Payment Gateways for Online Businesses: Stripe, PayPal, Wise and the Real Cost of Accepting Payments
Every payment processor advertises its rate. Here's what the actual cost looks like when you add up all the fees — and which to choose for what.
When you're starting an online business, the payment gateway decision feels like a simple percentage comparison. Stripe is 1.4% + 20p for European cards. PayPal is 3.4% + 30p. Easy, pick the cheaper one.
The reality is that the headline rate is only part of the cost, the coverage varies significantly by market, and the choice of payment processor affects conversion rates, dispute rates, and your ability to operate in certain countries. Here's how to think about it properly.
Understanding What You're Actually Paying For
A payment transaction involves multiple parties, each taking a slice:
Interchange fee: Paid to the cardholder's bank. Set by Visa/Mastercard and non-negotiable. Typically 0.2–1.8% depending on card type (debit cards are cheaper than credit cards, consumer cards cheaper than premium/business cards).
Scheme fee: Paid to Visa or Mastercard for using their network. Small but not zero.
Acquirer fee: Paid to the bank or institution that processes the transaction on the merchant's side.
Payment processor margin: What Stripe, PayPal etc. add on top. This is where the negotiation happens at volume.
When Stripe charges you 1.4% + 20p for a European card, that covers all of the above plus their margin. When a card costs more to process (US cards routed through international networks, premium travel rewards cards, business cards), the actual fee you pay goes up — and with blended pricing, you pay an average across all card types.
Stripe
What it is: Developer-first payment infrastructure. The API is the best in the industry. If you're building a product with any complexity — subscriptions, marketplaces, invoice-based billing, platform payouts — Stripe is the default choice.
Pricing (2021, Europe): 1.4% + 20p for European cards, 2.9% + 30p for non-European cards. Additional fees for currency conversion, 3D Secure, radar (fraud tools), and other features.
Where it works well: SaaS, subscription businesses, digital products, marketplaces, developer tools. UK/EU/US businesses. The Stripe dashboard, reporting, and webhook infrastructure are genuinely excellent.
Where it has limitations: Stripe's availability in emerging markets is limited. Bangladesh, Pakistan, many African countries — Stripe doesn't support payout to these countries directly. You need a company in a supported country to use Stripe properly. High-risk industries (certain travel businesses, gambling, adult content) get rejected or terminated without much notice.
Chargebacks: Stripe's chargeback process is straightforward but the $15 dispute fee stings. Fraud rates above roughly 0.8% trigger reviews and potential account termination.
PayPal
What it is: The default for non-technical merchants and markets where Stripe isn't present. Consumer trust in PayPal as a payment brand is very high, particularly for B2C purchases from buyers who are cautious.
Pricing: 3.4% + 30p for standard transactions in the UK. Lower rates available at volume. International transactions add 1.5% cross-border fee.
Where it works well: Markets where Stripe isn't available. Buyers who don't want to enter card details on an unfamiliar site. Freelance work billed to US/EU clients. Marketplaces where buyers want PayPal's purchase protection.
Where it has limitations: Fee is genuinely higher than alternatives. PayPal holds funds frequently, especially for new accounts and accounts receiving unusual transaction patterns. Account bans and freezes are a recurring complaint from merchants — PayPal can hold your money for 180 days with limited recourse. The developer experience is significantly worse than Stripe. For subscription billing, PayPal is painful.
Wise Business (for receiving international transfers)
What it is: Not a payment gateway in the traditional sense — Wise doesn't process card payments. What Wise does is hold foreign currency accounts (GBP, EUR, USD, SGD, and many others) and let you receive local bank transfers in those currencies without the currency conversion overhead.
Where it matters: If you invoice B2B clients internationally — a UK client pays into your UK account number, a US client pays into your US account number — Wise holds those amounts in the respective currencies and converts at the mid-market rate (plus a small fee, typically 0.3–0.7%) when you need to move money out.
For freelancers, consultants, and B2B services businesses billing internationally, Wise can save substantially compared to receiving payments through a standard business bank account and taking the bank's exchange rate spread.
Where it doesn't work: Consumer-facing checkouts. Stripe or payment gateway products are needed for that.
Paddle and Lemon Squeezy (Merchant of Record)
Worth mentioning for SaaS and digital products: Merchant of Record (MoR) platforms handle VAT, sales tax, and compliance globally on your behalf. Instead of registering for VAT in every country where you have customers (increasingly required for digital services sold to EU consumers), you sell through Paddle or Lemon Squeezy, who are the merchant of record and handle all the tax complexity.
The fee is higher (Paddle charges 5% + $0.50 per transaction), but for a small SaaS business selling globally, the compliance overhead avoided can be worth the cost difference.
2Checkout / Verifone / Other International Options
For businesses that need to accept payments in markets where Stripe and PayPal aren't fully available, 2Checkout (now Verifone) is a common alternative. It supports card payments from most countries, though the rates are higher and the developer experience is dated.
For Southeast Asian and South Asian markets specifically: Adyen (enterprise-level, high volume), local payment processors (bKash for Bangladesh, easypaisa for Pakistan), and regional options become relevant.
Real Cost Comparison: A Sample Business
Assume a SaaS product at £49/month, 100 customers, mostly UK/EU:
| Processor | Monthly revenue | Transaction fee | Monthly cost |
|---|---|---|---|
| Stripe (EU cards) | £4,900 | 1.4% + £0.20 × 100 | £88.60 |
| PayPal | £4,900 | 3.4% + £0.30 × 100 | £196.60 |
| Paddle (MoR) | £4,900 | 5% + £0.50 × 100 | £295.00 |
At scale, the Stripe vs PayPal difference is significant. At £100k/month revenue, you're saving ~£1,000/month vs PayPal — which is £12,000/year.
Chargebacks and Fraud
Every payment processor shifts some dispute risk to the merchant. Key points:
Chargeback ratio: Keep below 1% (Visa's threshold, Mastercard similar) or you risk losing your merchant account. High-risk industries can have this threshold reduced or enforcement tightened.
3D Secure / Strong Customer Authentication: EU PSD2 regulations require SCA for most European card transactions. 3DS2 (the modern standard) shifts chargeback liability to the card issuer for authenticated transactions. Enable it — it protects you even if it adds a small friction step.
Radar (Stripe): Stripe's built-in fraud detection. Worth enabling; it catches most card testing and high-risk transactions automatically.
Refund policy: Having a clear, published refund policy reduces dispute rates. Many chargebacks happen because the buyer can't find a way to get a refund — they go to their bank instead.
Payouts: Getting Money Out
Getting paid is one thing. Getting the money to where you need it is another:
- Stripe → UK bank account: Daily payouts, 7-day rolling reserve for new accounts that reduces over time.
- Stripe → international bank: Stripe supports payouts to accounts in supported countries in local currency. Not available everywhere.
- Wise integration: Many businesses receive Stripe payouts to a Wise account (if in a supported country) and then use Wise's multi-currency features to move money efficiently.
- PayPal → bank account: Works but PayPal withdrawal fees apply for currency conversion.
What to Actually Choose
Building a SaaS or subscription product, based in UK/EU/US: Stripe. No contest on developer experience and features.
Non-technical merchant, selling physical products or simple digital goods: Stripe Checkout or PayPal both work. PayPal has the brand recognition advantage for consumer B2C.
Need global tax compliance handled for you (digital products): Paddle or Lemon Squeezy.
Receiving international B2B invoices: Wise Business alongside whatever gateway you use for card payments.
Based outside Stripe's supported countries: PayPal, 2Checkout, or a regional processor depending on where your customers are.
The decision isn't permanent. Most businesses start with Stripe or PayPal and add more processors as they scale and expand into new markets. The key is not letting the payment infrastructure become a bottleneck — get something working, measure it, and optimise once you have real volume to optimise against.
