What are Payment Gateways?
Online payment gateways have arguably become one of the most dynamic disruptions in the financial industry. They are also fast-evolving, driven by increased customer trends online and successful companies have adjusted to leading payment gateways to remain competitive. So fast that projections into their future show that global e-retail sales will grow to up to $4.8 trillion by 2021.
When researching the best payment gateways for your business, you’ll come across PayPal, Stripe, and Square — the top players in the game. But despite their role in facilitating secure online transactions between businesses and customers, PayPal, Stripe, and Square are radically different in several key areas.
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What are the best payment gateways based on pricing? And which one is better for starting your business — Click to read more
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What is Paypal?
As far as history goes, PayPal is a digital payment service that allows users to send and request money online. The gateway prides itself on being one of the pioneers in online transactions and has a vast global presence.
PayPal also offers peer-to-peer transactions to its users, a service that other payment gateways may not provide. Businesses that use PayPal include eBay, Expedia, Pandora, and many more.
What is Stripe
Stripe is a powerful payment API that helps its users move money online. It allows individuals and companies to make online payments using credit cards and other primary online payment methods. Stripe can be used both as a payment gateway and a payment processor. Stripe is used by Amazon, Shopify, Foursquare, Dribble, Google, Slack, and other companies.
What is Square?
Square is a merchant services and mobile payment platform. Square offers a suite of business software such as Square Cash, payment hardware, and other small business services. Its main highlight is its free Point-of-Sale (POS) system, a mobile application that lets businesses process payments via smartphone. Companies that use Square include Fuzz, Acuity Scheduling, La Colombe Coffee Roasters, etc.
How do they work?
All these payment gateways, PayPal, Stripe, and Square work by establishing a secure connection between consumers, their bank or money service provider, and an online business platform. It means that they can process and authorize electronic or digital payments in real-time as detailed below:
To purchase a service or product, customers choose their preferred payment method and enter their details on the host website. The website then sends these details to the customer’s payment gateway selected, either PayPal, Stripe, or Square.
The payment gateway encrypts the customer’s credit card data and sends it to the client’s bank or financial service provider for processing and authorization. After that, one of two things happen, the bank either approves or declines the request and immediately sends a response back to the payment gateway.
Consequently, the payment gateway instantly sends the response to both the website and customer. If the payment is approved, the funds are credited to the business account. If not, the customer is informed that their payment was declined, in which case the transaction is canceled.
Here is the full guide where we explain all the differences between Paypal vs Stripe vs Square and which one is the best payment gateway!
Feature Comparison:
Security
Ideally, you need a payment gateway that offers excellent security tools for both your business and customers. The good news is that PayPal, Stripe, and Square are robust, stable, and secure payment platforms. They do not only use end-to-end encryption to store data securely but are PCI Compliant. Besides, each company employs other internal security, privacy, and fraud protection practices to ensure sensitive data is protected from unauthorized access. With this in mind, you can be confident of data being handled securely.
Chargebacks and Refunds
Chargebacks can be hurtful for businesses, so it is essential to have a clear perspective of how they’re handled.
Apart from the transaction fee which isn’t returned, PayPal charges a $20.00 fee, which is refundable if a case is ruled in your favor. Stripe, on the other hand, issues a refundable $15.00 fee for such instances. And, more impressively, Stripe provides credit card fraud protection in their Stripe Radar feature package. Square doesn’t charge any additional fees for chargebacks.
Methods and Availability
PayPal supports 25 currencies and is available in more than 200 countries around the world, which gives businesses the potential to reach many customers. Payments are made using various methods, including PayPal Cash, PayPal Cash Plus, bank accounts, and rewards balance.
Stripe is only available in 39 countries and growing but supports over 135 different currencies while accepting far more payment methods. Stripe accepts major cards including Visa, Mastercard, American Express, JCB and others
For Square, its services are only available in the USA, UK, Japan, and Australia. Unfortunately, Square doesn’t offer different currencies. Square accepts payments with any US-issued and most internationally-issued chip or magstripe cards bearing Visa, MasterCard, American Express, Discover
Customer Support
In the customer department, it’s fair to say PayPal, Stripe, and Square are evenly matched and aren’t known for having excellent customer support. Nevertheless, they offer different customer service and support options, including Phone & Email Support, Live chat support, Developer Support, Social media, and Community forums, to mention a few.
User Friendliness
For one, PayPal is incredibly easy to set up, integrate, and start taking payments even for people without developer skills. If you can read HTML while being able to copy and paste the developer tools, setting up PayPal is straightforward.
For Stripe, its developer-friendly API is a unique selling point. However, the feature often appeals coming from a developer viewpoint. As such, even with its comprehensive developer tools and libraries, people lacking developer skills will find it challenging to set up and integrate Stripe.
Square, just like PayPal, makes it easy for almost anyone to integrate its payment processing into your business software with its APIs. It also includes resources to guide you through the process.
Conclusion
For businesses, payment gateways save time, offer convenience, provide a vast customer base, and eliminate data security worry. They also provide smooth, quick, secure, and diverse online transactions for both individuals and business.
However, every business has a unique business model and customer base. With so much disparity between companies, it’s utterly impossible to reach a verdict that either PayPal, Stripe, or Square is better than the other. They may serve very different functions but are the best in what they do.
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