What is Better For Subscription Businesses: Stripe or PayPal?
The right payment solution for a Subscription Business depends on several variables that are unique to your business, such as the products or services you offer, and how you offer the products or services to your customers, how you deliver them.
So the reality is that both of these merchant accounts solutions are absolutely the best across the board because they're different tools and should be used in different situations.
Stripe and PayPal are payment processing companies that allow your customer to purchase a product or subscribe to a service that you offer on your website. The right payment solution depends on numerous factors, but the most important criteria is the payment processing fees.
In this article, we will discuss Stripe and PayPal features and prices and which one a Subscription Business should prefer as their primary payment processor for subscription-based products or services.
Let’s get started!
What is PayPal?
PayPal is the most popular and longest-standing online credit or debit card payment processing company on the internet. It was the first company that allowed its users to make online transactions to buy & sell any products or services. If you’re going to set up a business that requires a credit card payments processor, then PayPal is a good option for you.
What is Stripe?
Stripe is the second most popular online credit card payment processing company on the internet. It allows businesses of all sizes to accept and send payment online with advanced fraud prevention. Stripe has built a set of online credit card payment processing tools that make it easy for businesses and freelancers to receive payment from their customers.
PayPal protects your financial information, such as credit card details and banking information, while you are doing any online transactions. You don't have to disclose all the financial information whenever you buy a product or service from the merchant. Other essential features of PayPal are:
1. Secure: PayPal is one of the most reputable online payment processing companies, and all your transactions are risk-free. The platform is reliable and encrypted so that you or your customers' data can be safe from prying eyes.
2. Fast: You can create, send, and receive payments by adding the recipient's email and send whatever amount you want to without having to fill up all the details such as credit card numbers, expiry, CVV, and other billing information. One can create an invoice and can send or receive money in a matter of minutes.
3. Global: PayPal is available in more than 200 countries, and it supports 25 currencies, which is enough for a merchant to sell their products and receive payments from their customers all over the world.
4. Local Currency: PayPal allows you to accept payments in your client's local currency. After you've received the payment, you can transfer it to your bank account in your local currency at no additional cost.
5. Less Documentation: You can create an account on PayPal by verifying your id proof such as passport, driving license, and address proof such as electricity or water bill. It could take up to 2-3 business days to get your account verified and start sending and receiving online payments.
6. Payment Gateway: PayPal gateway requires no setup cost or monthly fees, and it works with almost any merchant account, shopping cart, and processor. A merchant can integrate it into their website and can receive online payments from customers.
7. Low Conversion Fee: It's free to sign up and use a PayPal account, and there are no transaction fees to use it for purchases. There's only a currency conversion processing fees if you buy anything from merchants who are located in overseas (other countries).
8. Online Invoicing: A merchant can create and send online invoices for a product or service to its customer via email from the PayPal website or using the PayPal Android or iOS App. Customers can make a payment for online invoices using their PayPal account or credit/debit cards.
9. Express Checkout: The PayPal Express Checkout feature allows your customers to stay on your website throughout the payment authorization process.
10. PayPal Credit: Previously, it was known as Bill Me Later, PayPal Credit provides customers the flexibility to purchase without paying a single amount from their credit or debit cards. The PayPal Credit charges no interest if the amount is paid in full in six months on purchases made over $99 and more.
These are some of the unique features of PayPal that makes it one of the most popular online payment processing companies. But, is it good enough for a Subscription Business? We'll talk about it later; before that, let us take a look at Stripe Features.</strong>
Stripe is one of the most popular online credit or debit card payment processing companies that offers a customized solution for developers. Stripe makes it easier for merchants to receive subscription payments, store customer's information, protect payments with the help of their fraud detection system, and receive payments in more than 125 currencies. Some of the other top features of Stripe are:
1. Customer Interfaces: A merchant can create customized checkout experience for its customers that work across various browsers and devices such as a computer, laptop, and mobile phones. You can use the UI toolkit to design a custom payment form for your website.
2. Payment Options: Stripe allows your customers to choose from their choices of payment options, including the currencies. You can select the right payment option to make it easier for your customers to make an online payment and accept all major debit and credit card payments from all countries.
3. Mobile Payments: Stripe's iOS and Android SDK allows you to accept from your android app, iOS app, or a mobile website with a few lines of codes and require no backend changes.
4. Revenue Optimization: Stripe's dynamic payments API allows you to maximize your revenue and conversion while minimizing disruption to your customers' user experience.
5. Fraud and Disputes:/ Stripe Radar detects and prevents fraud transactions using a machine learning fraud system that's fully integrated into your payments.
6. Reconciliation and Settlement: Stripe gives you all the real-time information of refunds, charges, fees, and transfers through their API and Dashboard.
7. Reporting and Insights: Stripe Dashboard allows you to view and manage all your Stripe data, plans, customers, billing, balances, review possible fraudulent charges, and handle disputes all from one single dashboard. You can use SQL (Structure Query Language) to quickly analyze Stripe data and create custom reports to improve your sales, conversions, and customer churn rates.
8. Third-Party Integration: Stripe third-party integration allows you to automate manual tasks that could take hours of human time to complete.
9. Transaction Management System: Stripe stores all the sensitive customer information such as card details, customers' billing address, email, and phone number on its secured server rather than unsecured merchant servers.
10. Refunds: Stripe helps you to issue refunds to your customer's bank account or card quickly. It can take up to 5-10 business days on your customer's account to see the refund amount.
These are some of Stripe's unique features distinguished from other online credit card payment processing companies. As you can see, Stripe offers more to run and handle subscription payments in comparison to PayPal. All these features make Stripe as preferred subscription payment processing platform for Subscription Business. Now, let's compare Stripe and PayPal fees and pricing.
You can create a merchant account for absolutely free, and there is no setup, cancellation, or monthly fees to manage the merchant account. However, Stripe charges a flat rate of $2.9+30c for each transaction as long as you are doing under $1 million in volume per year.
PayPal also has the same selling fees i.e. $2.9 + 30c for per successful charge and buying is free when you purchase in the U.S. You can find more details about PayPal pricings below:
Which is cheaper stripe or PayPal?
Both Stripe and PayPal charge the same amount for each successful transaction, and there are no differences in pricing. However, Stripe offers more pricing options to the merchant and customers to choose from that could lower the charges. They’ve different pricing models available for businesses with large payments volume or unique business models, including:
1. Volume Discounts
2. Interchange Pricing
3. Multi-Product Discounts
4. Country-Specific Rates
You need to make sure that you are pricing your product or service right; otherwise, you’ll end up getting less than what you wanted for your product or service because both Stripe and PayPal charges selling fees from merchants and doesn’t charge buying fees from customers. For example, if you’ve got a subscription-based product or service and the pricing of that product or service is $100, it is essential to remember the transaction cost and include them into the actual pricing that makes it to $103.2.
Is Stripe or PayPal better for a Subscription Business?
Undoubtedly Stripe is more suitable for a Subscription-based business model as it offers more tools and features required to run a successful subscription business. It is simple and straightforward, and it has worked diligently for developers and designers to create beautiful payment pages and integrate them into their website. Stripe supports all major credit and debit cards plus Apple Pay, Google Pay, Android Pay, eWallet, ACH Payments, and e-check payments.
PayPal, on the other hand, is also a good option when you don’t have Stripe available in your country, or Stripe does not support your business model. The fees are almost similar, so you don’t have to worry about the payment part, but it doesn’t offer everything that Stripe does in terms of payment solution for a Subscription Business.