Dropshipping is one of the easiest ways to make money as an e-commerce merchant. This business model involves selling products online without an inventory.
You simply place and fulfill orders on behalf of customers from third-party suppliers through your online store before the manufacturer ships the product directly to the client.
What makes dropshipping profitable is that you get to set your own prices for all the products on your website. However, for you to accept and process payments, you need to select a payment gateway that supports dropshipping.
The internet is home to dozens of different payment providers, but not all of them allow dropshipping. Stripe and PayPal have emerged as the top two leading payment processors that support dropping.
Here is a breakdown of these leading payment gateways.
Stripe Vs. PayPal Compared
Stripe is a leading payment gateway tailored for online stores, e-commerce websites, and mobile applications. The Irish-American payment provider has been around since 2009 and it has its headquarters in Dublin and San Francisco.
At the time of writing, Stripe’s financial services are available in 44 countries only, but plans are already underway to expand to other regions as well.
PayPal is an online payment service that offers payment solutions to individuals and businesses alike. The payment gateway is one of the oldest in the industry and it has been around since 1998 with its headquarters in San Jose, California.
Ever since its launch, PayPal has expanded in leaps and bounds to become a household name in the financial services space. It has a presence in over 203 countries around the globe, making it the most used online payment provider.
The main differences between Stripe and PayPal revolve around availability, financial services offered, recurring bills, chargeback fees, and processing times.
While Stripe services are only available in 44 countries, PayPal operates in over 200 countries around the world. This means PayPal has a greater reach and you can accept and process payments from many regions globally.
Then again, Stripe does not support the transfer of money from one Stripe account to another. You cannot also send money directly to friends or loved ones or make donations to non-profit organizations.
This is not the case with PayPal, which allows for money transfers between individual accounts as well as business accounts.
Both Stripe and PayPal accept online invoices and recurring bills. However, Stripe charges a small fee of 0.5% once your recurring revenue reaches $1million.
PayPal does not charge anything for online invoicing no matter how much revenue you generate.
The timelines when it comes to processing of transactions also vary. Stripe processes payments for 7 to 14 days, but only for first-time payouts. Subsequent payouts take about 2 days. PayPal to PayPal transfers are almost instant while payout to bank accounts takes between 2 and 4 days.
In some instances, a buyer may request a refund in case the product does not meet their expectations. When dealing with refunds, Stripe will charge you $15 while PayPal charges $20 on chargebacks.
What is Stripe all about?
Stripe is an online payment processing platform designed for internet businesses. It allows customers to make payments easily and conveniently when buying goods or services from an online store.
Customers can use their credit cards when purchasing products and Stripe will essentially transfer the money from the buyer’s account into the merchant’s account.
Although Stripe has a foothold in only 44 countries, the company has proven to be a reliable payment gateway for many online businesses.
Big brands like Shopify, Amazon and Booking.com use Stripe as one of their payment processing options.
The best part is that Stripe offers its subscribers (store owners) a handful of tools that they can use to customize their payment options.
You can integrate Stripe with your Shopify or Woocommerce store if you are using them for dropshipping.
What is PayPal all about?
PayPal is a leading online payment service that allows for the transfer of money between individuals and businesses over a secure internet account. It facilitates payments between different entities through online money transfers.
The payment provider allows individuals to pay for goods and services, send money to friends and loved ones, or make donations to charity or non-profit organizations without disclosing their financial information.
PayPal is a household name in the financial sector and it has a presence in over 200 countries and regions.
It is therefore not surprising that the majority of online stores and e-commerce websites use PayPal to accept and process payments from customers and other business associates.
Which payment method is best for dropshipping?
From a personal experience, Stripe is much better than PayPal when it comes to dropshipping.
Here are some reasons why:
- Stripe easily allows you to accept different type of payments including Credit Cards, Google Pay, Ali Pay, and even Apple Pay for Apple users when they use Safari.
- Stripe delivers your money, to your bank, much faster. This allows your to re-invest in your project. PayPal may hold it until you provide them with shipping details they make sure that the the customer received the order. This can be a downside of using PayPal since dropshipping has longer delivery periods.
- Stripe integrates easily with Shopify and WordPress. Use Stripe’s plugin along with WooCommerce to do all the work. Read Stripe Vs WooCommerce.
- Stripe has a very neat, intuitive mobile app that will help you track and check your balance.
- Stripe’s support is faster and you can get an agent to solve your problems through your email very easily. While, PayPal support takes much longer and it has to be through their website.
If you are located in Canada, check Stripe Vs. PayPal – in Canada.
However though, the best payment method for dropshipping still depends on your location, clientele, and the type of products you are selling.
You also need to consider factors such as availability, transaction fees, compatibility, expandability, and data portability. All these factors determine what will work best for your business.
As you already know by now, dropshipping works like any other online store. However, dropshippers do not have their own inventory. They act as intermediaries between manufacturers and buyers.
Choosing the right payment processor can help build trust between you and your customers, and ensure successful transactions.
Other options to consider:
There are dozens of different payment methods that support dropshipping. What might work for your business, may not necessarily work for another business.
Here is a list of popular payment gateways that allow dropshipping:
- Google Checkout
- Apple Pay
Once you establish a dropshipping store, you need to find a payment gateway that fits the needs of your business. Here are a few guidelines on how to go about it.
- Select a payment gateway that supports dropshipping
- Always choose a reputable payment service that is popular in your target country
- Ensure that the payment service is available in your country of operation
- Make sure that the transaction fees are reasonable
Does Stripe allow dropshipping?
Yes. Stripe is one of the few major payment gateways that support dropshipping. However, you must meet various requirements before you can register your dropshipping business with Stripe.
Firstly, your dropshipping store must operate in the USA, the UK, Canada, or any other country outside the Asia-Pacific region. Your dropshipping business must operate in one of the 44 countries where Stripe offers its services.
The reason why Stripe does not support businesses in Asia-Pacific countries is that the company considers most dropshippers from that region as high-risk traders given the numerous cases of chargebacks and online fraud cases witnessed in the past.
Stripe does not approve dropshipping businesses that sell certain products considered illegal or shady. You cannot use Stripe if you sell cellphones, sex toys, get-rich-quick eBooks, weapons, and drugs.
Does PayPal allow dropshipping?
Yes. PayPal allows dropshipping but the payment provider has very strict requirements for dropshippers. The payment processor tends to ban several dropshipping stores every day for failing to meet these requirements.
For you to dropship using PayPal, you must first register a business account with the payment provider.
The business account must have all the necessary documentation including your business name (name of online store), registered business number, and the latest credit card statements.
If PayPal receives numerous complaints and chargeback disputes concerning your account, then they are likely to suspend your account or ban your dropshipping business altogether.
How to use Stripe for dropshipping?
Setting up your dropshipping store is pretty simple. Keep in mind a few requirements before you setup your dropshipping with Stripe:
- Your business must be registered outside the Asia-Pacific region
- You must operate your business outside the Asia-Pacific region
- You must have a bank account in the country of operation
- You must have a registered business address
- Your business must have a legitimate phone number
Make sure that you do not sell prohibited products like alcohol, cellphones, weapons, pirated music, and counterfeit items. These items attract fraud and money laundering while others have high financial risks.
With that said, here are the steps on how to use Stripe for dropshipping:
- Setup your stope on WordPress or Shopify
- Set up a verified Stripe account
- Connect your bank account to Stripe
- Start selling
How to use PayPal for dropshipping?
As highlighted above, PayPal are a lot stricter when it comes to dropshipping. You must adhere to various strict guidelines to use PayPal for dropshipping. Here’s how you can use PayPal for your dropshipping business.
- Open a PayPal business account
- Provide appropriate business documentation
- Provide location and identity proof
- Provide proof of shipment
- Provide tracking information
- Sell quality products from reliable manufacturers
- Invest in customer service
It is clear that Stripe is the best payment gateway for Dropshipping as long as your store is operating outside the Asia-Pacific region. In comparison, PayPal is too strict and they tend to close or ban user accounts haphazardly without notice.
Stripe has multiple payment options and they support over 135 different currencies. Their transparent pricing is a great advantage for dropshippers and customers alike plus they have an excellent support team that works around the clock to attend to customer concerns and queries.