PayPal has become a staple of the modern pay system. Individuals and companies everywhere use it to quickly send and receive payments electronically.
PayPal is likely the most well-known service for conducting pay transactions online. People use it daily to receive income from jobs, sales of goods and other online income sources.
Consumers use it to pay merchants and private parties. You may have used PayPal to buy products or to send money to family and friends. Or, you might have used it to receive money from online companies that pay for tasks you do.
However, as online financial transactions increase more and more, so do PayPal alternatives.
In this article we’ll show you what some of the best PayPal alternatives are. And we’ll give you insight on how each one works so you can decide which might be best for you.
What is PayPal?
PayPal was founded way back in 1998. At that time, it was called Confinity. It started as a company that developed security software for handheld devices.
However, within a year Confinity launched the money transfer service that would eventually come to be known as PayPal.
In July of 2002, eBay bought PayPal for an estimated $1.5 billion, then spun it off in 2015. Today, PayPal boasts 244 million users.
PayPal makes money by charging users fees for certain transactions. Senders of the money don’t pay the fees — receivers of the money do.
The fee typically amounts to 2.9% of the money received, plus an additional 30-cent flat fee on each transaction. Note that these are the U.S. fees, and that fees in other countries may vary.
Note: PayPal doesn’t charge a fee if you get money from family or friends. However, if you send an invoice to someone through PayPal, PayPal will charge you once you get paid.
As with all good things, PayPal alternatives have risen up over the years. Here are some of the more popular PayPal alternatives, and some information about how they work.
Dwolla is among the more popular PayPal alternatives. The company was founded in 2008 in Des Moines, Iowa. Today it services clients in the entire U.S.
If you transfer an amount under $10 with Dwolla, there’s no service fee. However, any transfer over $10 gets charged a 25-cent fee for the receiver. There’s no percentage-based fee like there is with PayPal.
This can be a huge money saver for those who have a freelance business and get paid online. The reason Dwolla can charge so much less is that it doesn’t work through credit and debit cards.
Instead, it only transfers to and from bank accounts. This enables Dwolla to avoid passing on the interchange fees that credit and debit card networks charge.
Another difference between PayPal and Dwolla is that PayPal won’t charge you a thing if you send or receive via family and friends. Dwolla still has the same fee structure whether you’re getting money from a business or from family or friends.
Additionally, some might see Dwolla as a bit more of a security risk. This is because it’s running directly to and from bank accounts without having a credit card as a buffer.
You may want to check the Dwolla website for more information on the security measures it uses. However, as far as money savings is concerned, Dwolla definitely beats out PayPal.
Venmo is another one of PayPal’s top competitors. Venmo was started in 2008 by a couple of former college roommates. Interestingly, PayPal purchased Venmo in 2013 and still owns it today.
Well, technically, PayPal purchased Braintree, which had purchased Venmo in 2012. But the fact remains that Venmo is owned by PayPal.
As far as fees, using Venmo is free — as long as you transfer the money from your bank account. If you choose to use a credit card, Venmo will charge you a 3% fee.
Venmo is more geared toward individuals conducting personal transactions. For instance, it’s for paying back a friend for half of a restaurant dinner check.
It’s not really meant for business transactions like freelancer payments. In fact, the Venmo website specifically says you may not use Venmo to accept payment from another person or company for goods or services.
PayPal has clearly set up Venmo in a way that it won’t directly compete with PayPal’s business transaction market. However, if you need to send money to a family member or friend, Venmo is a good alternative since it’s free for both the sender and receiver.
3. Google Pay
Google Pay is an updated, consolidated version of Android Pay and Google Wallet. You can use Google Pay in a few different ways.
- To pay in-store
- To pay online or in apps
- To send money to family and friends
Each function of Google Pay is approved to work in specific countries. For instance, you can only use Google Pay to send money to family and friends if you live in the U.S., the U.K. or India.
If you’re paying in-store or online, you have a lot more countries that qualify for Google Pay. However, not all countries can use Google Pay. In addition, not a ton of stores accept Google Pay yet. Some that do include Starbucks, Trader Joe’s, Walgreens and McDonald’s.
Google Pay is free if you are sending money from your checking account. However, if you want to use a credit card to pay for something, it’ll charge you a 2.9% fee.
Skrill was started in 2001 under another name and is based in London. It supports 40 currencies as of this writing.
The company allows you to send and receive money to and from different sources, including cards whose details you can store online. Once you’ve received your money, you can transfer it to various sources as well, such as your bank account.
You can use the site for things like sending and receiving money from friends, shopping online or making purchases within games.
There’s no fee when you use Skrill to send money directly to a bank account. Skrill does charge a fee of 1.45% to send money to someone whose bank account information you don’t have. This fee equates to less than half of what PayPal charges when you include its 30-cent transaction fee.
However, Skrill charges other fees. To upload funds, you’ll pay between 1% and 6%, depending on your payment method. And to withdraw funds, you’ll pay another $5.50.
Stripe was founded in 2011 as a way for individuals and businesses to receive payments over the internet. It’s primarily a platform for ecommerce businesses. As with PayPal, you can use Stripe to make online purchases or to send money to a family or friend.
Its fees run the same as PayPal: 2.9% and a 30-cent per-transaction fee. It does charge extra to use international cards and for currency exchanges.
Payoneer allows you to pay money to people all over the globe. It was founded in 2005 and now has several offices around the world.
Payoneer seems to specialize in paying overseas freelancers. So, if you are a freelancer or you employ a freelancer who is located in another country, Payoneer could be a good choice for you.
Depending on how you choose to receive payment (or send payment), the fees will vary. Typically, Payoneer charges between 0% and 3%.
Payza doesn’t charge any fees for those who want to send money. However, the Payza website says it charges 2.9% plus a 30-cent fee to receive funds. That’s the same as PayPal.
But if you want to add funds to your account using a credit card, you’ll pay 3.5%. To add funds via bank wire, there’s a flat $8 fee. Topping up your account using Bitcoin is free.
Payza will charge you for receiving money in different currencies as well. It supports over 25 currencies worldwide. The good news is that Payza doesn’t charge anything to sign up, and the site is easy to use.
2Checkout is an electronic payment service that allows merchants to accept online credit card payments.
According to its website, 2Checkout works in over 180 countries and currently services over 17,000 clients. Because it works in so many countries, 2Checkout could be good for businesses with a worldwide client base.
Fees vary depending on which country you live in. In the U.S., fees run the same as PayPal: 2.9% plus a 30-cent flat fee to receive payments.
WePay was founded in 2008 in Boston and was acquired by JP Morgan Chase in 2017. Companies such as Constant Contact and GoFundMe use WePay to accept payments.
WePay’s primary focus is on merchant services. For online transactions, you’ll pay 2.9% plus a 30-cent per transaction fee like you would with PayPal.
ProPay is similar to WePay. It focuses on providing pay solutions for merchants. You might find it if you’re making payments to industries such as:
- Legal firms
- Property management companies
- Direct marketing companies
- Medical and dental offices
ProPay fees vary. See the website for more information. ProPay doesn’t service transfers to family and friends like PayPal does.
TransferWise was founded in 2011 and touts itself as a cheaper way to send money internationally. Basically, it charges you an exchange rate fee to send the money. That rate is the mid-market rate, the midpoint between demand and supply for a currency. It’s considered the fairest exchange rate.
The site says that banks often charge higher rates for sending money internationally. If you need to send money to family and friends that are in different countries, you might try TransferWise.
12. Amazon Pay
Amazon Pay lets you pay third-party merchants using the payment methods stored in your Amazon account. The main benefit for consumers is that you don’t have to sign up for an account with the third-party merchant and input your payment card details again.
You can also use Amazon Pay to make donations to some sites. Amazon says that thousands of website are affiliated with and accept Amazon Pay.
Note that Amazon Pay doesn’t charge you as a payer for this service. Also, you can’t use Amazon gift cards to make your third-party payments.
Adjusting to the World of Online Payments
We live in a time when money exchanges hands via the internet. Some people still have trouble buying into this concept. And I get that.
It’s a somewhat unfathomable concept that the days of going to the bank, mailing checks and paying with cash are slipping away. It seems a bit risky from a security standpoint. However, the security measures payment processing companies take are solid and the benefits are hugely convenient.
Payment processing companies like PayPal and its competitors have changed the world in many ways. They allow people to have great online jobs where they can work and get paid right from the comfort of their own homes.
For me personally, being able to work and get paid from home has allowed me to homeschool my four kids. If it weren’t for online side hustles and payment processors like PayPal, I wouldn’t have been able to do that.
It’s nice to know that, along with PayPal, there are other options out there for sending money to merchants, family and friends.
Have you ever used any of these payment processing sites? Do you have a favorite? Feel free to share your thoughts in the comments section on our social media accounts.