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Paypal Vs. Stripe

Paypal Vs. Stripe

When it comes to processing these electronic payments, three companies dominate PayPal, Square, and Stripe. As each of them launched, they targeted a particular sector of the market.

Paypal, the oldest of the three, began life as a simple peer-to-peer money transfer service. Ten years later, startup Square launched a card reading device that could be plugged into smartphones, making it possible for anyone to turn their phone into a mobile checkout, thus taking on the physical retail sector.

Two years after that in 2011, Stripe launched its service, focusing on making it easy to add payment processing to any website or app.

Credit and debit cards are more popular than ever. The market value of financial cards and payments in the United States reached a record 12.9 trillion dollars in 2017 and is still rising (Statista).

There are more than 450 million credit card accounts in the country, and 87 percent of Americans own a debit card. With 9 percent of U.S. retail sales now happening over the internet, the use of cards and other electronic payment methods is only set to grow.

Since these three Goliaths of payment processing came to market, each of them has expanded their range of products and services.

Where once they dominated their own sectors, there is now a large degree of crossover between them. Even so, their core competencies remain a differentiator and each company has something unique to offer.


PayPal (NASDAQ: PYPL) is the granddaddy of digital payments. Its long history (in internet terms) and years spent as part of popular online marketplace eBay, means it enjoys massive brand recognition among consumers. The company boasts 225 million consumer accounts and more than 19 million merchant accounts in 200 markets around the world.

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PayPal began life in 1999 as a money transfer service inside Confinity, a cryptography and payments company created a year prior by four founders including Peter Thiel. In 2000, Confinity merged with Elon Musk’s online bank. A year later, changed its name to PayPal as the business focussed entirely on payments.

PayPal was taken public in 2002, and in the same year was bought out by eBay, who integrated it tightly into their auction site. It remained there until 2014. Being the default payment method for the online marketplace meant it enjoyed rapid growth; eBay made it almost unavoidable to have a PayPal account in order to buy or sell on their site.

Although we take electronic payments for granted today, it was PayPal that popularized peer-to-peer spending. Built-in currency conversion made it easy for customers to pay in their own currency wherever they were in the world.

PayPal also gave consumers a way to make online payments even if they didn’t have a credit or debit card. Instead, they could link a bank account to their PayPal account and use it to fund purchases.

While PayPal was introducing consumers to the world of online shopping, it was also busy developing new services targeting businesses.

PayPal Merchant Services offered online checkout solutions that could be added to any website with almost no technical know-how, expanding the brand’s reach further as commerce sites large and small began to accept this new means of payment.

As competitors in the payments space began to appear, PayPal continued to innovate and expand. Three years after Square introduced its card-reading dongle, PayPal released an equivalent device. Combined with a dedicated app, the PayPal Here system turned any phone into a mobile checkout for processing offline real-world payments.

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In 2009, while market-leader PayPal focused on online payment processing and still deeply ensconced in the eBay ecosystem, Square (NYSE: SQ) opened its doors. The brainchild of Twitter co-founder Jack Dorsey, Square tackled the payment processing world from the opposite direction — in-store payments.

The company offered merchants a tiny magnetic-stripe-reading dongle they could plug into the headphone socket of a smartphone.

Combined with their app, this small square device (which gave the company its name) turned the phone into a credit card terminal and checkout in one. Suddenly anyone could take card payments in person without the hassle or expense of setting up a merchant account and hiring a terminal from a regular bank.

Since launching, Square has evolved and expanded its services. Today it is possible to purchase a feature-rich tablet-based touch-screen checkout with an integrated contactless card payment terminal, or for those whose budget cannot stretch to a thousand-dollar device, a suite of accessories that transform an existing iPad or phone into a similarly capable checkout system.

As well as taking credit and debit card payments in person, the Square system works as a virtual terminal for accepting phone payments, can manage check payments and gift cards, handle inventory management, oversee invoicing and recurring payments, and even take on the company payroll.

Square has also made inroads into the online checkout space dominated by its rivals. It offers both a plug-and-play payment system in the style of PayPal and a developer-focussed API (Application Programming Interface) for building custom integrations, in much the same way Stripe operates.


Stripe started life in 2010 when brothers Patrick and John Collison from Ireland decided the online payments space needed an overhaul.

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The pair had noticed that while it was easier than ever to set up an internet business, the process for being able to accept card payments online was slow, cumbersome, and often expensive. So the brothers built a software kit that any business, old or new, could simply plug into their website as a ready-made component, enabling that site to take electronic payments.

Headquartered in San Francisco and with eleven offices around the world, Stripe has grown quickly to over a thousand employees.

The company, still privately held, has received almost half a billion dollars of investment including from PayPal co-founders Elon Musk and Peter Thiel. It counts household names like Facebook, Lyft, Kickstarter, Pinterest, and even Amazon among its clients.

Unlike PayPal and Square, Stripe has positioned itself as a developer-first payment solutions provider. Although they have millions of end users (consumers who are making payments through their system), their target market is website and app developers who are looking for a way to take payments online.

A few lines of computer code and a Stripe account make it possible for any website to integrate a fully functioning and secure checkout.

Stripe’s service has become so popular that they claim when a payment is made through their checkout, there is an 89 percent chance they have already seen the card number being used.

This statistic is a core element of their Radar fraud detection product which uses machine learning to trawl their vast database of payment data collated from millions of clients, to find and block potentially fraudulent behavior.

Beyond payment processing and fraud detection, Stripe has quickly expanded to become a one-stop shop for e-commerce solutions.

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They offer a billing system for single and recurring invoices, a query language called Sigma that lets customers dive deep into their payment data, and even a service for creating everything required to run an internet business — including company incorporation and a bank account.

Most recently, Stripe has begun offering branded credit and debit cards, further eroding the stranglehold traditional banks have enjoyed on the world of commerce.

Feature Comparison

All three of the payment providers enable a seller to accept credit and debit card payments from a website. They all offer industry standard security features like PCI compliance and end-to-end encryption. Where they differ is in the services they provide above and beyond card payment processing.

All three of the payment providers enable a seller to accept credit and debit card payments from a website. They all offer industry-standard security features like PCI compliance and end-to-end encryption. Where they differ is in the services they provide above and beyond card payment processing.


The oldest service of the three accepts payments in more than 100 currencies, allows account holders to store funds in 25 currencies, and to withdraw them in any of 56 currencies.

As well as online payments via their branded checkout, PayPal caters for offline payments with their card readers and POS systems. They offer invoicing, and even credit — both loans to businesses and the ability for merchants to offer credit terms to their customers.

All of PayPal’s services are branded with the company’s name. There is no white label solution.

It comes as no surprise that, having been around the longest, PayPal offers direct integration into all the most popular e-commerce platforms including Shopify, Etsy, and eBay, as well as plugins for packages like Woocommerce and Magento.

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When it comes to withdrawing funds from a PayPal account, money can be transferred to a nominated bank account, the transfer taking one business day. There is no fee for standard withdrawals. It is possible to pay a small fee for faster access to cash, the exact amount depending on the currency involved and the location of the customer.


Of the three companies examined here, Square offers the most richly developed retail point of sale system. Their free magnetic stripe reader makes them the cheapest option for taking payments in person.

Like PayPal, Square has partnered with a number of e-commerce platforms, though the choice is considerably smaller. Most notably, industry-leader Shopify does not support payments by Square.

As well as all major cards, Square accepts payment by check, gift card, Apple Pay, Android Pay, and Samsung Pay.

Unlike its competitors, Square does not currently support cross-border card transactions. Payments can only be taken in the currency for the country in which the Square account was opened, and accounts can only be opened in five countries — the United States, United Kingdom, Canada, Japan, and Australia.

Getting money out of a Square merchant account takes one business day, or, for a fee of 1 percent, funds can be transferred instantly.


Unlike PayPal and Square, Stripe is purely an online payments processor; they offer no physical point of sale checkout. Their API is the most mature of the three organizations and supports not only web payments, but offers an SDK (Software Development Kit) for collecting payments from within iOS and Android apps too.

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Stripe has a wide geographical footprint, being available to merchants in 25 countries and accepting payments from consumers in 195 countries using 135 currencies.

The Stripe checkout is designed to be fully integrated into websites and apps, and there is no branding attached to payment screens unless the merchant chooses otherwise. A customer paying through Stripe’s system never needs to know that a third party is involved in the transaction.

As well as credit and debit cards, Stripe accepts payments from popular wallets, including Apple Pay, Alipay, Google Pay, and Microsoft Pay. Payments can also be made using local methods like SEPA bank transfer in Europe and ACH in the United States.

Price Comparison

None of the three payment providers charge setup or subscription fees for their core products. Instead, they make their money by taking a commission on every transaction.


The base price for accepting payments online is 2.9 percent + $0.30 per transaction in the United States. For transactions outside the U.S., the fee is 4.4 percent plus a fixed amount. That amount depends on the country from which the payment originates, but it works out to be the equivalent of about $0.40.

For taking payments in a store in the United States, PayPal’s fee is 2.7 percent. If the card being used is not from the U.S., there is an additional 1.5 percent cross-border fee plus an extra 2.5 percent charge for a currency conversion (if the foreign card is not denominated in U.S. dollars).

A PayPal-branded card reader is necessary for taking in-store payments. These devices start at $14.99 for a simple magnetic stripe reader and go up to $99.99 for the top-of-the-line chip card reader, with several options in-between.

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PayPal offers a discounted fee of 2.2 percent (plus a fixed fee) for registered charities, rising to 3.7 percent for funds coming from outside the States.

PayPal’s peer-to-peer system of sending money from one account to another is free when sending money to friends and family, provided the cash comes from the existing account balance or from a linked bank account. To send money from a credit or debit card, the fee is the same as that for accepting online payments.


Prices for Square’s point of sale hardware begin at free for a magnetic-stripe-reading dongle. As contactless technology takes hold and as fewer smartphones feature the headphone socket required for the basic dongle to work, the entry-level device is declining in popularity.

Next in their lineup is the combined contactless and magnetic stripe reader which uses Bluetooth to connect to a phone or tablet. This more versatile accessory comes with a $49 price tag.

Charges for accepting payments through both devices are the same at 2.75 percent. That drops to 2.5 percent plus $0.10 when using Square’s much more expensive all-in-one Register hardware. To acquire one of those machines you will need to fork out $999 or pay $49 a month over two years.

Processing online payments with Square costs 2.9 percent plus $0.30 per transaction, although discounts can be negotiated based on volume.

One way in which Square stands out from its competition is that they do not charge merchants for refunds or charge-backs.


For online transactions in the United States, Stripe charges 2.9 percent + $0.30. There is an additional 1 percent fee if the payment is made with a foreign card.

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In Europe, fees are 1.4 percent plus 25 euro cents (or 20 pence in the U.K.) for European cards, with the price rising to 2.9 percent for non-European cards.

Taking money out of a Stripe account via wire transfer (ACH or SEPA) incurs a fee of 0.8 percent, capped to a maximum of $5. Disputed payments and charge-backs that are not resolved in the merchant’s favor are charged at $15.


All three payment services have evolved and widened their product ranges over time. Which one to choose depends on the use case. Unsurprisingly, each company is still the strongest in the area in which it began.

PayPal is the easiest and quickest way to enable peer-to-peer payments and is a simple solution for small websites that aren’t worried about their checkout carrying another company’s branding.

Square has the most comprehensive point of sale offering for retail outlets, and Stripe offers the most mature API and the widest international support for seamlessly and transparently integrating payments into websites and apps.

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