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Stripe vs PayPal


Just over a month ago we added Stripe as an option for credit card payments (an alternative to PayPal) for our subscription-based project management service 5pm (www.5pmweb.com). After observing it for a month, we also added it to smartQ workflow management service (www.getsmartQ.com). So far, It has been working very well. So what is Stripe (www.Stripe.com), and why is it a viable alternative to PayPal?

Also, check the follow up article “Stripe + PayPal – Google Checkout = ?

If you are a SaaS (like us) and are offering a subscription service (that’s the important part),

there are not many options if you don’t want to deal with processing the credit cards through your site (and deal with payment gateways, merchant accounts, PCI compliance, etc.).

PayPal is was  the first choice that usually comes up – and we have been using it for years. But there are not many choices beyond that. Google Checkout? No, thank you. Even after introducing the support for recurring payments, Google Checkout still looks and acts like it’s in beta when dealing with subscriptions. In fact, we spent weeks implementing it as an alternative to PayPal – well, it took them 15 days to reply to the email that supplied documentation for a chargeback. At the end, we hit the wall – it can not deal with subscription plan upgrades/downgrades. We had to abandon Google Checkout… Luckily, at that exact moment we discovered Stripe.

Why not PayPal?

If it works, why look into PayPal alternatives? Some reasons:

  • Sending clients away from your site – You have to send clients to the PayPal website, and they have to open a PayPal account (for recurring payments).
  • “We do not want to use PayPal” – Some clients do not like to deal with PayPal.
  • Lack of transparency – You will never get information on why a payment failed. Anything on PayPal’s side is a black box. One summer, all our subscriptions from outside the US with failed payment attempts (PayPal tries three times and then cancels the subscription) just got stuck “indefinitely”. Not only did we have to track these issues ourselves and prove it to PayPal (and that usually takes time), but, in the end, the answer from them was to cancel those subscriptions and ask our clients to re-subscribe.
  • Limits on upgrade amounts – Some time ago, PayPal introduced limitations on the subscription plan upgrades (“You can only increase the profile amount by 20% in each 180-day interval after the profile is created”). Basically, if you offer a subscription plan for $10/month, there is no way to process the upgrade to a $20/month plan. The 20% limitation makes any upgrades pretty much unrealistic. Old PayPal accounts got grandfathered and do not have this limitation, but this was years ago, so, most likely, you will have to deal with it. For most subscription services this limitation alone can be a show-stopper – unless you want to deal with creating a new subscription and cancelling the old one on each upgrade.
  • Non-adequate support – PayPal is just a big company. That can be good and bad. Between submitting a ticket there, emailing here, calling elsewhere, you will end up bouncing back and forth between different agents explaining your issue again and again. We have been there. At one point, a dedicated account manager was assigned to us (not sure what volume you have to hit for that) – which is nice since there is a contact you can call and email directly. But that account manager has limited technical knowledge of the systems and, most of the time can not help with real issues.

With all that, PayPal does work for subscription payments and is a solid workhorse when it comes to online payments. Google Checkout is not there yet.

Enter Stripe

Stripe.com is relatively new on the market, but growing fast in their San Francisco headquarters.

For those outside the US and Canada (Canada only since September 2012), unfortunately, you can stop reading right here since it is available only in these countries right now. But it looks like they are coming to the UK soon.

So how does Stripe stack against PayPal? In short, is has the same pricing, but you can process credit cards without sending clients to another site.

The last part is important. Stripe came up with a smart way of having it both ways. It allows people to enter the credit card info directly on your site, without you storing it, no PCI compliance has to be involved.

As a whole, Stripe just looks like PayPal 2.0

While the PayPal interface still looks like it was built in the 1990s, Stripe is built by developers for developers with an easy site and great UI. Stripe API is well thought, documentation is clear and the sandbox environment is very easy to set up.

Stripe is active on Facebook and Twitter, emailing support is simple, and the answers are pretty fast – generally a day or two, though one time it took five. Most importantly, the answers come from people who know what they are talking about. After all, it is still a small company.

There are some differences when comparing apples to apples (see the table below) – like PayPal is actually cheaper (for high volume sellers) – but the most important thing Stripe offers, that PayPal can not, is CONTROL. Since clients remain on your site, you can track exactly what is going on: log the errors, measure the conversion on all pages, run A/B tests on your payments forms, etc. With PayPal you just “push and pray” – with the push of a button, you send your clients to the PayPal site, and hope they will emerge back from that black box as paid customers. And the PayPal website is a bit of a maze – we constantly deal with clients opening a new subscription when trying to upgrade an existing one.  Sure, with Stripe, doing it all on your site also means you will have to do some things by yourself – like building the payment form, generating some custom notifications (like when the payment fails), but that’s a small price to pay.

Then there are small but important differences. Stripe will automatically adjust the next month’s price on a plan upgrade to include the partial price for the period left in the current month. PayPal does not do that, and it means you lose money in those cases – that can add up. It also means customers get prorated on downgrades with Stripe, so you don’t have to deal with partial refunds, like with PayPal.

paypal_logo Stripe
Customers are sent to PayPal site Customers never leave your site
2.9% + $0.30 per transaction
2.4% + $0.30 (when over $10K monthly sales)
2.9% + 30 cents per successful charge *
Funds available at once Funds are held for 7 2 days
Available worldwide Available to sellers in US, Canada and 11 more countries**

 * Stripe: “We start offering volume discounts for companies that are on track to do a million a year”
** https://stripe.com/global

So what to pick?

The answer is simple – both. Most likely you already have PayPal available as an option. Add Stripe as a second option, brand-free, so it is positioned as a “plain” credit card payment option while PayPal remains as a good option for those who have PayPal accounts. PayPal is still a solid payment system, but giving Stripe a chance too is a good idea.

Also, check the follow up article “Stripe + PayPal – Google Checkout = ?

{ 46 comments… add one }
  • BrentNo Gravatar March 10, 2013, 8:40 am

    Doesn’t PayPal have x.com and the adaptive payments API which allows you to process payments without leaving your site as well? It’s been available for about 3 years now… Confused on what Stripe does over that?

  • ZechNo Gravatar March 10, 2013, 12:21 pm

    @Brent, PayPal has a very poor implementation of something vaguely resembling Stripe’s functionality. It’s called PayPal Advanced – it allows you to plugin a “Widget” to your site .. which is very poorly designed, clunky, and overall a nuisance. I am fresh off of working with this very thing, and suggested to my client they switched to Stripe. Oh, and it cost. (5$/mo). Anything that doesn’t force you to swap pages will cost you with PayPal (paypal pro, advanced, or whatever they are calling it now’a’days.)

    The comparison is like night and day. I implore you to check out Stripe just in a test bed, and see what you think =o)

  • Independent Software DeveloperNo Gravatar March 23, 2013, 3:24 pm

    I plan to setup recurring payment options for some SaaS and was leaning towards going with paypal until I heard all the downsides to subscription based payments you listed so I’m now going to use Stripe (it’s API looks well documented which is a huge plus)!

  • UmarNo Gravatar March 26, 2013, 5:50 pm

    I have had one of those days with PayPal!!! Very frustrated with the run-around from agent to agent to agent… I have a Shopify store and after reading this, its time to say goodbye to Paypal and move on to Stripe. Thanks you for sharing.

  • J MarstonNo Gravatar April 9, 2013, 3:46 pm

    Your points are valid for the most part and something our company struggles with constantly. HOWEVER, your percentages table is incorrect and can make an enormous difference in revenue when talking about higher volumes:

    $0 to $3,000 => 2.9% + $0.30
    $3,000+ to $10,000 => 2.5% + $0.30
    $10,000+ => 2.2% + $0.30
    high discount when over $100,000/mo

    Stripe fees listed are correct but you have to get to $1MM before you see any discount. That is the one thing that has kept our business with PayPal for so long. Awesome APIs and support is great but when you are talking about he difference of nearly a percentage point per month, that adds up quick annually.

  • TylerNo Gravatar May 12, 2013, 3:38 am

    Stripe > Paypal for most things. Big catch – no international support. I’ve been riding the stripe awesomeness for a time now, but need to migrate, or provide both, soon.

  • Jennifer LyleNo Gravatar July 6, 2013, 9:41 am

    What about security? It is my understanding that by the transaction taking place on Paypal’s website that the financial transaction security liability rests there. If Stripe keeps the customer on my website, doesn’t that mean that I now am legally liable if anything goes wrong during the transaction? This is something that just isn’t talked about in the online entrepreneur world.

  • 5pm TeamNo Gravatar July 6, 2013, 10:32 am

    The transaction still takes place on Stripe website. The form just passes the data to them, no information on client credit card is stored on the store site.

    From Stripe website: “We shoulder the PCI compliance burden by ensuring that you never need to handle sensitive card data. (Learn more about PCI and our approach.)”

  • JWNo Gravatar August 8, 2013, 4:27 pm

    Nice to have an alternative to PayPal…currently we are using a payment gateway and are charged approx 2% per on Visa and MasterCard…and we receive payment into our bank account in two days vs. seven days…honestly, I do not see the big advantage to Stripe…please explain.

  • Kevin McCaugheyNo Gravatar August 18, 2013, 5:50 am

    With Paypal most sellers get a HORRIBLE rolling reserve (i.e. 20% of transactions held in reserve for 120 days, or (in my case) 100% of transactions held in reserve for 28 days). And these are mostly random and for no reason, so that Paypal can keep money and gather interest on it.

    I strongly advise you to have a look at paypalsucks.com or similar websites to read the horor stories. Almost all accounts have stupid “reserves” placed on them. If you have a chargeback, well you are screwed basically – they can freeze your account for 6+ months and you have no hope of getting your money.

    MAke sure and check the horror stories before you choose. These stories are all over the internet.

  • BrandonNo Gravatar October 9, 2013, 6:51 am

    It’s great we can use Stripe Brand-free and make it look like a regular credit card check-out. It’s great we don’t have to worry about PCI and SSL with Stripe. But the issue I see is when you’re trying to make it a “regular” credit card check out, then sophisticated shoppers will want to see the “regular” SSL badges that should be accompanying the sites.

    So how does one go about winning the trust of the buyer? I would like to say, “Trust us, we do not need to be PCI compliant and we do not need any SSL badges…” But I’m sure that won’t do it. LOL! This is a serious question. I see that 3DCart has partnered with Stripe and I’m strongly considering this. Before, I would think about the added cost of the payment gateway, the merchant, etc. But this is really intriguing now.

  • JamesNo Gravatar October 12, 2013, 9:10 pm

    I worked on PCI compliance and it can be time consuming if you don’t have full level IT support to handle some of the technical questions for you and depending on the credit card processing system you have it can also be pricey to get up to compliance…What small business has 20K to shell out for compliance if they are not already set up? I think this is one great thing about Stripe or any other service that takes care of PCI for you.

    However, I am not too fond of these all-in-one packages touting horrible percentages and interchange fees. Our company was able to negotiate fees using Level II and III because we dealt with predominately B2B and corporate cards. We saved 50K one year! 2.9% IS freaking insanely high. Could you imagine we were just throwing away money because of one tiny detail that these big banks won’t care to tell you– because they don’t have to. And yes we have someone entering the credit card details and the system isn’t imbedded as these packages seem to be, but for our business, having control of fees and processing is important to us. It’s all about the bottom line and I think it takes a lot of number crunching and research.

    I have an accounting/finance background and experience above comes from working with a $MM designer company. I know this article caters to perhaps a different volume and type of business but I’m just reiterating– really dig into what kinds of processors, gateways, merchant banks, etc out there.

  • JohnNo Gravatar November 10, 2013, 1:03 pm

    Great article – thanks. I am looking into an alternative payments processor to add to Paypal, now that Google Checkout/Wallet has closed its doors to most physical goods resellers. We are UK-based so Square is not suitable. Stripe certainly sounds like a contender. Having said that, Paypal has been pretty good for us, as was Google Checkout during its brief existence.

  • 5pm TeamNo Gravatar November 10, 2013, 1:24 pm

    We deal with subscription (recurring payments). While Google Checkout “kind of” supported it (in some perpetual beta mode) – when we tried to implement it, we found out that it’s not a working solution. For example, we were not able to figure out how to handle upgrades from one plan to another – it looked like it could only be done by cancelling a subscription and opening a new one. So while we found Google Checkout a good alternative to PayPal (prior to Stripe) for one-time payments, we found it not fit for subscriptions.

  • NickNo Gravatar November 19, 2013, 2:32 pm

    I will be trying out Stripe because they are the only payment platform that is supported by the Leaky Paywall plugin. Hopefully it functions well.

  • Chris MNo Gravatar January 23, 2014, 6:52 am

    How do you find the signups/conversions compare for Stripe vs Paypal? We used to host our own payment pages but found that people converted better when using Paypal’s checkout.


  • CraigNo Gravatar January 30, 2014, 11:14 am

    I have look at the Stripe and found you have to send the data on to you server then to there to be safe. The Stripe.js and Checkout widget should not be use as they run on the client computer and can be easily hack.

  • DaveNo Gravatar February 5, 2014, 3:26 am

    Stripe takes at least a week to clear your funds. That is ridiculous.

  • 5pm TeamNo Gravatar February 21, 2014, 8:06 am

    You just sign in into this blog

  • DaveNo Gravatar March 13, 2014, 6:28 pm

    7 days is not bad, considering the upsides.

  • Kwame GondweNo Gravatar March 16, 2014, 9:44 am

    7 Days is just fine. Amazon takes 14Days. Yes, a whole fortnight. No worries about checking out conversions and stuff. I recommend and agree with a post above, use SSL, the majority of customers really checks this green and https sign. Add a nice About Us page and Secure Shopping features and you are good to go.
    I was about to pay £75 one off plus £58+ monthly subscription fees excluding merchant account fees which i am not yet aware off before I just chanced on STRIPE somewhere doing something else unrelated. What a FOUND. Paypal sucks. Who doesn’t know paypal sucks?

  • SaharNo Gravatar March 19, 2014, 4:28 pm

    Can you please elaborate on the Level I & III negotiations given B2B integrations.. etc for your business ? I agree 2.9% is very high

  • AndreNo Gravatar March 30, 2014, 10:12 pm

    Would NOT recommend Stripe… I’ve recieved the message below from them. Stripe is currently holding our funds, does not reply to any messages indicating that we sell USED products and are not, and can not be, an authorized reseller of either Apple or “Playstation” (last we checked the company is called Sony) when you’re selling USED items. If you had to be an authorized reseller when dealing with used products then places like eBay would have very few sellers.

    Hi Andre,

    Thanks for signing up with Stripe! It seems like you’re reselling fairly popular brand name products, such as Apple adapters and Playstation controllers. In these instances, we need to ask for confirmation of your authorized reseller status for Apple and Playstation. Can you send us documentation that can confirm your reseller status? Sorry for the hassle — we know it’s frustrating when a few bad actors make it more difficult for legitimate businesses, but we will need to complete this step before we can transfer payments to your bank account.


  • 5pm TeamNo Gravatar April 3, 2014, 11:04 am

    Stripe update: Now funds are not held for seven days anymore, just one.

  • Alex HoltappelsNo Gravatar May 3, 2014, 2:25 pm

    5pm Team,
    where did you find the information that funds are only held for one day?
    When I open https://stripe.com/de/pricing today it says: “Earnings are transferred to your bank account on a 7-day rolling basis.”
    They explain pretty well why they do it here: https://support.stripe.com/questions/why-does-it-take-seven-days-to-receive-payments-in-my-bank-account.
    So I would be very interested if you git the money faster.


  • IngridNo Gravatar May 16, 2014, 4:52 pm

    We have used Stripe and Paypal (and Rev. Allen we’re a Canadian company).

    They’re both easy to use, and for our purposes we don’t see a major difference.

    The major challenge we’re having with Stripe is the terrible customer service. We have to wait days for an email response (incredibly frustrating!), and there’s no phone number to call. When you have customers or staff waiting for an answer before you can move forward it becomes a nightmare having to wait for days for an answer.

    I truly don’t understand why they don’t have a phone number. Being able to call and get a quick answer would save everyone a ton of time, and make for much happier customers (mine and theirs!).

  • 5pm TeamNo Gravatar May 16, 2014, 5:12 pm

    About customer support. Just yesterday we had a question for Stripe about a charge and the answer came within hours.
    Our experience in USA is that Stripe is more active on social networks – hit them via Twitter to accelerate the process.

    PayPal on another side is a large corporation. You could wait on the phone for hours, then talk to a basic technician, then wait again to be escalated to a better technician, explaining along the way everything over and over again. BUT, you get assigned a personal sales/support person… I do not remember when it happened – a couple of years ago. Maybe you have to hit certain sales numbers. So that way you have a single contact to email or call. She is very responsive, though not a technician and can’t actually help with much when it comes to real stuff…

    That’s our experience in USA.
    We use both Stripe and PayPal.

  • 5pm TeamNo Gravatar May 16, 2014, 5:15 pm

    They sent us an email about it…
    Also here is a link on their website where they mention it:

    So it looks like they started to roll it out in USA first.

  • Jason JudgeNo Gravatar July 31, 2014, 8:52 am

    Or maybe there is some JS I am missing, that talks directly web browser to Stripe, using scripts that come from Stripe? Is that where the token comes from?

  • JeremyNo Gravatar September 11, 2014, 2:02 pm

    My biggest concern w/ Stripe has to do with fraud protection. Paypal flags suspicious charges for 24 hours which is helpful. However, what is much, much, much more important is that when a customer files a chargeback or disputes a charge we are never liable when dealing with Paypal. We have done millions and millions for 6 years with them and never had a problem. Stripe seems to put all the responsibility on you to resolve chargebacks and disputes which is very unappealing.

  • 5pm TeamNo Gravatar September 11, 2014, 2:17 pm

    In reality they handle the disputes the same – simply act as a middle person between you and the client’s credit cart company. They put the funds on hold and then ask for additional info about the transaction. Once you supply it – they pass it to the credit card company. And the credit card company then decides to reverse the payment or not. The decision is final and neither PayPal or Stripe would do anything about it… We are talking here about legit charges, when clients simply flag it as fraudulent (by mistake or intentionally). Sometimes credit card companies accept that that was a legit charge, sometimes not. We mostly deal with subscription payments, where clients can mark one or multiple payments as fraudulent, which makes no sense since they started the subscription and had similar charges in the past (monthly)…

    In our experience over the years, both companies pretty much acted the same, while PayPal had an advantage since we could contact the dedicated PayPal agent (it looks like they assign one to bigger accounts) and that agent can sometimes provide some help. For example, we had a client who used our services for years, then cancelled and marked all the past payments as “fraudulent”. Initially PayPal did not resolve the case in our favor, but via the agent we were able to explain the case and get the money back. In any case, even with PayPal, with each case you have to explain again who you are and what are your services, and that those are subscriptions… it feels like introducing yourself to your girlfriend’s parents over and over again, after years of being together… 🙂

  • JeremyNo Gravatar September 11, 2014, 9:26 pm

    I’m not sure if we’re talking about two different things or what, but I believe you are very misinformed. Paypal offers “Seller Protection” (https://www.paypal.com/webapps/mpp/security/seller-protection) which protects you from unauthorized transactions. If someone uses a stolen CC to buy something from me and it’s reported after I’ve shipped the item Paypal I am never liable provided I meet a few basic requirements like providing tracking info, using signature required, etc. I have been in business for six years selling over $3 million and have never been held liable. It probably happens once a month and Paypal always covers me.

    The down side of this amazing fraud protection is that Paypal is very protective. We get people saying Paypal refused their payment somewhat often because their fraud prevention software decided the payment looked suspicious. This is what prompted me to start looking for something else. But if Stripe says you’re on your own for unauthorized transactions there’s no way I could ever justify the switch.

  • 5pm TeamNo Gravatar September 12, 2014, 8:39 am

    Jeremy, yes, we were talking about totally different things.

    We do not deal with material goods and physical delivery. We sell software as a service, and Seller Protection rarely applies to it.

  • AlexNo Gravatar February 23, 2015, 3:14 pm

    We had a very unpleasant experience with Stripe. A week after we chose to partner with them, we received an email accusing us of committing fraud. We barely ran 3 transactions for our guests and they chose to close our account. All this was on Valentine’s day weekend when we had many customers waiting to pay the invoices we issued. You can imagine how difficult it was lost to find alternative payment methods on a Friday. Not to mention, our app was already integrated with Stripe.
    We offered to submit to Stripe any kind of document to resolve the issues, including for them to contact our customers and confirm the transactions. They don’t have any phone support and they replied 5 days later with a standard email. We will not continued to work with them and other companies should be advised of their unprofessional attitude.

  • 5pm TeamNo Gravatar March 4, 2015, 2:18 pm

    What country are you located in?

  • AudioShopNo Gravatar April 15, 2015, 7:20 pm

    We’ve used Paypal for years but are looking to open a secondary processor “STRIPE”.

    Stripe , so far , have been very difficult to deal with – the BigCommerce connected successfully with Stripe and their Photo ID verification was completed. We then took 2 test payments and were about to ship them when Stripe “HELD” the payments re-requesting the previous ID verification.

    Why does Stripe bill customers’ cards when an account is not verified – I do not know. I’m currently waiting for Stripe to reply , at this point we are hesitant to add Stripe to our payment options because we have no way of knowing if Stripe can process payments correctly.

    I googled Stripe reviews following this and alot of people are complaining about a huge spike in chargebacks because , apparently , Stripe is very open to fraud etc. Is this true? Our thoughts , if Stripe turns out to process correctly , was to do a small deposit refund for all Stripe transactions and have the figure confirmed before shipping any Stripe transactions. Paypal have the seller protection which is of course a huge advantage.

    Does anyone have any experience with Stripe working correctly and any advice , pros , cons , etc?

    The payment processor “PIN” – Pin payments? – Have offered us a secondary facility but we are currently more interested in pursuing what Stripe have to offer – despite their 7 day settlement timeframe. This 7 day timeframe is actually quite helpful in our case because :

    1. It gives us time to investigate for fradulent transactions
    2. It gives us time to process the small refund to confirm the card holder is the one making the payment.
    3. Allows enough time to refund any suspicious payment without the payment being settled first.

  • Mike SchellNo Gravatar July 29, 2015, 1:22 pm

    FoxyCart is another service that shoulders the PCI compliance burden. It also gives your users a great cart and checkout experience as well as allowing you to take payments via credit card, skrill, bitcoin, paypal and several other methods.

  • kyle stanleyNo Gravatar August 11, 2015, 11:04 am

    Stripe is the worst. NO customer service. there is no number to call when you have an issue. You write them an email, and within 24 hours they will write you back, or not. I have written them on 2 separate occasions with no response. When I receive a payment on my website, I can’t access the money for 5 days even though they say it will be 1-2 days. Every day during that time, I would log on and see if I have money yet, EVERY time it says “funds available tomorrow”, I go and check the next day , and of course it tells me tomorrow. This goes on for a week. They give you no clue as to where your money is, why they are holding it, or when you will get it. Puts my business on hold when I can access the money my customers send. Company is garbage and won’t respond to customers.

  • rick harrisNo Gravatar September 27, 2015, 1:21 am

    Yes i also believe Stripe is the better payment service. I’ve been using Payolee to accept payments their stripe integrated and i must say i haven’t looked back. their very simple. If anyone wants to check them out go ahead. They make it simple for graphic designers like me to get paid.


  • LisaNo Gravatar November 3, 2015, 8:08 am

    I have used paypal for years thinking of no alternative, I will be testing out stripe now.

  • ImranNo Gravatar December 15, 2015, 9:11 pm

    stripe is fraudulent company, they stuck your money for no reason, i will never suggest anyone to use this worst service, also their support is world’s worst support, they don’t reply emails and they don’t have phone support.

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