Paypal vs Stripe Review

Xero and most eCommerce platforms offer two payment services for invoices and purchases - PayPal and Stripe. We review which one is best for businesses in New Zealand to help minimise processing fees and maximise cashflow and working capital

Updated 15 June 2020

Xero offers Stripe and PayPal as a way to accept debit or credit card payments for your invoices. By providing a payment method beyond a bank transfer, it’s likely customer payments will arrive faster and boost your working capital as a result. Both Stripe and PayPal deduct a fee from every transaction for processing payments.

In this guide, we review Stripe and PayPal, outlining the pros and cons of each as well as comparing the two when it comes to features and pricing. We cover:

PayPal – An Introduction

PayPal is known globally, having operated for 20+ years. It works as a payment processer much like Stripe does, but it has additional consumer-facing features. The most popular feature of PayPal is the money transfer option. Unlike Stripe, consumers can sign up and have a PayPal account which lets them pay for things online without having to enter in credit or debit card details.

Stripe – An Introduction

Stripe isn’t as well-known as PayPal, but its functionality is very similar. Established as a payment processing service in 2010, it is popular among eCommerce websites who integrate to the service. In mid-2019, Xero integrated Stripe with its invoice system, allowing customers to sign up for Stripe and receive payments via the platform. Beyond Xero, Booking.com, Shopify and SquareSpace are all Stripe customers who use the service to process their customer’s payments.

Among Xero customers, who uses Stripe and PayPal?

Small and medium-sized business invoicing customers for goods and services
Freelancers invoicing clients
Not-for-profit entities collecting donations
eCommerce companies processing customer payments

Fee Differences - Stripe vs PayPal

Every invoice you send will incur a fee if payment is made via a customer using PayPal or Stripe. Our table below presents the fees for each platform side-by-side.

Service	Stripe	PayPal
Fee per Transaction	2.9% + $0.30 NZD	3.4% + $0.45 NZD
Setup Costs, Monthly Fees or Contract?	No	No
Recurring Billing Available for Customers?	Yes	Yes
Chargeback and Refunds	$15 fee, no fee rebate if customer refunded	$20 fee, no fee rebate if customer refunded
Customer Support	Email, 24/7 Phone and Live Chat	Email and NZ Hours Phone
Access to Funds Times	Two Days (Average)	Immediate (but clearing to NZ bank account takes 1-2 working days)
In-Person Card Readers	Yes - for an additional fee	Yes - for an additional fee
Payments Handled 100% on Your Website or via Xero	Yes	No

Evaluating Stripe vs PayPal – 10 Must-Know Considerations

Stripe and PayPal both have their own advantages as a payment provider, and we evaluate them in detail below so you know exactly what you're signing up for.

Understand the Cost Per Transaction/Sale

Both Stripe and PayPal are upfront and transparent about their fees, so you know what you’ll pay every time a customer pays you. Per the table above, Stripe and PayPal’s New Zealand fees per transaction are 2.9% + 30 cents and 3.4% + 45 cents.

Winner: Ultimately, Stripe is cheaper than PayPal by around 0.50% per sale. Over one year, if customers used Stripe to pay $100,000 worth of invoices, you would save at least $500.

Neither Stripe or PayPal Charge Setup Costs or Monthly Fee

There are no ongoing costs for either platform; if customers prefer to pay via bank transfer or automatic payment, you won’t be stuck with ongoing costs.

Winner: It’s a draw as neither charge upfront or ongoing.

Understand Chargebacks and Refunds (and How They Cost You)

It’s unlikely a customer will dispute an invoice once they’ve paid the amount due. However, if such an instance arises, the customer can initiate a ‘chargeback’ or refund request from Stripe or PayPal. There’s a fee involved regardless of whether or not the request is approved. If you’re dealing locally, then the risk is low, but if you’re an eCommerce provider, it can be a triple whammy if you have to pay the fee, have the payment reversed and have already sent the goods.

Winner: Stripe’s chargeback fee is $15; PayPal’s chargeback fee is $20, making Stripe a little less expensive. If the refund is approved, neither Stripe or PayPal will reimburse you for the processing fees they charged initially.

Understand what Customer Support is Offered

Both Stripe and PayPal offer reliable, responsive support centres, with phone, email and platform message being the most popular. Stripe offers 24/7 phone support, whereas PayPal’s phone support is 10am to 10pm NZT Monday to Friday, and 10am to 9pm NZT Saturday and Sunday.

Winner: Stripe’s 24/7 phone support commitment puts it in front of PayPal.

Customer Payment Experience

When integrated with Xero, clicking ‘pay now’ on an invoice offers two different experiences depending on whether you’re using Stripe or PayPal. Stripe helpfully pre-populates your name (per Xero details) and other information and asks you to enter your card details. PayPal gives you the option of logging in to pay (if you have an account) or paying with a debit or credit card (and, optionally, signing up for PayPal after). The experience with Stripe is fast and fewer clicks, but having your payment details saved if you have a PayPal account is very convenient. Based on industry data, B2B businesses customers are unlikely to use a PayPal account. How B2C customers pay depends on what you’re selling – PayPal does offer added payment protection so customers may favour that if you’re an eCommerce business.

If you’re comfortable to take payments over the phone, Stripe is arguably a lot easier to use than PayPal as it’s a single screen and requires fewer fields to be completed.

The examples below compare the user experience of Stripe and PayPal when a payment is made.

Winner: It’s a draw, as both Stripe and PayPal offer distinct advantages and features.

With Stripe, customers pay directly on your website or upon clicking the invoice - and data is pre-populated based on their account details

With PayPal, customers must click on the PayPal button and are taking to PayPal.com to process the payment, before being returned to your website or the original invoice

Setup in Xero and eCommerce Websites

Stripe and PayPal integrate effortlessly into Xero. You’ll be able to reconcile payments and receive email notifications when a customer pays an invoice. It’s very realistic to be able to integrate either payment platform into Xero within 5 to 10 minutes.

If you’re an eCommerce retailer, Shopify integrates with both PayPal and Stripe. Many other online shopping website builders offer the same.

Winner: It’s a draw, as both Stripe and PayPal are equally accepted by third-party applications.

Know How Long (and How Easy) it is to Get Paid

PayPal and Stripe both let you withdraw funds to your bank account. PayPal advises this will take 2-5 business days, but in reality, payments will appear the following day. Stripe automatically deposits into your bank account within 1-2 days of payment. PayPal doesn’t offer that option – every time you want money, you’ll need to make a manual withdrawal. If your balance is below $150, PayPal charges a $1 withdrawal fee.

Winner: With automatic deposits and no minimum required to avoid fees, Stripe offers a better deal than PayPal.

Understand the Security Features and How Payments are Transacted

Both Stripe and PayPal’s services are robust and your customer’s data is encrypted. As world-leading platforms, your customers have an incredibly low likelihood of any data breach occurring. Stripe allows your customers to pay without ever leaving Xero of your website (if you’re an eCommerce website). However, PayPal requires customers to click ‘login to PayPal’ on a new browser. This means the customer will be taken away from your invoice (or exit your website altogether) to sign in to a PayPal account. Only once they pay are they redirected back to your site, which may be undesirable if you want to keep clients on your website. It can be problematic if it risks ‘abandoned cart’ when they’re taken to another screen and change their mind.

Winner: Both platforms offer industry-leading security. When it comes to transaction experience, Stripe has the edge as customers stay on the same screen. This greatly reduces the chance of a loss in customer focus.

Taking Physical Payments with Card Readers

Beyond taking payments online, both Stripe and PayPal offer payment processing abilities. Stripe offers this directly, whereas PayPal offers it via Vend. There are ongoing costs, and because pricing depends on volumes processed, we do not cover prices or estimates.

You don't have to sign up with either Stripe or PayPal if you use Xero - bank payments are the default

It can be easy to want to offer customers the ability to pay by card, but you will incur costs on every transaction. If your margins aren't that high, or you don't think your customers will take it up, you're under no obligation to offer it. As per our conclusion below, Stripe offers the lowest fees, and if you were to provide a card payment option, it is arguably the better choice. Best of all, like PayPal, you only pay when someone pays you, so there are no ongoing fees.

Evaluating Stripe – Pros, Cons and the Bottom Line

Pros:

Flat and transparent fees
Great user experience for customers paying invoices or via an eCommerce platform
Customers never leave your website or invoice during their purchase
There are no contracts or minimum turnover
Payments automatically get paid into your bank account within two days of processing
24/7 phone support
Customers can use Stripe to set up recurring billing

Cons:

The two days wait for money is one day longer than PayPal payments

Evaluating PayPal – Pros, Cons and the Bottom Line

Pros

Flat and transparent fees
There are no contracts or minimum turnover
Customers can use PayPal to set up recurring billing
Customers are familiar with PayPal and trust it as a payment processor
Funds are available immediately in your PayPal account, and take one day to arrive in your bank account
Support offered is extensive

Cons

Customers leave your website or invoice during their purchase
No automatic deposits in your bank account – you had to make manual withdrawals
PayPal balances below $150 incur a $1 fee if you plan to withdraw the money

Bottom Line: Stripe vs PayPal – Which Offers the Best Payment Solution?

We believe that for most businesses, Stripe offers a better payments solution.
This based on the fact that the fees are lower, money automatically clears into your bank account, and there’s a better payment integration which keeps customers on the one page.
Best of all, customers don’t see the PayPal logo and think they need to have an account to pay.
Ultimately what’s right for you will depend on your business needs. If you also need an eCommerce payment solution, PayPal is a trusted brand that consumers identify with.
Xero lets you use both – it does add administrative time to your business; reconciling two accounts instead of one and managing cash flows are not insignificant tasks.

Overall, both Stripe and PayPal offer fantastic features and don’t burden any business with ongoing costs. Paying per transaction is fair and flexible.

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