Stripe vs PayPal: Is Stripe Better than PayPal?

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In part 1, we considered the PayPal vs Stripe debate solely in terms of the transaction costs involved (see part 1: Paypal versus Stripe). Obviously, cost is an important consideration for small businesspeople, especially the growing number of home-based, internet entrepreneurs in America and elsewhere.

However, competing market leaders are often indistinguishable on their price points, so other criteria must come into play when making the final decision. Here are four critical factors to look at when comparing PayPal and Stripe.

1. Security Issues

After transaction costs, security is arguably the biggest issue for online payment processors, and both companies are at the security forefront. Stripe has gained accolades for its Stripe.js program, which allows users to collect credit card information without having to store it on their own servers. Its web page offers a tutorial that explains the functions you'll need to get started with payment processing on your e-commerce site.

Why is it better to let a third party handle your customer's data? Here are some answers:

  • Ensure Payment Card Industry (PCI) compliance so as not to run afoul of regulators.
  • Improved security because if your servers are hacked, credit card data won't be stolen.
  • You or your employees are not tempted by others' credit card data. Only large businesses willing to pay for PCI compliance should even consider local storage.

Generally speaking, most online entrepreneurs, particularly solo-startups, prefer to use a third-party shopping cart to process the transactions for their business rather than getting into all the technical nitty-gritty of doing it on their own servers.

PayPal offers an extensive developers' kit for setting up payments and storing cards in a vault, but you are obliged to store the information on your servers. Unless you are comfortable with coding and APIs, you are at the mercy of the software developer who implements your payment security; which can become extremely cumbersome and costly.

2. Payment Processor API

Stripe is recognized for having one of the best APIs (interfaces) in the business, and has forced PayPal to make significant improvements in recent years. What is Stripe's secret? Simplicity, clean code, good documentation, and ease of use. The Stripe API libraries are available in several languages (e.g. Java, PHP, Python, Ruby, etc.) to give you added flexibility when hiring developers.

PayPal's RESTful API is a step-up from the bad old buggy days when competition was non-existent. It should grudgingly acknowledge Stripe's role in redefining its own user experience.

Again, you are most likely not going to handle the payments on your own servers, but this flexibility gives you a lot of options when choosing a shopping cart solution, as almost all of the most popular ones integrate with Stripe.

Stripe also allows you to accept Apple Pay payments on your website.

3. Customer Service Issues

As with APIs, PayPal is far removed from the bad old days of infrequent e-mail communication and nearly non-existent live phone support when crises (e.g. fund freezes) arise. Still, its size and management structure make it more susceptible to complacency than its more nimble rival.

Stripe is motivated to take over top spot for good, and its entrepreneurial spirit shines through in this aspect of the business. Its IRC and e-mail channels make engineers accessible for live help, and although phone support is not formally in place yet, you get the impression that it is moving fast in this direction.

The reality is that many people are looking for an alternative to PayPal based on either a bad customer service experience themselves, or based on a bad customer experience they heard from a colleague.

4. Data Portability

Stripe comes out on top here, since they will actually help you migrate to the new platform in a  PCI-compliant fashion. PayPal, not so much. You risk losing a lot of customers if you leave PayPal, no matter how long you've been with them, because they won't transfer credit card data for you.


Based on this two-part survey of both online payment processing companies, it is difficult to conclude that one company fits all. A home-based entrepreneur or someone who is just starting a new blog is likely to find comfort in PayPal's established history and micropayment option, whereas Stripe has the better API and is in our judgment more customer friendly.

If it is at all possible, perhaps trying out both services equally for a few months will help you decide what is most appropriate for your business.

Finally, many online business owners will use both services on their website; Stripe to take credit card payments and PayPal for those customers (a large majority) who are most comfortable using the established platform.