Payment Gateways: PayPal versus Stripe

As businesses increasingly begin to sell their products and services online, we are getting more and more questions about payment gateways and how you take payment from your e-commerce website.

The first thing to understand is that an online store or e-commerce website is very similar to a physical retail store in some respects. At a physical retail store, you'd walk in, pick a product off the rack, take it to the checkout and either hand over some cash or pay through an EFTPOS/Credit Card machine. The shop owner will be paying someone for the privilege of using that machine (particularly for credit card transactions), so that's while you'll often see stores either charging more for credit card transactions or not offering them at all. Online, it's the same story. A customer will come to your online store, click on the product they want to buy, head through to an online checkout and then provide their credit card details through a payment gateway. That gateway takes care of all the security and the $$ transaction, but as far as the customer is concerned, they've just paid you for the item they are buying. As an online store owner, you'll end up having to pay that payment gateway provider somehow, and how each gateway works for you as the store owner is slightly different in each case. Below are a couple of the options we use both ourselves and with clients.

PayPal
If you've shopped online you've probably come across PayPal at some point. It's globally recognised, has a very good track record, and is very simple to use.

• Sign Up - one of the best things about PayPal is that the sign up process is very easy. Answer a few questions and you're basically good to go.
• Pricing - PayPal has simplified their pricing in NZ recently - at the time of writing you'll only pay on the transaction (3.4% + 45c per transaction). So if you sold a $10 item online, you'd pay 79c ($9.21 into your pocket). You can find PayPal's fees at this link.
• Getting your money - the one downside of PayPal is that you'll need to draw down your money from your PayPal account manually. You'll receive the funds into your PayPal account (less the transaction fee), and they'll stay in that account until you sign into PayPal and make a lump sum withdrawal to your verified bank account.
• Integration - integration with the CMS that 543 uses is really simple (just sign in basically), and PayPal works equally well with software like Xero. By creating a PayPal 'bank account' in your Xero reporting software, all the transactions will be recorded and it is super easy to reconcile. You can also connect PayPal up to your Xero invoicing if you want to give the option for any invoices you generate to be paid online.
• Other bonuses - because PayPal effectively acts as a bank account, you'll be able to use your PayPal ID to pay for transactions across the internet with other stores. That means no need to add your credit card details over and over again.
• PROS - globally recognised and trusted. Super easy to use & integrates easily with Xero etc.
• CONS - have to draw funds down yourself. Can be confusing to some users as the PayPal portal gives users the chance to 'sign in'.

Stripe
Stripe is the new kid on the block in New Zealand, but has been established overseas for a while now. 

• Sign Up - again, Stripe is really easy to sign up for, just make sure to have all your business details ready when you go through the process.
• Pricing - Stripe has come into the NZ market lower than PayPal with a per transaction price of 2.9% plus 30c. So if you sold a $10 item online you'd pay 59c ($9.41 into your pocket). You can find Stripe's fees at this link.
• Getting your money - unlike PayPal, Stripe will automatically pay your funds across to your bank account (once they have cleared). You'll be able to login and see a full summary of all the transactions, which have cleared and when they are expected to clear and land in your account etc.
• Integration - Stripe integrates really well into the payment side of most applications and certainly in the 543 CMS it's a simple matter of signing in. Because Stripe acts more as a direct payment portal, rather than a bank account, it doesn't integrate quite as well as PayPal into Xero. The descriptions that come across into Xero can be a little confusing for reconciliation, but there are ways around this, and we're picking this will improve in the not too distant future. Connecting Stripe up to Xero invoicing is also really easy - and reconciling that when you do connect it is extremely straight forward.
• Other bonuses - developers really seem to like Stripe. That means alot of plugins etc accept Stripe, and it's growing really quickly globally.
• PROS - payment straight through to your bank account (once confirmed). Easy to use. More in depth reporting and developer functionality. Low fees.
• CONS - doesn't integrate into Xero as smoothly as it could.

Other Options
There are a bucketload of other payment gateway providers out there (basically every bank will have some sort of option - Payment Express, PayMark...the list goes on). When you talk to your bank, they'll recommend the one that they use, but they'll all have different pro's and con's. The reason we've looked at PayPal and Stripe are because they are a perfect starting point for small to medium sized businesses. They are robust, easy to use, integrate into the CMS we use effortlessly and only charge per transaction. We've found alot of gateways (particularly with the major banks) charge a monthly fee plus a transaction fee. They'll have other upsides - like payment straight into your account - but the first thing you should always do is chat to your website designer or developer about what will or won't work with the site they are building/have built for you. Technology is a bit like a jigsaw puzzle, and while you can mash pieces together to get something to work, it's always best to use gateways and facilities that fit and work well together.

Like anything, do your own research and chat to your designer. Listen to the opinions of the experts, and you're bound to be better off in the long run.