Summary: Yes, PayPal does have a host of advantages, for both the customer as well as the merchant, compared to card payments. Yes, it is one of the most popular alternative payment methods. However, there are two sides to this coin, PayPal isn’t the be-all and end-all of online payment methods. This post lists the top PayPal alternatives that merchants and businesses around the world should be looking at.

In an online payments world that was once ruled over by card transactions, PayPal was a breath of fresh air for consumers, for several reasons:

  • They could buy at most online stores around the world using a single PayPal account, without having to enter their card or bank account details every single time.
  • As PayPal encrypts and keeps all the card/bank account details private, they needn’t worry about disclosing their financial information online again. Thus safeguarding the data from hackers, who could simply download them from a merchant’s website.
  • They could avail the benefits of Buyer Protection, where PayPal would reimburse the customer for the full price (including shipping cost) of a product, up to $20,000/item, if the product didn’t arrive or was vastly different from the original description.
  • As they could link their PayPal account to multiple bank accounts and cards, they could save themselves from the embarrassment of a payment decline.

The 2016 Globe Newswire Survey discovered that about 77% of cardholders were familiar with PayPal, of which 62% were using it regularly.

PayPal fast overtook card payments, grew into the most popular (and also the default) payment method amongst eBay users, and by August 2017, it boasted a whopping 203 million active user accounts and 16 million merchant accounts spread across 202 countries around the globe.

The buyers were not its only benefactors. Apart from the obvious advantage that a majority of their customers opted to pay via PayPal,

  • Merchants could set up a PayPal account for free, link their bank accounts (no merchant account, whatsoever) and start accepting payments in no time.
  • They could also effortlessly create, send, and monitor invoices, and small business owners can even do away with a bookkeeper, as all the financial data that they’d need are copy/paste ready on their dashboard.
  • Apart from its transparent terms and pricing, PayPal neither locked them in a contract that penalized them with an early termination fee.
  • It also seamlessly integrated with a plethora of shopping carts, billing and accounting solutions, and shipping solutions, which made it all the more effortless to run an online business.

And then in January 2018, after 15 years of partnership, eBay announced that it’ll be cutting off PayPal as its predominant payment processor in 2020, and will be shifting to the Amsterdam-based payments company Adyen.

Their rationale was pretty straightforward: eBay made this move to “take more control over the critical checkout experience… while giving more payment options to eBay shoppers.”

Moving away from PayPal, lowering the costs of selling products on the marketplace makes eBay a more significant competitor because it lowers the relative cost versus others including Amazon.
Tom Forte, Senior Research Analyst, D.A. Davidson & Co

And that’s just a snapshot of the various aspects that PayPal falls short of when it comes to online transactions.

The biggest drawbacks of PayPal for merchants are:

  • While it is free for personal use, PayPal gets a piece of the pie when it comes to business use. For each transaction involving goods or services, it takes about 2.9% (plus $0.30). Losing 3% of every transaction that you make with customers will add up quickly as your business grows. In addition to those charges, banks also require transaction fees to transfer funds. They also have a hefty chargeback fee of about $10.
  • PayPal is notorious for freezing accounts without warning. If its algorithm detects any suspicious activity in your account, PayPal will automatically go ahead and freeze your account along with the funds in it. For example, some of the flagging criteria are a sudden surge in the transaction volume, products being sold at prices lower than their costs, or any questionable/vague products being sold.

PayPal customer's complaint on Twitter

  • Considering its widespread acclaim and the fact that your entire financial data is protected by a single username and password, PayPal is also one of the most appealing targets for scammers. They use various platforms like email and even Twitter, where the fraudsters pose as PayPal’s affiliates or customer support staff and phish for your PayPal credentials.
  • It will take 3 to 5 business days to withdraw funds from your PayPal account, which might be a difficult pill to swallow if you’re financially tight.

As with any other well-acknowledged payment solution, PayPal does have its share of “horror stories”.

Why do you need online payment methods like PayPal?

For a merchant, offering PayPal as one of the payment methods to your customers is a no-brainer.

But should it be your primary payment processor? Maybe not.

Yes, PayPal will grow along with your business. No, it doesn’t suffocate you with a massive monthly subscription fee (while PayPal Payments Standard is free, PayPal Payments Pro charges about $30/month) or a stringent contract. And yes, it’ll enable you to receive payments from anywhere and at any time, and will also enable you to do much more than that, thanks to its assemblage of partner programs, tools, and integrations.

If you only receive payments sporadically, say like a freelancer or a consultant, or if you have a low volume of transactions, or if you’re just starting out, then you don’t have to go through the trouble of creating a merchant account and PayPal is one of the best bets for you as a one-stop starter solution.

But then, once you hit a certain revenue mark where you’re making over $10,000 – $20,000 a month, you’ll need a more cost-effective option, and a more personalized service, which you can’t expect from PayPal. Adding to that, like all other aggregator services, your account stability will be one of your biggest concerns. Even though you can create an account in a blink, unexpected red flags might result in the freezing or termination of it.

So, as the saying goes, don’t put all your eggs in one basket.

Now that that’s out of the way,

Here’s the list of alternatives to PayPal for merchants (apart from card payments and merchant accounts):

PayPal Alternatives – Ewallets:


  • Pricing – If the transaction volume of the previous month is less than 1 million RMB – 2.2% for the current month. If the transaction volume of the previous month is equal to or more than 1 million RMB, but less than 3 million RMB – 2% for the current month. If the transaction volume of the previous month is equal to or more than 3 million RMB but less than 10 million RMB – 1.8% for the current month. If the transaction volume of the previous month is more than 10 million RMB – 1.6% for the current month. Alipay also charges a 0.1% fee on online transfer of funds over 20,000 yuan, from their Alipay accounts to bank accounts (the minimum fee per transfer is 0.1 yuan). While Alipay absorbs the remittance fees of the settlement bank, the merchant has to take care of the processing fees (if any) of the receiving and/or intermediary banks
  • Most popular in – China  
  • Settlement time – When the to-be-settled funds reach or exceed $5000, the total amount will be transferred to the merchant’s bank account
  • Registration requisites – “Valid Business Registration Document, ID certificates of Legal Representative, Shareholder and Primary Contact Person, Valid URL to implement Alipay. The business category must also comply with all applicable laws and meet Alipay requirements.”
  • Security – Alipay is compliant with PCI DSS, and supports SMS verification service, full/partial/multiple partial refunds, Digital Certificate (hardware-based security solution), Payment Shield (Alipay’s security solution that consists of electronic signature and digital authentication), and a real-time risk monitoring system
  • Major customer complaint – Compared to the other popular e-wallets, creating an account in Alipay is more complicated and involves more stringent registration and verification steps and rules (you should also have a Chinese bank account to accept payments with Alipay)
  • Major customer compliment – Once the funds get deposited into your account, it cannot be frozen and there are no “disputes” in the case of Alipay – it employs the “Escrow” system, where the funds are released only after a buyer confirms the receipt of the product and hasn’t raised a complaint within 7 days of delivery, and Alipay’s terms of service gives complete freedom to the merchant to handle their account and funds at their own discretion
  • Brownie points – As of September 2017, Alipay accounted for 54% of China’s mobile payment segment, and is also the most preferred payment method for Chinese customers

Collect, Manage, and Maximize Recurring Payments

Apple Pay

  • Pricing – No fee for merchants (it charges the banks as a rebate for every transaction)
  • Most popular in – The US  
  • Settlement time – Once the customer sends the amount, it is automatically stored in your Apple Pay Cash (which is present in the Wallet app). You can either transfer/spend it using Apple Pay immediately, or transfer it to your bank account (which will take about 1-3 business days
  • Registration requisites – You need a merchant account, shouldn’t be involved with any of their prohibited uses and must follow their branding and UI guidelines. If you offer multiple payment methods, you should include Apple Pay as one of the payment options in that list and in cases where the customer has an active card in the Wallet, then Apple Pay should be set automatically as the default/sole payment option on any webpage that accepts payments
  • Security – Apple Pay employs the inbuilt hardware and software security features of the Apple devices to secure the transactions, including near-field communication (NFC), biometrics and tokenization, and your customer’s card details will be stored neither in your or Apple’s systems
  • Major customer complaint – Apple Pay is only compatible with iOS, isn’t available on Android, and doesn’t have a desktop interface – customers can only authorize transactions on iPhones, iPads, or MacBook Pros using Touch ID/Face ID/passcode, and on the other Macs using their nearby iPhone or Apple Watch
  • Major customer compliment – Apple Pay will especially be effective if your customer segment has a high mobile and iPhone usage. As it works with people’s everyday Apple devices, it makes the buying process frictionless and seamless, which, in turn, improves the conversion.
  • Brownie points – According to the February 2018 report by Loup Ventures, Apple Pay users jumped from 62 million in 2016 to for 127 million (38 million are in the US and 89 million use it globally) by the end of 2017. Even though that accounts for only 16% of the iPhone user base, Apple Pay is expected to “gain widespread adoption over the next 3-5 years”

Google Pay

  • Pricing – No fee for merchants
  • Most popular in – The US and the UK  
  • Settlement time – It takes about 2-3 days to transfer money to your bank account, but it’s instant if you send it to your debit card or to your Google Pay Send balance
  • Registration requisites – You should have Google Play version 11.4.x or higher installed in your Android device, you should use Chrome for Android version 59 or higher for the web, and you should comply with the Google Pay API Acceptable Use Policy
  • Security – Google Pay tokenizes the customer’s card data before passing them on to the merchant and card networks. The Token Service Providers (TSPs) and Google Pay take care of the entire tokenization process, making it easy for merchants to integrate and reducing the risk of data breaches
  • Major customer complaint – A majority of the Android devices worldwide run on outdated OS versions, which exposes the security loopholes and affects Google’s mobile innovations. Adding to that, while Android rules over the low-end and middle of the smartphone user base, Apple dominates the high-end market, where users spend the most on apps and similar services. This would explain the low adoption rate of 5.3% of all smartphone users
  • Major customer compliment – Unlike the other digital wallets, Google Pay consolidates the existing Google services and offers a consistent payment experience. The customer can pay using their Android/iOS devices or on the web, and can even use one of their cards previously used on YouTube, Google Play Store, or Chrome. On the other hand, since Google Pay isn’t actually processing the payment, the implementation for merchants via API is very simple. Developers just have to call a Google API to find out if a customer has Google Pay enabled and can then simply accept payments through Google Pay, using a payment processor like Stripe or Braintree
  • Brownie points – Merchants can easily add and run loyalty programs and rewards tracking to Google Pay. Adding to that, Google integrates smart tap into Clover’s APIs, which enables developers to build Android apps for loyalty, coupon, and gift card redemption

 WeChat Pay

  • Pricing – WeChat’s commission rate ranges from 0.10% to 1%, and the billing cycle could either be T+1, T+3, or T+7. Both these vary from industry to industry. While WeChat doesn’t charge users who transfer funds from the wallet to their debit cards, it charges a fee for withdrawals. Beyond the free withdrawal limit of 1,000 RMB, users will be charged a fee of 0.1%, with a minimum of 0.1 RMB per withdrawal. And similar to Alipay, while Tenpay absorbs the handling fee for the settlement of payments, the merchant has to take care of the processing fees (if any) of the receiving and/or intermediary banks
  • Most popular in – China  
  • Settlement time – Settlement is based on T+1, where a transaction carried out on T day will be settled on the T+1 business day. Also, the minimum settlement amount is $5000 (if the amount is less than that, it won’t be settled during the respective settlement period and will be accrued to the next period)
  • Registration requisites – “Business Registration Certificate, Financial License, Anti-Money Laundering Questionnaire, ID certificates of Directors, Main Contacts and Legal Representatives. Industries must be compliant with all the applicable laws and in accordance with WeChat Pay Requirement.”
  • Security – WeChat Pay is compliant with the Payment Card Industry Data Security Standard (PCI-DSS), has real-time security monitoring of accounts and transactions, and encrypts account profile and personal data
  • Major customer complaint – WeChat Pay charges a transaction fee for withdrawals, to “encourage users to make fewer withdrawals and thus keep more money circulating within the WeChat Wallet ecosystem.” In Alipay, you can use the wallet balance to buy financial products within Alipay to avoid the transaction fee and then transfer it to their bank account, or withdraw the money to bank accounts under Taobao and Tmall for free. Such workarounds aren’t possible in the case of WeChat Pay
  • Major customer compliment – WeChat Pay has the largest number of monthly active users of around 600 million, mainly because it is built on top of the social networking and IM tool WeChat (thus guaranteeing a high-frequency use from the customers’ side). This gives merchants access to a large base of prospective customers. And unlike Apple Pay and Samsung Pay, WeChat can be operated on Android, BlackBerry, iOS, Windows, and Symbian operating systems, and also has a web desktop version
  • Brownie points – WeChat is China’s “Super App” that’s intertwined with the lifestyle of 902 million daily active users, making it a goldmine for marketing. By creating a service account on WeChat, merchants can run targeted ads, distribute coupons, offer multi-chat customer service, launch a store, and accept payments right within the app

PayPal Alternatives – Direct Debit:

ACH credit and direct debit

Automated Clearing House (ACH) credit transfers enable customers to transfer money from their bank accounts directly to the merchant’s bank account that’s registered in the US. It is one of the most common modes of payment among B2B and B2C businesses with high AOV (average order value). Direct debit, on the other hand, enables merchants to collect money directly from the bank accounts of their US customers. This method is commonly used by SaaS and subscription-based businesses.

  • Pricing – The cost will vary depending on whichever merchant account provider, payment processor, or payment service provider that you use to process ACH payments. They typically charge anywhere from $0.25 to $0.75 per transaction or 0.5% to 1% per transaction. Some processors might also charge an additional fixed monthly fee
  • Most popular in – The US  
  • Settlement time – As per the Rules for the ACH Network formed by the National Automated Clearing House Association, an ACH credit transaction takes about 1-2 business days to settle and the direct debit transaction takes around one business day. However, the funding time will defer from one processor to the other
  • Registration requisites – You can only accept the funds only in USD and you must have a US/USD bank account
  • Security – While ACH is regulated by the federal government, it isn’t mandatory to be PCI DSS compliant to process ACH payments. So it is recommended that the merchants use additional layers of protection like data encryption and tokenization, and authorize customer bank accounts using techniques such as micro-deposits, check verification, pre-notification entry, debit card number authorization, and account verification
  • Major customer complaint – Even though ACH payments don’t have any chargeback or retrieval fees, when a customer disputes a transaction with a bank, the only option that merchants have is to go to court and justify why they debited the account. And in most cases, merchants would choose to rather absorb the chargeback and move on. Adding to that, while a card transaction gets declined for insufficient funds in real time, an ACH debit transaction might take about 24 hours to get an insufficient funds notification
  • Major customer compliment – Since ACH payments are processed in batches, they work out to be far less expensive than card or check transactions. This, and the fact that the predefined amount will reach the merchant’s account on the preset date (in the absence of disputes) make ACH a convenient option to collect recurring payments
  • Brownie points – With NACHA rolling out the new Same Day ACH, ACH payments would now be processed on the very same day the payment gets initiated, making it all the more convenient for merchants

SEPA Direct Debit (SDD)

The European Union came up with the Single Euro Payments Area (SEPA) as an integrated payment solution to simplify direct debit bank transfers denominated in euro, between the member countries. In this case, merchants have to use the customers’ bank account details in the IBAN (International Bank Account Number) or BIC (Bank Identifier Code) format to initiate a transaction, and the customers have to authorize the merchants to debit money from their accounts.

  • Pricing – Even though SEPA assures that banks cannot deduct the transfer amount, processors like financial institutions and banks do have the option to charge an additional fee for direct debit transfers (which might range from € 0.05 to € 0.5 or from 0.5% to 1.5% per transaction, with/without an additional fixed monthly fee)
  • Most popular in – EU member countries  
  • Settlement time – 1 to 2 business days
  • Registration requisites – You can either process SEPA payments in-house or use a third-party processor. For the former, you’ll need a bank account within the SEPA zone, a Unique Creditor Identifier (UCI), and get your bank to accept Click Mandates (read more about it here and here)
  • Security – Some of the security measures include the use of IBAN and BIC to initiate transactions, identification of merchant using UCI, break up of the mandate post 36 months of disuse, the requirement of additional mandate information for debit collections (like mandate number for single and further transactions)
  • Major customer complaint – The default, Core SDD allows debits to be returned up to 8 weeks after the settlement date (and up to 13 months for unauthorized debits). However, to offset this, merchants can make their customers pay via the B2B SDD, where the customer cannot reverse a payment with “no questions asked.” The B2B scheme requires a substantial amount of customer trust, and also not all customer banks will support this scheme (as it requires the debtor bank to perform a mandate validity check)
  • Major customer compliment – Since the amount is withdrawn directly from the customer’s bank account, the delay is only in the bank transferring the funds to the merchant’s account. This fast settlement process thus reduces financing costs and improves the cash flow. In addition to that, the risk-analysis (checking the validity of the bank account details and the history for suspicious behavior) is also performed in real-time, thus minimizing fraudulent transactions
  • Brownie points – Merchants can centralize payments across the EU using a single bank account and a single set of payment instruments. The result? Increased control, reduced cost and high efficiency

PayPal Alternatives – Internet Banking:

(Note: While this payment method can only be used for one-off payments in Europe, merchants are allowed to retrieve the customer’s bank account details from the transaction and use that information for subsequent recurring payments with the help of SEPA direct debits.)


  • Pricing – They consist of a setup fee of around € 99, a fixed monthly charge of around € 5.9, a PSP fee of € 0.09 per transaction, a transaction of max 0.89% of the sales, and a verification fee of € 0.49 per verification
  • Most popular in – Germany  
  • Settlement time – 1 to 2 business days
  • Registration requisites – “In order for your customers to be able to pay with you in the online shop with Giropay, you need an acceptance contract. Our sales partner GiroSolution offers you an online application, which you can fill out here. In it, among other things, the conditions are regulated”
  • Security – SSL encryption with Extended Validation certificates, AES 256-bit encryption with TLS 1.2 for secure transmission, security certificate of Giropay transaction pages issued to the processing bank, and exchange of sensitive data like PIN and TAN only between the participating banks (no other third party will have access to personal and payment details)
  • Major customer complaint – The customers must have a bank account or a savings account in one of the affiliate banks to process payments via Giropay, and it supports only one currency (EUR). So it cannot be used for international payments
  • Major customer compliment – Thanks to the real-time transaction confirmation, merchants receive a payment guarantee from the customer’s bank almost immediately. In addition to that, Giropay doesn’t allow any chargebacks. In short, 100% payment guarantee
  • Brownie points – 16% of the total online transactions in Germany are processed via Giropay, with 40 million German consumers using Giropay to make payments


  • Pricing – The payment service providers may charge a transaction fee may vary from € 0.10 to € 0.70 per transaction, and may or may not charge an additional fixed monthly fee
  • Most popular in – The Netherlands  
  • Settlement time – 1 to 2 business days
  • Registration requisites – “If you would like to enable your customers to pay using iDEAL, you must agree to an iDEAL contract with a certified Payment Service Provider. They offer a range of different types of subscription or contract for iDEAL. Simply select the subscription or contract that best suits the way you run your business. The bank or CPSP can advise you on this. When you have agreed to an iDEAL contract, your PSP will issue you with the Merchant Integration Guide. This document describes the technical specifications for integrating iDEAL into your online checkout system. Your PSP can assist you with this”
  • Security – iDEAL operates in the participating banks’ online banking sites, and so uses the same security measures, like two-factor authentication. In addition to that, no sensitive data like card details get shared with the merchant
  • Major customer complaint – Similar to Giropay, iDEAL works purely on the Dutch domestic transfer system and so can be used only by the citizens in the Netherlands and Holland, who have bank accounts in the participating banks
  • Major customer compliment – Customer can make payments from a familiar online banking environment, and don’t have to share their card details with the merchants. iDEAL also offers real-time payment confirmation notification, doesn’t involve interchange percentage, and doesn’t support chargebacks
  • Brownie points – As of January 2018, iDEAL hit a market share of 57% in the Netherlands, with around € 33 billion paid by the customers using iDEAL in about 378 million transactions. What more? iDEAL grew by 33.8% in 2017, while the Netherlands e-commerce industry grew by just 14%

 SOFORT GmbH (Klarna)

  • Pricing – Klarna hasn’t published the charges and fees. However, they usually charge a transaction fee per successful transaction of around 0.9% + € 0.25, a monthly basic fee of about € 4.90, and a one-time installation fee of around € 59.90
  • Most popular in – Germany, Austria, Belgium, the Netherlands, Poland, Italy, Spain, Slovakia, Switzerland, France, the UK, Hungary, and the Czech Republic
  • Settlement time – Typically 2 business days (can go up to 14 days)
  • Registration requisites – “You need an account at SOFORT. If you don’t have this account you can register here. You have to set the configuration key in the module. This configuration key can be found in your SOFORT account. The Module have to be activated.”
  • Security – “No storage of confidential data (such as PIN and TAN). SOFORT GmbH has been awarded the seal “Approved Data Protection” and SOFORT Überweisung the certificate “Approved Payment System” by TÜV Saarland. In addition, our information security management system (ISMS) has been certified according to ISO 27001 by TÜV Saarland. As SOFORT Überweisung is not using credit cards a PCI certification is not needed”
  • Major customer complaint – Even though the merchant will get notified about a successful transaction in real-time, the funds aren’t guaranteed until the merchant actually receives the amount (which will take anywhere from 2 to 14 business days). Hence businesses usually consider the initial authorization as the authoritative nod and don’t wait till they receive the funds (note that the payments once made via SOFORT cannot be reversed)
  • Major customer compliment – Customers don’t have to register for SOFORT and can make payments using their existing online banking details. The merchants will also receive a real-time acknowledgment of the transaction, and also have the option to give their customers buyer protection and additional security
  • Brownie points – Klarna acquired SOFORT in 2013 and went on to become the biggest pan-European payment provider. At the moment, they own about 10% market share of Northern Europe and process about 800,000 transactions for around 89000 merchants

The more, the merrier

In one of their surveys, YouGov found out that about 40% of consumers stated that they would feel more comfortable buying from a merchant who offers a broad range of payment methods, compared to a merchant who supports only one method. What’s more? 50% of the respondents also said that they’d abandon the checkout process if the payment method that they prefer isn’t available. 

eBay seems to have understood that. And they have taken their first step towards changing with their customers – Adyen supports about 200 payment methods (including PayPal) and processes transactions in over 150 currencies. I rest my case.

If you are running a subscription business and interested in accepting multiple payment methods, Chargebee can be of good help.

Support Multiple Payment Methods for SaaS