Paypal vs. Gumroad vs. Stripe – The Battle of The Payment Processors
If you’re building an online business where people are paying for products or services, you’re going to need a payment processor.
Nobody is going to show up at your office or home and hand you cash. In fact, many of your customers are probably sitting at home in their jammies making purchases.
There are tons of payment processing services out there and it can be overwhelming to figure out the best choice for each situation.
I’ve done a lot of research on this topic and have narrowed my findings down to three payment processing solutions; and I use all three for different purposes.
In this article, I’m going to discuss the pros and cons of Paypal,Gumroad and Stripe and explain how each works best for different scenarios. Let’s do this.
Whether you like them or not, PayPal is the Godfather of payment processing; one of the first to come on the scene. When people think about online payment processing, this is almost ALWAYS an option that is considered, and in most cases, the option that many solopreneurs choose.
PayPal came on the scene as a way to send money via email, and has grown way beyond it’s original purpose.
People were initially drawn to PayPal because you weren’t required to create a merchant account or pay monthly fees. You’d only be charged a fee when someone sent you money, and the fees were pretty nominal.
Today, when someone purchases something from you, you are charged 2.9% of that transaction + $0.30, which is relatively low.
Also, depending on your volume of sales, those fees can go down to 2.2%.
Another plus to PayPal is that purchases can be anonymous. I can purchase something as “Leslie Samuel”, as “That Guy With A Blog” or as email@example.com, depending on how I set my account.
This anonymity played a big role in PayPal’s growth, especially at a time when people were uncomfortable entering credit card info onto a stranger’s website (understandably so).
It basically gave a layer of protection against fraud that was beneficial for the average consumer.
The main downside I’ve found in PayPal is that they are notorious for placing holds on accounts for various reasons. I’ve had my account placed on hold for about a month. I was able to receive payments but not withdraw payments made to me. As you can imagine, this can be inconvenient when you have bills to pay.
I’ve also had other minor incidents which involved someone filing a dispute on a payment they made. Paypal would place a hold on those transactions and almost always sided with the purchaser, whether or not they were in the right.
All in all, I present Paypal as an option to my customers because it’s still the payment processor of choice for many people; but I absolutely hate using it since I like being in full control of my business.
Because I don’t fully trust PayPal, I try not to keep a lot of money in there. At the end of the day, if I have more than $500 in my account, I withdraw and deposit the money in my bank account – just to be on the safe side.
This is a serviceI started using when I began selling a Physiology Study Guide on my Biology Blog. Like PayPal, Gumroad doesn’t charge a monthly fee, but their processing fee is higher than PayPal’s.
Their fee is 5% + $0.25. However, the reason they charge more is because they do much more. PayPal only accept payments. You have to have a different system, or create a system for delivering the goods.
With Gumroad, you upload your product (in my case, an eBook) to Gumroad, set your price, connect it to your bank account and that’s it!
They will accept the payment for you and deliver the digital product to your customers. Two days later, that money is direct-deposited into your bank account. Your involvement in the process is absolutely zero after the initial setup.
The key here is ease of use. I started using them because I didn’t want to think about the potential issues that arise when setting up a shopping cart and using self-hosted solutions for delivering products.
Since setting up my eBook on Gumroad, I haven’t done anything but see payments come in. It’s just that simple. You set it and forget it. You’re only involvement occurs if a customer is having a specific problem or question and they need direct contact with a real human
If you have a simple digital product, like an eBook, that you want to sell, this is the route I recommend.
As stated in their “about” page, “Stripe is a developer-friendly way to accept payments online and through mobile apps”.
That’s exactly what they are. If you want to accept payments directly on your website, you’d typically set up a merchant account. This is a special type of bank account that allows you to accept online payments.
You also need a Payment Gateway – a kind of e-commerce service that does the payment authorization. These two services work together making it possible for you to take payments on your website (without having to resort to a service like Paypal).
There’s usually an application and setup process to get everything working together correctly.
I did this once. I used authorize.net and some other services that came along with it and was so confused with the instructions and fees that I decided to run away – tail tucked between my legs.
Then I heard about Stripe and fell in love. The fee structure is similar to Paypal – 2.9% + $0.30. Also, the setup process is pretty easy. However, you do need some kind of shopping cart system that integrates with Stripe.
Fortunately, most of the good shopping cart systems integrate with Stripe. I use Amember to manage my membership site and accept payment; and since Amember integrates with Stripe, this combination has become my payment solution of choice.
Combining Amember with Stripe does require a SSL certificate on your server and that usually comes with an additional annual cost determined by your hosting provider. So if you decide to go this route, make sure to look into SSL certificates. This means people will feel safe entering their credit card information on to your website.
One of the additional reasons why I’ve decided to go with Stripe is because it integrates with services like Hookfeed, a program which gives you all kinds of awesome customer insights like the lifetime value of each customer and Intercom, a service I use to increase engagement inside my member areas.