If you’re launching your first e-commerce website, one of the most critical decisions you’ll make is choosing how customers will pay you. The payment processor you select affects everything from how quickly you can launch to how you handle disputes, and there’s no universal “right answer.”
John Hofmann, founder of Fusion Marketing, has been building e-commerce websites since 2009. Through working with countless clients launching online stores, he’s developed a practical perspective on the three major players in payment processing: PayPal Business, Stripe, and Authorize.net.
“I usually tell clients to sign up for PayPal to get their website live, and then as soon as it goes live they can work on getting Stripe set up,” John explains. “PayPal is a tiny bit faster for that go-to-live.”
This strategy reflects an important reality – you don’t have to pick just one payment processor. Many successful e-commerce businesses offer multiple payment options to reduce friction and accommodate different customer preferences.
PayPal Business: Built-In Trust With a Catch
For many new business owners, PayPal Business feels like the safe choice. The platform gained massive popularity during eBay’s rise, and that brand recognition translates directly into customer confidence.
“Somebody that’s a little bit older that is used to buying things with PayPal is going to be more comfortable making a purchase from a strange website using PayPal,” John points out. “They already have that trust and there’s a certain level of security because if things go wrong and it turns out that it’s a scam, you know that PayPal is going to cover your butt.”
PayPal offers another advantage for cautious online shoppers – they never have to share their credit card information with your business. They’re paying through PayPal’s secure system, which adds a layer of protection that resonates with security-conscious consumers.
The platform is also straightforward to implement. Most e-commerce platforms have built-in PayPal integration that can be activated quickly, making it an excellent choice for businesses that need to launch fast.
“But there’s a significant consideration that new business owners need to understand about PayPal’s dispute resolution process.”
“PayPal has a tendency to side with consumers whenever there are disputes,” John cautions. “Even if you are in the right, PayPal has a reputation for ultimately ruling in favor of the customer.”
When a customer files a dispute with PayPal, the funds are placed on hold while both parties work toward a resolution. You have 20 days to reach an agreement with the buyer. If that doesn’t happen, the dispute escalates to a claim, and PayPal investigates to make a final decision.
The concern for new business owners isn’t that refunds happen instantly – it’s that when the investigation concludes, PayPal’s track record shows they often rule in the customer’s favor, even in cases where the merchant has provided evidence of proper fulfillment. A quick search online reveals business owners across various forums and social media platforms sharing frustrations about losing disputes despite having tracking information, photos, or other documentation supporting their case.
Stripe: Modern, Flexible, and Widely Trusted
Stripe has become the payment processor of choice for many modern e-commerce businesses, and for good reason. Major brands like Amazon, Lyft, Shopify, and DoorDash use it because implementation is straightforward, and it offers the kind of flexibility that growing businesses need.
Like PayPal, Stripe integrates easily with most e-commerce platforms. The setup process is comparable in complexity, meaning you can get up and running quickly without extensive technical knowledge.
Where Stripe differs is in how it handles payments and disputes. Because customers pay directly with credit cards through Stripe rather than through a separate account system like PayPal, the dispute resolution process follows standard credit card chargeback procedures rather than PayPal’s internal system.
“I think that Stripe is fantastic,” John says. “It’s easy to implement. A lot of big name brands use it.”
But direct credit card processing comes with its own considerations. “In my experience, it’s a little bit more susceptible to fraud because anybody with a stolen credit card can try to make a test purchase off of your website,” John explains.
This doesn’t mean Stripe’s security is weak – quite the opposite. “We’ve had lots of bot attacks and Stripe has never let any of them get through,” John shares from Fusion’s experience. “For any of the companies that we have worked with, Stripe’s security has always done its job.”
The fraud concern is really about the nature of credit card payments themselves. When credit card information gets stolen or leaked, criminals send out bots to test if the cards are still active by attempting small purchases on various websites. This is a risk inherent to any credit card processing system, not a Stripe-specific vulnerability.
If you do find yourself targeted by these kinds of attacks, there are protective measures you can implement. “You can implement different security measures on the website, like a firewall, and use CAPTCHA,” John advises. “Realistically, there isn’t a whole lot that you need to worry about. But if you do find yourself being targeted by one of these, you’re going to want to work with your developer so that they can tighten down the bolts.”
Stripe’s built-in protections flag potentially fraudulent transactions automatically, and most new e-commerce businesses never encounter serious fraud issues.
Authorize.net: The Brick-and-Mortar Bridge
Authorize.net occupies a different niche in the payment processing landscape. Rather than being a complete payment solution like PayPal or Stripe, it acts as a payment gateway – a connector between your website and your existing merchant account.
“If you already have a brick-and-mortar location and you already take credit cards and you want to integrate and start selling your stuff online, Authorize.net would be something that you could look into,” John explains.
This makes Authorize.net particularly attractive for established businesses expanding into e-commerce. If you already have a relationship with a credit card processor for your physical location, Authorize.net can bridge that existing infrastructure to your online store. Your rates will depend on your current credit card processor relationship rather than a standard platform fee.
John recommends reaching out to trusted merchant services providers for guidance on this route. “Sean Carney from PC Band Card has always been amazing and willing to look at credit card statements for our clients,” he shares.
The trade-off with Authorize.net is complexity. “The downside is it’s usually a little bit more clunky to set up and less straightforward than Stripe or PayPal,” John notes. “So you might end up incurring some additional development fees if you go that route.”
For a brand-new business without existing merchant services, this added complexity and cost may not be worthwhile. But for established businesses, the ability to leverage existing relationships and potentially better rates can make it an attractive option.
The Money Question: Transaction Fees
One of the first questions new business owners ask is about costs. The good news is that transaction fees across these platforms are remarkably similar.
“At the time of writing, the industry standard is going to be like 2.9%,” John explains. “PayPal charges you just about the same; they charge you a few pennies for the actual transaction. I think it’s 30 cents. That’s really the industry standard for standard payment processing.”
The typical fee structure you’ll encounter is 2.9% + $0.30 per transaction across both PayPal and Stripe. Authorize.net’s fees will vary based on your merchant account, but you’ll generally be in the same ballpark.
This means your decision shouldn’t be driven primarily by cost. The differences in dispute handling, customer perception, and implementation complexity matter more than the small variations in fees you might encounter.
Customer Experience Matters
Beyond the backend considerations of fees and fraud protection, how your customers experience the checkout process can significantly impact your conversion rates.
“I think it depends on the consumer, right?” John observes. Different demographics have different comfort levels with various payment methods.
Older consumers who grew up using PayPal for eBay purchases may feel more secure seeing that familiar button at checkout. They know PayPal will protect them if something goes wrong, and they appreciate not having to enter their credit card information on an unfamiliar website.
Younger consumers or those without existing PayPal accounts may prefer the streamlined experience of entering their credit card directly. They don’t want to create yet another account just to make a purchase, and they’re generally comfortable with standard credit card processing.
This is why John’s recommendation to offer both PayPal and Stripe makes practical sense. You’re not limiting your potential customers based on their payment preferences. Someone ready to buy shouldn’t bounce because you only offer their second-choice payment method.
Making Your Decision
So which payment processor should you choose? The answer depends on your specific situation:
Choose PayPal Business if:
- You need to launch quickly with minimal setup
- Your target customers are older or particularly security-conscious
- You’re comfortable with customer-friendly dispute resolution
- You want immediate brand recognition and trust
Choose Stripe if:
- You want a modern, flexible payment solution
- You’re comfortable with standard credit card processing
- You plan to scale and need robust developer tools
- You prefer standard chargeback procedures over PayPal’s system
Choose Authorize.net if:
- You already have a brick-and-mortar business with existing merchant services
- You want to leverage your current credit card processor relationship
- You have the budget for potentially higher development costs
- You value the continuity of working with your existing financial partners
Or choose multiple options to accommodate different customer preferences and reduce friction in your checkout process.
The transaction fees are comparable enough that they shouldn’t be your deciding factor. Focus instead on your customers’ preferences, your risk tolerance for disputes, and how quickly you need to launch.
And remember John’s practical advice: start with PayPal to get live quickly, then add Stripe once you’re up and running. You don’t have to figure everything out perfectly before launch – you can evolve your payment processing as your business grows and you better understand your customers’ needs.
