Square vs Paypal: Which Online Payment Processor is Right for Your Business?

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Square and PayPal are two of the biggest names in the payment processing industry, which makes it tough to decide which to buy. Both platforms provide core features for small businesses from POS transactions to invoicing, mass payments, reporting, and ecommerce sales.

While both brands provide highly competitive features, PayPal tends to focus on ecommerce activities, while Square facilitates in-person transactions.

In this article, we’ll take a closer look at two of the best online payment processors; examining the infrastructure and functionality of each POS system, pros and cons, pricing, and other key points to help you make a decision.

What is Paypal?

Founded way back in 1998, PayPal is an online payment system that supports 100+ currencies. The company also owns finance brands like Venmo, Xoom, and Braintree. It’s headquartered in San Jose, CA, and provides millions in financial support to nonprofits and charities worldwide.

The online payment system enables businesses to securely send and receive money; and serves as a middleman to keep your bank data secure. The system is accessed via the web, mobile app, or in-person through POS hardware.

What Does Paypal Do?

How does PayPal work? It automatically links a credit/debit card or bank account to your PayPal account. The account can then be used to make purchases, send or receive money, manage funds, and attend to a multitude of business needs.

An organization can also add more than one financial account to its PayPal account. Then, whenever making a payment, you can select which account to debit.

The service provider works as a secure intermediary between you and your bank. Everything is processed through the PayPal platform, including online transactions and sales through the mobile card reader.

Any monies a business receives will sit in your PayPal account where it can be used for e-commerce, point of sale (using your PayPal Mastercard), or transferred to a bank account. These transfers can take a few days or even a few minutes (with an extra fee). The PayPal balance can also be topped off at any time with a bank account or assigned card.

Pros of Paypal

  • Enables both online (virtual terminal) and in-person payments for goods/services rendered.
  • Provides an easy way to send and receive money internationally (including hardware options).
  • Ensures various levels of security and payment protection, as well as contactless payments.
  • Provides tools and services to support point of sale, e-commerce, online stores, and subscription-based transactions.
  • Extensive integrations (QuickBooks, Stripe, Shopify, eBay) with in-depth developer tools.

Cons of Paypal

  • PayPal tends to have higher fees than a typical credit card processing account (including chargeback fees).
  • There can be inconsistent customer support, phone support, and there are account stability issues.
  • The platform is not suitable for high-risk industries.

What is Square?

Square is a mobile payment platform launched in 2010, that offers a suite of financial software, from point of sale (POS) to inventory management, chip readers, payment processing, and even business capital.

The Square payment and POS app has been downloaded more than 33 million times and features 2 million+ active sellers.

The San Francisco-based program is a payment processor that acts as a SaaS with customizable ecommerce and invoice templates. The initial setup includes both hardware (Square Reader) and software that can be easily downloaded on an Apple iPad, iPhone, or Android device.

What Does Square Do?

The basic Square account is free and comes with a credit card reader that plugs into your mobile device. Your account can be set up and ready to process payments within minutes.

Square offers next-business-day payments after the card is swiped. The technology quickly transmits the bank data to the card reader, which it then sends to the Square software. This information is then passed on to the acquiring bank.

The Square brand acts as an intermediary between a business and its financial institutions.

Pros of Square

  • Square offers dedicated versions for specific industries, like Square for Retail, restaurants, and more.
  • The payment service is fast and free for next-business-day transactions.
  • Free credit card payment hardware with no up-front costs for small business owners.
  • POS hardware options like Square Register, Square Stand, and Square Terminal.
  • Integrations for invoices, social media, employee management, shopping carts, and more.

Cons of Square

  • Response and resolution time can be improved by customer support, particularly with the payment gateway.
  • Square doesn’t handle cross-border payments for transferring revenue earnings to owners.
  • The cost is structured for startups and, according to user reviews, can get costly as you scale.

Power your entire partner payouts operations


Customer Satisfaction


Annual Transactions






Customer Retention

Receiving Cost3.49% + $0.49 per transaction for online payments/invoicing.
3.5% + $0.15 for keyed sales on mobile or in-store
2.7% per swipe for mobile/in-store payments (within the United States).
2.6% + 10¢ for contactless payments, swiped or inserted chip cards, and magstripe cards. 
Manually keyed-in, processed using Card on File, or manually entered using Virtual Terminal have a 3.5% + 15¢ fee.
50 international payment methods – cost varies.
Sending CostOnline transactions and in-store consumer transactions are free.Next-business-day: free. Instant and same-day: 1.5% of the transfer amount.50 international payment methods – cost varies.
Speed1-3 days1-2 days0-2 days
Mobile AppYesYesNo
Debit CardMastercardMastercardNo
International PaymentsAvailable in more than 200 countries/regions.US, Canada, Japan, Australia, and the United Kingdom.Pays to 196 countries.
TaxesCalculates VAT automatically.Item-level tax rates for POS systems.There is built-in tax and VAT compliance.
Mass PaymentsPayPal Mass Pay optionYesGlobal mass payables automation solution.
Business CapitalBusiness loan and PayPal Working Capital programSquare CapitalNot yet

PayPal vs Square Fees

When examining PayPal fees vs Square fees, it’s important to look at a few different aspects of the pricing structures. For most companies, PayPal’s online processing fees are higher than Square’s. However, Square generally charges less for online payments, while PayPal charges less for in-person transactions.

Here are a few key differences to note:

Admin Fees

When comparing Square vs PayPal, neither have any administration fees to speak of. In fact, both brands sell themselves on free merchant accounts. There is no monthly fee to use the Square POS app or the PayPal platform.

However, hardware add-ons may incur additional costs. While a magstripe reader comes free with a Square account, you will need to purchase additional hardware for a PayPal Zettle (formerly PayPal Here) account.

Getting Paid

The following transaction fees apply when your business is receiving funds:


  • 2.7% per swipe for mobile/in-store payments (within the United States)
  • 3.5% + $0.15 for keyed sales on mobile or in-store
  • 3.49% + $0.49 per transaction for online payments/invoicing (within the United States)


  • In-person purchases: 2.6% + $0.10
  • Online processing fee: 2.9% + $0.30
  • Manually keyed-in: 3.5% + $0.15

Paying Out

When making payments through PayPal, the fees will vary based on a variety of factors like domestic vs international, payment type (credit card, ACH, etc.), currency received, payment method, checkout, and consumer vs. merchant fees.

For online and in-store consumer transactions without currency conversion, PayPal is free.

Paying out with Square is free for the next business day. If you want instant payment options or same-day transfer, the cost is 1.5% of the transaction.

International Fees

PayPal international fees vary by payment method. When sending funds directly to another PayPal user, PayPal charges 5% of the transaction, with a minimum fee of $0.99 and a maximum fee of $4.99.

The fee will differ if the international money transfer is funded through a credit card, debit card, or PayPal Credit. It will include a funding fee of 2.9% plus a fixed fee (based on the currency used) applied.

Square customers will have to bear the conversion costs with their bank. The platform works with most internationally-issued cards with a Visa, MasterCard, AMEX, Discover, JCB, or UnionPay logo. 

Square will only accept currencies from the US, Canada, Japan, Australia, and the United Kingdom.

Pre-paid Card

The Paypal Business Debit Card is used anywhere that Mastercard is accepted. The standard cashback rate is 1% on eligible purchases, and the card can also be used in the ATM (for additional fees).

The Square debit card is free to order and has no monthly fees, minimum balance fees, overdraft fees, or any other recurring fees. Payment processing fees are separate and still apply.


The type of platform you choose largely depends on what you want to do. Ecommerce businesses will have an easier time with PayPal as the system is geared more toward processing online payments.

On the other hand, the Square platform sends members free hardware that can do everything from scanning barcodes to processing refunds and inventory management. It’s built more for the brick-and-mortar venture.

While PayPal is secure and has a vast capability for international commerce, Square tends to deny anything it deems “high-risk”.

If you’re still scratching your head, a third option exists that may be an optimal fit.

Tipalti is a streamlined, global mass payment solution that easily automates the entire payables process. It’s perfect for a business of any size in both the virtual and in-person payment space.

The system effortlessly provides supplier self-service onboarding, validation, tax compliance, fraud controls, and a reduction in errors. It’s the perfect alternative to both PayPal and Square.

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