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Written by Catherine Pearson Content Writer
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17 Jun 2019  |  Frankenstack

Handling Online Payment Processing: The Alternatives to PayPal

5 minute read

For a long time, PayPal has reigned supreme. Customers benefit from a single sign-in to securely handle most online payment transactions worldwide, while businesses have a quick, no-contract solution to start receiving money right away. Since its conception, its promise to eliminate the hassle of card transactions has made it one of the biggest and most widely used payment processors. But is it still the best and most cost-effective option? Let’s take a look at the alternatives.

Why PayPal is so popular

Since it was founded in 1998, PayPal has grown to become the most widely accepted online payment processor amongst North American retailers. As one of the first companies to simplify payments online for both customers and businesses, it has become a name of repute that shoppers and sellers alike trust. According to, PayPal processed 9.9 billion payment transactions last year, with a payment volume of over $578 billion.

PayPal is a very attractive ‘plug in and play’ option for businesses. New businesses can set up a PayPal account in no time at all by just linking their bank account - there’s no need to have a merchant account in place. The prospect of getting started right away is hugely appealing and it can be tempting to stick with the devil you know once you’re set up, especially since ‘PayPal Payments Standard’ (as opposed to the ‘Pro’ version) is free. Invoices are easy to create and, without a contract, there’s no termination fee if you decide you want to move on.

Why you should consider other options

PayPal was acquired by eBay in 2002 for $1.5 billion and has since been the default payment option for the online auction giant. However, all good things must come to an end. After eBay spun off PayPal to become a separate publicly traded company in 2015, the end of the pair’s relationship came for PayPal early last year when eBay announced that it was leaving PayPal in favour of the smaller payment processor Adyen.

With eBay citing the desire to take control over the “critical payment experience” and give more payment options to eBay shoppers (one of which will remain PayPal), it’s clear that PayPal is no longer head and shoulders above its competition. It may be time for your company to consider what you’re getting from your PayPal experience… and if a different solution model altogether could bring you and your customers more value.

It isn't a flawless experience…

The downsides to using PayPal

  • It may be free for personal use but PayPal gets a cut when you’re using it as an individual seller or a business. For each transaction involving goods or services, it takes 2.9% plus $0.30.
  • It takes 3-5 business days to withdraw funds from your PayPal account.
  • If PayPal spots any suspicious activity in your account, it can freeze your account - and the funds in it - with little warning. This can happen as a result of a spike in transaction volume, an ambiguous product listing and/or if products are being sold at a price lower than their costs.

The Alternatives for  Online Payment Processing

The modern world has brought myriad options when it comes to processing payments online. But don’t worry, we’re not about to bombard you with a long list of providers. Before you look into the payment processor itself, it’s important to consider a solution type more broadly and how it could help or hinder your business growth. So, here are our four top payment methods for your consideration.

1. E-Wallets

An e-wallet is an online app that sits between your business and your customer, allowing you to manage money from online transactions. Much like a bank account, it can keep money stored digitally for a significant period and enables both business and customer to transfer funds to their bank accounts. Yes, PayPal is a popular e-wallet, but there are plenty of others out there, including ApplePay, Neteller, Skrill and Ecopayz. Do you process a large volume of payments? Do you need currency conversion for a number of different geographies? There a wide variety of e-wallets tailored to different business needs.

2. Piecemeal

The piecemeal approach involves creating a checkout process from composite parts, with a platform that takes care of your payments as part of your stack. To go down this route, you’d add a Payment Service Provider (PSP) to your checkout to handle the exchange of money. A PSP acts as both a merchant account and the payment gateway, meaning that your business doesn’t need to have its own merchant account to get started.

You’re right, this sounds a lot like PayPal. And indeed it is, but there are other PSPs out there to consider, including Stripe, Adyen and Braintree. eBay is going down the piecemeal route themselves with their aforementioned shake-up and it’s a good option for a company that only need to focus on a checkout. If you’re a scaling company selling software, however, the piecemeal solution doesn’t offer you a comprehensive experience. You need the benefits of reporting, subscription management, security and many more features that a payment plug-in cannot provide.

3. Merchant of Record

So if piecemeal cannot provide a thorough, hassle-free billing and checkout experience - what can? A Merchant of Record (MoR) is a great option if you’re a software company looking for a payment processor that handles the whole checkout experience for you. Paddle does just this. We take care of - among many other elements of your billing and checkout - subscriptions, promotions, licenses and reporting while offering powerful analytics to build your business. We also take the hassle out of compliance, sales tax and fraud prevention, mitigating risk by being legally responsible ourselves.


We are a native integration platform with a best-in-class payment gateway that handles the processing of all card transactions. Our MoR solution is also a much more cost-effective and scalable way of handling checkouts once you consider all the different components you’d need to stack together to build your own billing from scratch.

4. Cryptocurrency Wallets

Initially a volatile currency, crypto is a stabilizing market and there are now a variety of e-wallets that support crypto payments. Some online merchants accept cryptocurrency as direct payment and, with the news of Facebook’s brand new cryptocurrency Libra due to be launched in 2020, it’s prudent to consider global currency as a way of handling online payments. Coinbase, for example, facilitates the payment of goods via Bitcoin, Etherium, Litecoin and a number of other crypto currencies by charging a Visa Crypto Card and collecting the cryptocurrency, which is then deposited into your merchant account.  

Interested in learning more about switching to a Merchant of Record? Get a demo today!

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