Paypal was founded in 1998 as an alternative to traditional paper-based banking. The company had its IPO in 2002 and was acquired by eBay (EBAY) the same year. Paypal's main focus is in facilitating payments and money transfers between businesses and people. It has over 150 million users and, as of 2014, transacts in 26 currencies.

WePay was founded in 2008 as a way to collect money from various sources in a hassle-free manner. In 2011, the company began focusing on accepting credit card payments for small businesses. Currently, its services are only available in the US and Canada.

Paypal and PayPal Fees

PayPal is known and trusted by millions of people. This trustworthiness is used by the company in its marketing strategies – an overview of their website encourages businesses to use PayPal and display the PayPal logo as a sign that the merchant is serious about business.

PayPal transactions are completed within minutes and the company promises that the money will be available for payment or withdrawal to a bank account immediately. Money is secure, privacy is protected, and, since the customer base is so large, transactions are faster than traditional methods where customers enter their shipping information and payment details on the merchant site.

PayPal’s website advertises a 2.9% + $0.30 transaction fee which works out to $3.20 for a $100 transaction. This sounds simple until you dig deeper and find all the different packages and services available to merchants. (For more, see: Review: PayPal Extras Credit Card.)

PayPal Merchant Account

Merchants can sign up for merchant accounts when they have over $3,000 in monthly sales. Merchant account fees range from 1.9% + $0.30 per transaction to 2.9% + $0.30 per transaction, depending on sales volume. Transactions where the buyer is outside of America or Canada have an additional 1% charge as well as a 2.5% currency exchange fee.

In addition, these fees exclude merchants whose average sale is less than $12 (micropayment transaction fees are lower at 5-6% + $0.05) and different still from the fees for merchants who sell digital goods (5-5.5% + $0.05, except Japan which is 5-5.3% + $0.05).

Finally, there are the merchants who either don’t want to send their customers to PayPal’s website to finalize a payment, or those who want phone and fax payment support or virtual terminals for their brick-and-mortar business. PayPal has solutions for those merchants, offering packages that have monthly fees and (sometimes) lower transaction fees. (For more, see: Alibaba's Goal: Supplant eBay, Amazon and Paypal.)

WePay Fees

WePay is a bit different from PayPal. For starters, merchants integrate the payment system into their website to make the shopping experience seamless. WePay offers two services – Connect, a quick set-up approach and Clear, a white-label payment approach. Connect charges a flat 2.9% + $0.30 per transaction (with credit cards) and 1% + $0.30 per transaction (with bank transfer). Clear allows merchants to set their own pricing. Merchants that use WePay can expect funds to reach their accounts in about a day, and although the company is planning to expand internationally, it currently only supports American and Canadian buyers and sellers.

The Bottom Line

While the flat-fee of the WePay Connect service may appeal to merchants who don’t want to fuss with multiple pricing schemes, the service is more expensive than PayPal if customers pay by credit card. A potentially huge benefit to WePay is that the customer is not redirected to a third-party site – a feature that costs $10-35/month on PayPal.

Additionally, while both websites have restrictions on the activities that their services can be used for, WePay’s list of prohibitive activities is much longer than PayPal’s.

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