
  • The payment processor processes the official transaction between the cardholder and the seller.
  • The payment gateway processes trade payment messages and use security protocols and encryption to ensure transaction security.

Electronic payment transactions are divided into two types: one-time payments by suppliers and periodic payments by customers.

  • One-time vendor payments are typically used on e-commerce sites. The cardholder enters the card or bank information on the checkout page and simply presses a button to make a purchase.
  • Payments of regular customers-suppliers are used when the cardholder regularly pays for a product or service. Customers enter their data once and then choose the option of regular billing with a fixed payment date. It is often used by insurance agencies, telephone companies, credit management companies, and other businesses.

What is Stripe and how does it work?

If you really don't pay attention, Stripe may seem like a conspiracy, because it is everywhere, but not always in sight. In truth, Stripe is a “full-stack payment processor,” which is a fancy way of saying that it serves as both a third-party payment processor and a payment gateway. This means that Stripe allows your business to process credit and debit cards, as well as automated clearing house transactions, both online and offline.

Founded in 2010, Stripe currently supports the operations of some of the largest brands, including Lyft, Under Armor, Blue Apron, and Pinterest. In fact, the company claims that 89% of all credit cards were processed on the Stripe network at some point. With the ability to handle 135 currencies, this is a common solution for companies doing business internationally.

Stripe positions itself as a convenient solution for developers. The Stripe online development resources are certainly impressive, and unlike many competitors, they are fully publicly available.

Stripe supports a large number of payment methods, making it a convenient choice for doing business in foreign markets. Stripe even uses a rare approach to support local payment types in addition to the more common “universal” payment types, which pay special attention to the types that are popular in the EU and China. Stripe supports universal payment types like Alipay, Apple Pay, Google Pay, Microsoft Pay, Amex Express Checkout, Masterpass by Mastercard, Visa Checkout, WeChat Pay, etc.

Stripe supports local payment types in markets where they are popular. Namely, ACH, Bancontact, EPS, Giropay, iDEAL, Klarna, Multibanco, P24, SEPA Direct Debit, SOFORT.

And it’s obvious that Stripe will not do business with organizations that sell illegal products or services. But still, Stripe restrictions have exceptions, because you can declare your business in Stripe, thus requesting that an exception be made for you. Stripe also does not want their services to be used in ways that are inconsistent with its intended purpose or that are prohibited under the Stripe Service Agreement.

What is PayPal and how does it work?

PayPal has been working in the field of mobile payments for more than ten years and this service allows you to pay for purchases through a secure online account. You simply add your bank account details, credit or debit card details, and whenever you pay using PayPal, you can choose which of your cards or accounts it pays. You can also choose the default payment method, which will be used if you do not choose another.

In addition to paying for goods through PayPal, you can also receive money through the service. Any money received is stored in your PayPal account and can be used to pay for something, and the balance is replenished with your designated cards or bank account.

PayPal is ten years old, which means that it has established itself well and is widely recognized even in small stores. The PayPal option can be found on thousands of websites. PayPal buyer protection mechanisms also guarantee that you will receive a refund if the product you buy online does not arrive or does not match the seller’s description.

Those who sell goods on a personal or business level and paid through PayPal are also protected. For example, if you can provide proof that you sent the goods by mail, but the buyer claims that he did not receive it, you will receive full payment.

PayPal also launched its own credit service, where you can pay for goods using PayPal, but pay them later. This is very similar to a credit card, although you do not need a real card. Some stores offer special offers when paying for goods using PayPal Credit, with reduced interest rates depending on the seller.

Which payment system is better?

You have the most amazing selection of products, competitive prices, and fairly successful marketing in your business. However, you will not be able to succeed in the world of e-commerce until you get one more correct thing - it’s your payment gateway and it’s just a must-have in any modern business when all your payments occur instantly.

There are many options, but still, the most famous and reliable payment systems in the e-commerce market are Stripe and PayPal. Let's look at the pros and cons of these two systems.

Stripe Pros:

  • Subscription features are simple and powerful.
  • International merchants should not have a problem with Stripe.
  • Very clear documentation.
  • Stationary prices are transparent.
  • Development tools feature advanced customization.
  • Rich client libraries, especially mobile.
  • High grown fresh platform.

Stripe Cons:

  • Stripe available for a limited amount of countries(US and Canada, EU, Switzerland, Norway, Australia and New Zealand, Japan)
  • You do not receive a direct telephone support line.

PayPal Pros:

  • Available for 190 countries.
  • Your customers may already be familiar with PayPal.
  • A mature and stable system, proven reliability.
  • Your customers do not need a PayPal account to pay you.
  • You can create and send invoices directly through your account.
  • You can set up recurring payments.

PayPal Cons:

  • It's harder to set up and use. More complex api with legacy.
  • PayPal seller protection policies do not apply to digital products.
  • There are huge chargeback fees.
  • PayPal fee is less than many trading accounts but still more than Stripe (3.6% vs 2.9% for card payment in the US region).
  • You are limited in use and are subject to suspension of the account at any time, which may lead to a freeze of funds for months.
  • There are a number of people who refuse to use PayPal, which can lead to loss of business.
  • It can be difficult to contact PayPal customer service.

So what is better than Stripe or PayPal? Well, it's up to you, of course. You know your business better than anyone else, and you should choose the solution for online payments that are best suited to how you imagine the process of ordering your business online. However, if you are looking for an affordable entry-level payment gateway, PayPal Payflow will be an easy choice. But if you want an easily customizable interactive interface, then Stripe will significantly outperform PayPal.

Our Experience with Payment Systems Integration

Let's take another look at Stripe and PayPal relative to each other.

To begin with, compared to Stripe, PayPal online payments are actually quite basic technology, if you can believe it. Because Stripe offers a fully integrated online payment service setup, it has combined several previously disparate low-tech processes into one technology-enabled package.

In addition, Stripe is more convenient for developers than PayPal. That is, Stripe will always be customizable and focused on engineers, while PayPal is not at all focused on technical specialists, and in order to get PayPal, you will have to go through a series of manipulations with whole stacks of documents.

Another area where Stripe is better is reports. PayPal comes with a lot of built-in reports, but only Stripe allows you to customize reports to get exactly the information you need. With Stripe Sigma, you can ask a question using SQL and get a report on it.

In general, if you are a technology company that has or can access engineering resources, Stripe offers its customers a more streamlined, proprietary interface.

In our developments, we used an integration with both systems. Let's take a quick look.

Instagram Automation Tool that allows increasing the Instagram page rating automatically we used Stripe as a subscription manager. The main payment methods were cards like Visa, MasterCard with 3d secure and PCI, iDeal, Bancontact, and SEPA Direct Debit. The main point is smooth migration on subscription plans and external tools for subscription management.

A mobile application ViGu designed to create and use tours with access to audio, video, and text accompaniment. We use Stripe for one time changes. A mobile client for Nativescript was used. 3D security, PCI, and card credentials reusing were included.

In our current project we use PayPal subscription. The main advantage here is that Paypal takes over the maintenance of subscriptions after the user has confirmed the subscription. The inconvenience is that it is not possible to make payments by subscription without the participation of the user, even after the user has given all the agreements.

Summary

Electronic transfers have existed for many years, and the economy has greatly benefited from this technological advancement. The electronic payment system has simplified cash transactions and even provides a way to finance everyday purchases with a loan. But there are still many questions and considerations regarding the virtual economy. For example, the risk of identity theft, market euphoria, and privacy issues will always exist. But nevertheless, thanks to new innovations and proper use, financial technologies can become the key to successful business management at any level.

If any questions appear about this article contact us directly at hello@amoniac.eu or +372 5770 7573.

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