Do you think that choosing a payment processor comes down to pennies on the dollar? Think again. Payment processor fees from companies like Stripe, PayPal, and Square will add up over time. It’s especially true as you jump through all the hoops to scale your ecommerce business. The difference between 3.5% and 2.9% processing fee, for example, would add up to $6,000 for a company running with $1m+ in revenue.


“Amazon and retail ecommerce is a complicated business model because of inventory and the cash flow required to support it,” writes Cyndi Thomason at Practical Ecommerce. By choosing the right payment processor for your growth, you can remove the process from your list of worries.


OrderMetrics provides an accurate picture of how every decision affects your ecommerce profitability — from shipping costs to payment processing. But it’s not all numbers.


Check out the pros, cons and bottom line for each of the most popular ecommerce payment processor companies: Stripe, PayPal and Square.


Get to Know Ecommerce Payment Processor Companies

Stripe: Cost, Benefits, Drawbacks

Stripe is a digital first payment processing company founded in 2010 to complement the rapidly expanding ecommerce space.


“At the time Patrick [the cofounder] was working on several side projects and they debated why it was so difficult to accept payments on the web,” writes Derek Anderson. “They sought to solve the problem and see if it was possible to make it simple – really simple.”


With its APIs and dedication to a simple process, what benefits does Stripe have over other payment processors?

The Cost

For the most part, Stripe charges flat rates for processing credit and debit cards: 2.9% + 30 cents for each transaction. Though that isn’t necessarily a hard and fast rule — you can check out our tips for negotiating with Stripe in our Profit Guide. Chargebacks will run merchants $15.

The Benefits

Since Stripe was created specifically for developers, the major benefit is that the APIs are simple and straightforward to implement on your ecommerce store. The payment processor works well for international merchants as well, with multi-currency support and competitive international processing fees (1% on top of the 2.9%). Stripe also offers PCI compliance free of charge.

The Drawbacks

Working primarily as an API, Stripe isn’t exactly user-friendly for the novice. Rather than a plug and play option for a SquareSpace ecommerce site, Stripe is better suited to larger ecommerce businesses building their own platforms. Stripe also faces complaints of unexplained account suspension and unresponsive customer service.

PayPal: Cost, Benefits, Drawbacks

Out of the three payment processors listed here, PayPal is by far the one with the longest history with ecommerce. Founded 20 years ago, PayPal now has nearly 300 million active consumer accounts and supports 17 million merchants.


With this kind of pull, what can PayPal offer ecommerce merchants — and where does it come up short?

The Cost

PayPal fees are entirely built on transactions, with no annual fee, cancellation fee or PCI compliance fee. At first blush, pricing is equal to Stripe: 2.9% + 30 cents per transaction. But this pricing varies depending on the type of transaction — swiped in-store transactions run 2.7% while keyed-in in-store transactions run 3.5%. International fees create an additional 1.5% fee, and chargebacks see a $20 fee.

The Benefits

PayPal has the unique advantage of being in the game the longest. The site and the integration si trusted by consumers, and merchants like the flat-rate pricing — though that can be difficult to negotiate. Since PayPal works as both an all-in-one payment system and an account for incoming and outgoing payments, the payment processor may work well for vendors with low volume and revenue.

The Drawbacks

PayPal’s fees are consistent, but they are relatively steep, especially since merchants are rarely able to negotiate them down. Like Stripe, merchants may face unexplained account freezes without notice. On top of it all, customer service at PayPal is spotty at best.

Square: Cost, Benefits, Drawbacks

Square works as both an online payment processor for ecommerce merchants and a mobile payment option for retail and multichannel brands. While it started as a simple dongle for accepting credit card payments through a smartphone, Square has evolved into something much bigger.


“Square has come a long way from being an mPOS solution for cash-based glass blowers and farmers market purveyors,” says the PYMNTS blog. Square now offers business loans and e-commerce payment processing solutions — and now sellers with $500k or more in annual volume make up a good chunk of the processor’s income.


With the evolution Square has seen since its inception as an idea in Twitter CEO Jack Dorsey’s brain, what makes it a unique and potentially better solution for ecommerce?

The Cost

Square offers a lot of different services, and almost none of them have an additional cost beyond the processing fee. The fee sits at the same rate as the other two payment processors: 2.9% + 30 cents per transaction.

The Benefits

Square offers a wide range of options for a wide audience. Ecommerce merchants can choose to setup a unique and mobile friendly storefront, integrate Square with any number of ecommerce platforms or work with the software’s API for a custom solution. Users can customize the gateway with shipping costs, taxes, form items and more. On top of all that, Square supports mobile credit card and debit card payments with its hardware.

The Drawbacks

Merchants may find their accounts suspended after initial sign up if they are deemed ‘high-risk’ by Square’s underwriters. Square also relies mostly on its self-serve help resources, so phone support is relatively limited.

The Bottom Line is Your Bottom Line

No one payment processor will be the exact right fit for every ecommerce brand. Instead, consider your context. If you’re combining ecommerce sales with physical sales, maybe you want Square to bridge that gap. If you’re looking for flexibility in fees, you could work with Stripe. And if you want stability for a rapidly expanding e-commerce business, Paypal could be what you’re looking for.


Whatever the case, remember to factor payment processing fees into your profitability assessment. When looking at profitability, look at your per-order net profit after all costs are considered — this includes shipping, ad spend, discounts, refunds and (yes) transaction fees. including shipping, ad spend, transaction fees, discounts, refunds and more.


Remember: little tweaks can turn into a big difference in profits over the long term.


If you need help managing the profitability of your ecommerce business, we can help. Give us a call today.

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