What’s Best for FX Web Shops? Stripe vs. PayPal Review

2013/05/22

Madrid Edifice

What do you need to share sound on your own site?

In my e-Book, Selling Creative Sound, I explained that a Web shop allows customers to do the following:

  • Search for sounds using keywords and categories.
  • Hear sound previews.
  • Create and modify accounts.
  • Add or remove sounds from a virtual shopping cart or basket.
  • Send payment information in a secure manner.
  • Exchange payment for permission to use a sound.
  • Securely download a copy of a sound file.

That is fairly obvious since we’ve all been shopping online for years now. From a shop owner’s perspective, however, it isn’t as easy as it looks. Selling Creative Sound explains how to share sounds on a partner’s site. If you want to share sound from your own home on the Web, you’ll need to figure out how to jump through each of those hoops.

The most vital, yet difficult, roles are sending payment information in a secure manner and exchanging payment for permission to use a sound.

Are you thinking about starting a sound effects store? Have one already? In today’s post I’ll explain what happens behind the scenes. I’ll also explore two options for getting this done: PayPal, and Stripe.

A Tricky Exchange

Exchanging payment for sound effects is difficult for two reasons: security, and authentication. Both are essential to complete a transaction, but this is difficult to do well.

Before we look at options, I’ll share a bit of background on these crucial steps of sharing sound.

Authentication

Before sounds are delivered, a shop needs to be paid, of course. The majority of these payments are either by credit card, or from digital online accounts.

As far as authentication is concerned, it doesn’t really matter where the money comes from. Instead, authentication ensures two things:

  • The shopper has funds to cover the bill.
  • The shopper is who they say they are.

The first part is relatively easy. Authentication checks the credit card or account balance. If the shopper has the money, they receive the sound, and the shop is paid.

The second part, identifying the payer, is trickier. Why? The first reason is technical. Let’s say two people are shopping at once. Authentication ensures that their identities and transactions aren’t jumbled as they travel through the store, and receive their sounds.

Authentication also prevents fraud. It catches mismatched card numbers, swapped out emails or usernames, and so on. It checks against blacklisted credit card numbers. It watches for unusual activity, such as a Canadian’s credit card number suddenly used on the other side of the globe, or a PayPal purchase attempted from an atypical IP address.

Security

Security ensures that the entire process is private. Typical Web traffic is easily intercepted, after all. Transmitting a shopper’s identity and their payment method must be confidential.

To do this, a Web shop uses encryption. SSL, or secure sockets layer, does this by creating a temporary, private tube of communication between the shopper and the store. Encryption uses complex math to mash up private information on the customer’s end, then unravel it properly at the other.

A shop doesn’t use SSL all the time, however, because it slows Web browsing. It’s usually just used in the account and checkout sections of a Web store.

How Web Shops Accept Payments

As you can imagine, this is a delicate process. It requires sophisticated code. It is easily derailed without care. This also must happen in less than three seconds. How can any of us possibly do this ourselves?

Well, most of us can’t. Instead, a Web shop uses a broker of sorts, known as a payment gateway. The gateway performs authentication for you in return for a small piece of a successful transaction (around 3%, and sometimes a monthly fee). They take the customer’s payment info, and, with blistering speed, ask the bank if the information is good. They then return the answer to the Web shop. Depending on the answer, the store will approve or decline the transaction.

Authorize.net

Old-School Payment Gateways

For a long time payment gateways were tough to join. Only established businesses were able to use them. The reason?

Trust. A payment gateway needed to know a business was authentic. I’m sure that smaller shops with few sales weren’t worth their while, either. The gateways demand large monthly fees, regardless of sales. Adding gateways required complex code. As a result, processing payments were beyond small Web shops.

One of the largest payment gateways is authorize.net (now owned by Visa).

PayPal Logo Small

PayPal.com Arrives

Transactions on the Web changed dramatically as PayPal.com gained prominence. You’re likely familiar with it. PayPal.com allows anyone to upload funds from typical banks into a digital account. Then, they can buy from sites, or receive cash themselves.

PayPal’s significance was immense. Why? Well, anyone could join. You didn’t need to set up a specialized merchant account at your bank just to accept credit card payments. That meant that billions of people could send cash, or receive it. And it meant that anyone could begin selling securely online. Accepting payments was no longer reserved for physical stores. PayPal was responsible for a major surge in selling on the Web, also known as e-commerce.

PayPal is fantastic because:

  • PayPal button

    You can use payment buttons on your site. Simply create a product name and price for each of your sound bundles on PayPal.com, fetch the resulting code, and dump it on your pages. This creates a button image, liked to PayPal. Fans click this button, the pack is added to their cart, and they pay via the PayPal.com site. The brilliance is that it requires no databases, shopping carts, or deep coding skill to sell sound on the Web. Anyone can do it.

  • PayPal isn’t limited to online payments. It can also accept credit cards, too. Sure, shoppers were whisked away to a PayPal page to pay. However, this avoided the need to create those expensive and paperwork-heavy merchant accounts.

  • It is simple, and secure. PayPal works well, has tough security, and is trusted.

  • It is an industry standard. PayPal is known worldwide. You can create an account in dozens of countries.

To compete, old-school payment gateways have loosened their restrictions. They remain popular only with larger sites with broad catalogs and thousands of sales, though.

Problems With PayPal

Changes occurred as PayPal.com grew. It was acquired by eBay. Innovation slowed. Gradually, frustrated voices emerged. Why?

There are five common complaints about PayPal:

  • It is complicated. PayPal offers PayPal Standard, Payments Pro, PayFlow Link, PayFlow Pro, and PayPal Digital Goods. You can sign up for a personal, premier, or business account. There are micropayment and donation accounts. Confused yet? Me too. Good luck trying to find anything on their site, or the entire Internet, to tell these apart simply.

    The differences lie mainly in which payments you can accept, whether you can include your own branding, and where you pay: on their site, or yours. Of course, each of these involves larger monthly fees and broader slices from each sale.

  • Draconian bureaucracy. PayPal will lock your account if they see odd transactions. They do this to prevent fraud. Admittedly, PayPal’s security is exceptional. However, the problem is that they suspend accounts unilaterally. The merchant is shut out of this process, as if they are immediately assumed to be complicit.

    The there are horror stories of honest people being suspended for puzzling reasons. Unlocking an account is exceptionally hard, especially since it is difficult to engage PayPal’s customer service deeply. When problems occur, users report feeling powerless appealing to a corporate behemoth.

  • PayPal Profile

    Your PayPal profile. Ugh.

    Poor administration. The PayPal website and admin tools haven’t received an update in years. The site is confusing. Information is buried. It’s difficult to find details. Answers are non-existent, or complicated. Just try to find a simple explanation of their products.

  • Poor design. A quibble of my own. The site has corporate feel straight from 1997. Navigating the site is sluggish. The design is inconsistent, messy, and confusing.

    PayPal Account Details

    Outdated design.

  • Fees. PayPal’s fee structure is complex. Every credit card transaction has fees, and that’s standard for any payment gateway. However, there are many other fees. You are charged for certain account withdrawals, and sending cash to others. Currency exchange rates are unimpressive.

Stripe Logo Small

A New Option

A few years ago a new option appeared, called Stripe. It was created to make accepting payments effortless. How?

  • Accounts are simple. You can set up a full account in minutes. You’re not introduced to graduated account types, each with increasing fees, like PayPal. Your account has all abilities unlocked right away.

  • Stripe Dashboard

    Easy on the eyes.

    The design is slick. The code, Stripe website, and tools are all beautifully designed, and a pleasure to use. The dashboard, payment view, and activity graphs are attractive, and instantly understandable. This is a refreshing change from PayPal’s dry charts.

  • Simple, reasonable fees. Other gateways charge processing, chargeback, or transfer fees, in additional to monthly fees. Not Stripe. It’s the standard 2.9% + $0.30 a transaction. No other charges, ever.

  • Test mode. Want to test transactions before you go live? That’s built into Stripe. Simple flick the “Test” switch on the dashboard, then run through purchases on your shop. You can see how customers will travel through your store without the hassle of setting up trial credit cards that other gateways require.

  • Seamless credit card payments. Accepting payments via credit card usually involves hopping temporarily to another site. Integrating this seamlessly within your site requires advanced plans and their monthly fees. Not Stripe. It works smoothly, and is lightning-fast.

  • Stripe APISimple API. Traditional payment gateways are difficult to code into software. Stripe allows communication between software and your account using transparent, basic code with a simple API. Not a coder? That’s OK. A simple API means that other developers can build Stripe integration quickly and easily. As a result, Stripe plugins are popping up everywhere. (PayPal has recently responded by stepping up their game.)

Stripe’s popularity is surging. Developers love the API. Former PayPal co-founders Max Levchin and Elon Musk have invested in the company.

I like how easy it is to begin. I linked Stripe with my shop in ten seconds. The Stripe site is a pleasure to use.

Surely there must be some downsides, right?

  • Code is required. PayPal’s button feature requires only HTML. It’s simple to add any sound bundle to a site. (Deliver the audio is another matter.) Stripe requires inserting code that, while well-structured, is beyond most of our skills. However, its simple API allows other developers to release plug-ins for us to use.

  • It’s not a replacement for a digital bank. PayPal allows you to store funds, and pay for goods digitally. Stripe only allows credit card processing. To get around this, most shops use a hybrid approach: they offer both PayPal and credit card payment (via Stripe) options at checkout.

  • It is spreading slowly. Businesses can accept payments from anywhere, but only people with a Canadian or American bank accounts can sign up to receive cash. Western Europe is reportedly next on the list.

Payment Gateways

Other Options

There are other gateways you can choose.

WorldPay, Skrill, and 2checkout are similar to PayPal. Braintree is similar to Stripe in its simplicity and aims. It’s available to the UK, Europe, Canada, the US, and Australia.

Amazon Payments is an interesting concept. Customers checkout with merely their Amazon account login. There’s no need to add card numbers and addresses. This is all fetched from Amazon behind the scenes. It’s only available in the US, though. Google Wallet (formerly Google Checkout) is similar, and has shifted its focus to payments from mobile phones at physical places.

My Choice

I have used PayPal Payments Pro for years. It was deeply embedded in the Airborne Sound website, and also here. It’s solid, and bulletproof. I’ve only lately begun using Stripe.

However, my experience with Stripe was so dramatically superior that I’ve dropped PayPal for Stripe. Stripe is so much simpler, cheaper, and pleasurable to use. I save on monthly fees. I also sidestep the frustrating experience of shoehorning PayPal into the site, and the lifeless admin and design.

I still offer PayPal as an option if people want to pay with their PayPal balance. However, the heavy lifting is all done by Stripe.

Your Choice

Which do you choose?

You won’t be deleting your PayPal.com account any time soon. PayPal’s ability to store a digital balance and pay with it is unmatched.

However, if you have a store and want to accept credit cards, Stripe is the clear choice. It’s cheaper, it slips simply into your site, and is a pleasure to use. It is more professional. There are no jarring, temporary visits to a PayPal page to pay with a credit card. Shoppers stay cozily within your own site.

If you’re not a code wizard, you’ll need a Stripe plugin for your store, of course. However, these are available for most major carts already.

And don’t forget your choice may be limited by your country. Some gateways work better with banks from specific countries.

Questions about selling sound? Opinions about payment gateways? Leave comments below, or contact me.





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