PayPal vs. Stripe vs. Authorize.Net—Which Payment Gateway Should Be Chosen for the Online Recurring Payment Processing?

In the ever-evolving subscription and SaaS billing arena, recurring payment processing requires the integration of robust, secure, and flexible payment processing services providers. Today, more than 80% of online shoppers prefer businesses that offer their favorite payment methods. That means your gateway must accommodate maximum customers from across the regions and support several payment methods, currencies, and businesses. With the global digital transaction volume exceeding $5 trillion annually over the past few years, having an online payment framework is more important than ever.

Currently, more than 100 payment gateways or payment processing services providers are facilitating online payment processing through digital wallets. Some gateways work solely as payment processors, while others provide merchant accounts that help businesses collect and manage funds without needing a traditional bank setup.

A few key payment gateways include PayPal, Stripe, Authorize.Net, Braintree, GoCardless, 2Checkout, WePay, among others.

Online Recurring Payment Processing Through the Payment Gateways

Digital payment gateways play a significant role in providing an enhanced checkout experience. They contribute heavily to facilitating customers in making smoother transactions with minimal fractions like declined payments, unauthorized payments, or late payments.

Choosing the perfect payment processing service provider requires an understanding of business revenue goals, the customer market, and the customers’ preferred payment methods. To accept payments online, a payment gateway is required that authorizes the payment for processing. The gateways’ links check out to the actual payment processor after encrypting the payment and purchase information, securely transmitting the data to the processor.

This blog post outlines the three most commonly used payment gateways that assist subscription merchants and SaaS vendors in making the best choice for their payment system platform.

These are:

• PayPal
• Stripe
• Authorize.Net

We will discuss these payment gateways, highlight their prominent features, and evaluate their limitations.

PayPal—The Most Popular Recurring Payment Processing Services Provider

PayPal is the pioneer of online payments through digital wallets. PayPal offers a number of flexible plans to support both individual users and businesses. Here’s what users can do:

• Set up a business account for free. There are specific fees per transaction for business accounts.
• Subscribe to PayPal by customizing their own subscription plan. Businesses can add all their desired features to the plan, be charged accordingly.
• Buy additional PayPal services such as Pay Later Service, and Virtual Terminal which works like an online card reader.

PayPal offers support to all the major currencies from 200+ merchant locations across the continents. It supports Bitcoin and Ethereum in select regions too. PayPal accepts payments from PayPal accounts, debit and credit cards, e-wallets, and mobile payments.

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How PayPal handles Recurring Payments:

PayPal allows merchants to charge customers at regular intervals without the customer needing to log in to their PayPal account each time. The customer is charged automatically, and their payment is securely stored. With PayPal, you can leave your worries about failed payments aside as it handles them with retries. Additionally, it sends payment reminders and receipts for your ease. To add an extra layer of trust, it offers features like integrated dispute resolution and PayPal Purchase Protection.

PayPal Fees and Pricing:

Monthly account fee: starts at $0

Account upgrade option: $30

Online transaction fee: 2.29% + $0.090 (QR) to 3.40% + $0.49

Cross-border fee: 1.5%

Invoicing/recurring billing: +$14.99 for invoicing, +$10-$30 for recurring billing

ACH/E-checks: 0.8%, $5 cap (ACH). 3.49% + 49 cents, $300 cap (E-check)

Chargeback fee: $15 (PayPal checkouts). $20 (Guest checkouts)

Same-day funding: 1.5%

PayPal Advantages

Salient features of PayPal include:

• Automates recurring billing and payment processing with merchant account
• Offers Aggregated Accounts
• Offers PayPal Virtual Terminal
• Micropayments to receive small payments for small businesses
• Offers discounts for large-volume clients
• Supports cryptocurrency
• Easy and instant setup
• Affordable processing fee
• Global reach
• Safe and quick payouts
• Ensured PCI-DSS compliance
• PayPal Purchase Protection to cover customers from fraudulent merchandise
• Quick Account Approval and Faster Payout

PayPal Limitations

PayPal has limitations, too. It has more limitations than many of its contemporary payment gateways offering services for online recurring payment processing. Some of these are:

• PayPal is not considered ideal for many of the subscriptions or SaaS businesses recurring billing and payment processing
• PayPal is expensive than many other payment gateways
• Charges more for international transactions
• Accepts international payments through PayPal accounts only
• Complex setup fee
• PayPal supports only 25 currencies

Stripe—The Most Secure Recurring Payment Services Provider

Automating the recurring payment processing using Stripe is one of the most trusted and credible ways for online payment processing. Stripe accepts more than a hundred and fifty currencies and supports multiple online payment methods, regions, and businesses.

A significant percentage of US citizens use it for making online purchases. Merchants prefer Stripe due to its well-designed APIs that offer innovative features. Stripe opens the integration and customization avenues for subscription businesses, tech startups, SaaS, rentals, and other IoT-based ventures. It aids in boosting their recurring revenue and accepts more recurring payments without any friction in the online payment processing.

Noticeably, Stripe works best with eCommerce subscription businesses. It can integrate with almost any eCommerce platform to tap recurring transactions in no time, with as much customization as you want.

This payment services provider facilitates larger subscription-based businesses, complex SaaS products, and marketplaces. Some of Stripe’s most high-profile clients include bigwigs like Target, Lyft, Pinterest, Kickstarter, and others.

Stripe offers no monthly fee for the account and charges an extremely affordable and industry-specific transaction fee for online recurring payments. With Stripe, no strings are attached, and merchants can easily terminate the account at any point if they want to switch or cancel the account for any reason.

Unlike many other payment gateways, Stripe allows merchants to migrate the data if they want.

How Stripe Handles Recurring Payments:

With Stripe Billing, you can easily automate your recurring billing, generate, and send invoices based on the subscription schedule selected, e.g., weekly, monthly, or annually. Furthermore, it has built-in support for usage-based and tiered billing. Businesses get access to real-time analytics for dunning management and churn reduction. Stripe uses smart logic, backed by machine learning, to timely process retry attempts, allowing businesses to take charge of the retry logic. It utilizes tokenization to collect sensitive card or account details and securely stores data.

Stripe Fees and Pricing:

Monthly account fee: starts at $0

Account upgrade option: $10 for custom domain

Online transaction fee: 2.9% + $0.30 or custom interchange-plus rate

Cross-border fee: 1.5%

Invoicing/recurring billing: +0.4-0.7%

ACH/E-checks: 0.8%, $5 cap (ACH)

Chargeback fee: $15

Same-day funding: 1.5%

Stripe Advantages

Here are the most prominent features of Stripe for seamless recurring payment processing:

• Automated recurring payments directly into the merchant account
• PCI-DSS Compliance with encryption and tokenization
• Protection against chargebacks
• Supports more than 135 currencies from 45-50+ merchant locations, including the US, UK, Canada, Australia, Europe, Australia, India, China, and more
• Accepts international recurring payments through 50+ payment methods like credit and debit cards, digital wallets, most notably, mobile wallets like Android Pay, Apple Pay, 3D Secure, ACH, Google Pay, AliPay, etc.
• First payout in 7-14 days
• Adds a layer of security with an anti-fraud system that combines machine learning with a customizable ruleset
• Data Migration Assistance to import data to switch to another payment processing services provider
• Refunds the chargeback fee in case the dispute is over in the merchant’s favor
• Supports custom SQL queries

Stripe Limitations

Though Stripe is extremely popular in online payment processing for B2B, it has some drawbacks as well. Some of the prominent ones are:

• No PayPal Support—Subscription merchants are required to integrate another payment gateway or PayPal itself to process PayPal payments.
• Strict background checks for account approval
• Less popular for B2C
• Processing charges may fluctuate based on locations and can inflict more
• No Real-Time customer support

Authorize.Net—The Most Affordable Recurring Payment Services Provider

Amongst the most widely used payment gateways is Authorize.Net, which facilitates merchants around the globe to receive recurring payments directly into their accounts.

Authorize.Net, part of Visa, is trusted by hundreds of thousands of merchants globally. Each year, Authorize.Net processes over $149 billion worth of transactions. It is specifically used to enable merchants to receive online recurring payments set up through their bank accounts.

Authorize.Net works with almost every merchant account and payment processor. For merchants who have a payment infrastructure in place and are looking for a payment gateway that can accept online payments, Authorize.Net is a well-suited option.

One of the most notable features of this payment services provider is that it caters to businesses of all sizes and types. The industries it serves include eCommerce, subscription market, rentals, leasing, SaaS, cloud computing, data centers, telecom, power managed services, and more.

How Authorize.Net Handles Recurring Payments:

Authorize.Net handles recurring payments through its feature called Automated Recurring Billing (ARB). This can be set up by merchants in minutes, allowing them to automate billing for subscriptions and repeat customers with multiple scheduling options. Authorize.Net administers a Customer Information Manager (CIM) tool that stores customer payment data securely with tokenization. Moreover, it updates expired cards to avoid declines and orchestrate a smooth workflow.

Authorize.Net Fees and Pricing:

Setup fee: $0

Fee per card transaction: 2.9% + $0.30 (Authorize.net all-in-one). 10 cents per transaction, daily batch fee (Authorize.net payment gateway only)

Monthly gateway: $25

Chargeback fee: $25

International fee: 1.5%

Authorize.Net Advantages

Below are some of the most highlighted features of Authorize.Net as a payment gateway to process recurring payments:

• Automated and instant recurring payment processing directly into the merchant’s account
• PCI-DSS compliant payment gateway
• Protects against chargebacks with an advanced fraud detection suite that uses 13 configurable fraud filters to identify, manage, and prevent fraudulent transactions
• Offers an all-in-one third-party merchant account with payment gateway service
• Charges industry-specific transaction fee, i.e., 2.9% plus $.30 per transaction.
• Processes online payments from hundreds of merchant locations, including the United States, Canada, the United Kingdom, Europe, and Australia
• Offers account updater feature to keep customers’ credit card information up-to-date, diminishing recurring payment hassles and involuntary churn
• Accepts recurring payments from all major credit cards, debit cards, Apple Pay, PayPal, and more
• Faster processing than several other prominent payment gateways

Authorize.Net Limitations

Authorize.Net is not as preferred a payment gateway for recurring payments as others due to the following limitations:

• Does not offer a non-bank merchant account
• Monthly charges up to $25 when signed up with a merchant account
• Charges a $49 set-up fee
• Supports merchant accounts primarily from regions like the US, UK, Canada, Australia, and Europe

PayPal vs. Stripe vs. Authorize.Net—A Quick Comparison

Which Payment Gateway Should You Choose?

So, who’s the winner? Well, this answer is subjective. Whether you want to go for multiple payment options to open up horizons for your customers, or let them stay in one place by choosing from either of the three, this decision is entirely yours.

Payment service providers are the backbone of businesses, and a well-chosen payment gateway with the optimal features can do wonders for you. Choosing from the top three payment service providers can flip the script for your organization, provided that you select the one/s in tandem with your business needs.

With SubscriptionFlow, integration of all three is made possible, so your payment service integration choice becomes fairly straightforward.

Automate Instant and Secure Recurring Payment Processing with SubscriptionFlow

SubscriptionFlow is an automated recurring billing and subscription management platform that offers automated payment processing services. It allows for integration with PayPal, Stripe, Braintree, Authorize.Net, and others, helping subscription service providers and SaaS vendors to offer the best checkout experience to their customers. SubscriptionFlow leverages multi-currency options, catering to a wide customer base across regions.

In addition, SubscriptionFlow is a highly customizable, fast, secure, and flexible SaaS platform that automates subscriptions or recurring billing. It streamlines other revenue operations by integrating seamlessly with your sales, marketing, support, finance, and communications tools.

To learn more about recurring billing and payment processing for your subscription or SaaS businesses, have a chat with our subscription management ninjas. You’ll get the most personalized and exclusively tailored subscription billing, customer management, recurring payment processing, and recurring revenue management solutions.