No matter what kind of business you operate, you need to be able to accept payments.
Therefore, you need what is known as a payment processor—a company that processes credit
card and debit card transactions on behalf of your business, so that you can receive
the funds from those payments.
Two of the biggest companies that provide this service are Stripe and Square.
We’ll go on record as saying both are great products for small business owners.
But which is better for your business?
In this video, we’re going to answer that question by pitting Stripe vs. Square on five
criteria: payment processing cost, hardware, software, ease of use, and payment options.
Now, before we continue, we should warn you that payment processing is a fairly complex
topic full of jargon.
But don’t worry.
We’re going to do our best in this video to not only explain the differences between
Stripe vs. Square, but also break down all the different terms that pop up when talking
about payment processing.
If you have any lingering questions at the end of the video, feel free to leave us a
comment.
Now let’s get started.
Ok so first is payment processing cost.
Stripe and Square both allow you to accept credit and debit card transactions—but they’ll
charge you a fee for doing so.
Some of this fee goes to the credit card network, such as Visa or AMEX, which is how they make
money.
The rest goes to the payment processor, which is how they make money.
Most payment processors will charge different rates depending on whether or not the transaction
took place in person, such as at a store, or online, like on an ecommerce website.
The online processing rate is typically higher because online transactions are considered
riskier by payment processors because the cardholder is not physically present.
To compensate for this risk, most payment processors will charge a higher rate.
For in-person card payments, Square charges a fee of 2.6% + $0.10 per transaction.
So if, for example, Square processes a $100 credit card transaction on your business’s
behalf, they’ll take $2.70 of that sale as the fee for processing it.
Stripe’s in-person processing fee is slightly higher than Square’s: 2.7% + $0.10.
The fee for online payment processing for both Stripe and Square is 2.9% + $0.10.
Note that all of these rates are subject to change.
Now, before moving on we should explain that Stripe was designed to accept online payments,
whereas Square was initially designed to accept in-person payments.
Therefore, Stripe gives you a lot more bang for your buck if you operate an online business.
We’ll touch more on this in the software section of our comparison.
For now, we’ll say that Square is the more cost-effective option for brick-and-mortar
businesses, and Stripe is the more cost-effective option for online businesses.
And with either, you get a month-to-month contract and no early termination fee.
Next up is hardware.
When we talk about hardware in relation to payment processing, we’re talking about
the physical devices used to accept and process credit and debit card payments.
This includes credit card terminals equipped to read a credit card magstripe, chip, or
a mobile wallet like Apple Pay or Google Pay.
It also refers to additional physical devices that play a role in payment processing.
As a group, these devices are known as point of sale hardware, because they represent the
location where the payment is taking place.
Devices that could be considered point of sale hardware include receipt printers, barcode
scanners, cash drawers, and iPads or tablets connected to a credit card reader.
Now when it comes to Stripe’s point of sale hardware, your options are very limited.
Stripe only sells two types of credit card readers: one for processing magstripe and
chip cards, and one for accepting mobile wallet payments.
But again, Stripe isn’t designed for in-person payments, so they’re not focused on creating
point of sale hardware.
Square on the other hand built its reputation on cutting-edge point of sale hardware.
Chances are, you’ve probably already swiped or dipped your credit card in one of their
sleek white terminals.
In fact, if you sign up to have Square as your payment processor, they’ll give you
a free magstripe reader that you can attach to your phone to accept payments via mobile.
But that’s far from your only option.
There’s also the Square Register—a large countertop point of sale, the Square Terminal—a
handheld point of sale device that can print receipts, the Square Stand—a stand you can
mount an iPad on with a built-in credit card readers, and a handful of different credit
card terminals that can accept all kinds of payments.
Square also sells receipt printers, barcode scanners, cash drawers, on other products
separately, or as kits.
For all these reasons, Square is unquestionably the superior option for those looking for
a payment processor with hardware options.
Now let’s talk about software.
Payment processing software is the technology that works in conjunction with the point of
sale hardware to process a payment.
Here is where Stripe really shines, as they offer the developer tools to integrate payments
into any kind of website or application and create a totally customizable checkout experience.
Because of this, major brands like Glossier, Kickstarter, Slack, and even Lyft use Stripe
to process online payments.
Of course, creating a customized checkout experience requires a lot of technical know-how,
which is why Stripe has a ton of documentation on their website for developers.
But if you’re looking for something simple, Stripe can also provide you with just a few
lines of code you can embed on your website to create a checkout page.
We don’t have all day, so we’re not going to list everything included in the Stripe
software, but this page on their website gives you a pretty good idea.
Oh, and did we mention that all of this comes at no charge outside of the payment processing
fee.
While Square offers tools to facilitate online payments too, their software is more often
used for in-person payments.
Their free point of sale app allows you to track your sales and inventory, set employee
schedules, save customer information, and a whole lot more.
Square also offers different versions of this app depending on if you run a retail business
or a restaurant business, although these tools cost $60 per month each.
This point of sale software is something that Stripe doesn’t provide—although Stripe
does integrate with other point of sale softwares.
So in short, Square’s software will once more be better if you run a brick-and-mortar
business, and Stripe’s will be better for online businesses.
Next let’s talk about ease of use.
We can tackle this one fairly quickly: Square is the easier to use payment processor.
That’s because it takes no technical experience to get the most out of this product.
Simply download the Square app on your phone or iPad, connect the device to a credit card
reader, and you’re ready to go.
Of course, Stripe does have a simple integration as well, but to get the most out of Stripe
you really need to know how to utilize application programming interfaces and software development
kits.
One thing we can say that’s convenient about both Stripe and Square is that they’re payment
service providers.
This means you don’t have to apply to start processing payments with either service.
You just provide your business information and they attach you to their merchant account,
which is a special type of account required to accept card payments.
If you were to, say, go through a bank to get your merchant account, they’d put you
through a rigorous and time-consuming underwriting process.
For this reason, payment service providers like Stripe and Square are more popular with
small businesses.
So now we’ve covered cost, hardware, software, and ease of use, but if your payment processor
doesn’t accept the payment method your customers like to use, then none of that matters.
Fortunately, Stripe and Square both accept a myriad of different payment methods, including
Visa, Mastercard, American Express, and Discover.
Both can also process ACH payments, invoice payments, and most mobile wallets.
However, Stripe also allows you to process payments in over 135 different currencies,
whereas Square payment processing is only available in a handful of countries outside
the United States.
Stripe’s developer tools also allow merchants the ability to accept local payment methods
in other countries, such as Girpay in Germany and Alipay in China.
In short, if your customer uses it, Stripe probably processes it.
So for a business that sells all over the world, Stripe will be your best option.
But if you’re only performing in-person transactions, Square should be able to get
the job done.
To wrap this all up, we’ll state again that both Stripe and Square are excellent payment
processors, but they’re also very different payment processors.
Square is an excellent platform for brick-and-mortar merchants and those who are looking for a
simple payments solution that can scale with their business as they grow.
Their point of sale hardware and software are second to none, and you don’t need any
technical know-how to get started.
Stripe is a platform that pretty much allows you to accept payments online in any way you
want.
Of course, to do this you’ll need technical knowledge, which is why Stripe is beloved
by tech companies and internet businesses the world over.
If you’re this type of business, we highly recommend Stripe.
For everyone else?
Square is the way to go.
We hope you’ve found this Stripe vs Square comparison helpful.
For more information on how to start and grow your business, visit Fundera.com.
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And if you have additional questions about anything we’ve discussed, please leave us
a comment below.
Thanks for watching!