PayPal vs Wise for business banking – What’s best? Comparing fees, features, pros and cons

Last updated on 10 August 2023

In today’s digital era, businesses are increasingly relying on online platforms for their banking needs. PayPal and Wise (formerly known as TransferWise) have emerged as popular options for businesses seeking efficient and cost-effective international banking solutions.

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In this article, we will compare PayPal vs Wise, outlining their pros, cons, key differences, costs, and other essential considerations for the UK business audience.

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PayPal vs Wise

FeaturesPayPalWise
Wide Acceptance
Integration with E-commerce Solutions
Quick Setup and Accessibility
Currency Conversion
Competitive Exchange Rates
Transfer Speed
Multi-Currency Accounts
Local Bank Accounts
Integration with Accounting Software
Transaction Fees
E-commerce Tools
Customer Support
Familiarity and Recognition

Please note that a “-” indicates that the specific feature is not a primary focus or provided by the respective platform, while a “✓” indicates the presence or emphasis on the feature. This table can help businesses compare the key features and determine which platform aligns better with their specific needs.

Statistics

  1. PayPal:
  • As of Q2 2021, PayPal had 403 million active user accounts worldwide, making it one of the most widely used online payment platforms.
  • In 2020, PayPal processed over 15.4 billion transactions with a total payment volume of $936 billion.
  • PayPal’s mobile payment volume reached $311 billion in 2020, reflecting the growing trend of mobile commerce.
  • The average annual revenue per active PayPal user was $228 in 2020, showcasing the platform’s ability to generate consistent value from its user base.
  1. Wise:
  • Wise serves over 10 million customers globally and moves over £4.5 billion in customer funds every month.
  • Wise offers local bank account details in over 50 currencies and operates in more than 70 countries, providing businesses with extensive coverage for international banking needs.
  • Wise’s average exchange rate markup is around 0.35%, significantly lower than traditional banks, potentially resulting in substantial savings for businesses conducting international transactions.
  • In 2020, Wise’s customer deposits surpassed £4 billion, indicating a growing trust and adoption of the platform for personal and business banking needs.

These statistics highlight the extensive reach, transaction volume, and financial impact that both PayPal and Wise have in the online payment and business banking landscape. Understanding these figures can provide businesses with insights into the platforms’ popularity, scale, and the potential benefits they can offer.

Pros of PayPal

  • Wide acceptance: PayPal is a well-established platform with a global user base. It is widely accepted by online retailers, making it easy for businesses to transact with customers worldwide.
  • Integration and e-commerce solutions: PayPal offers a range of integration options, allowing businesses to seamlessly incorporate it into their online stores and payment systems. It provides secure payment gateways, fraud protection, and additional features like invoicing and recurring payments.
  • Quick setup and accessibility: Setting up a PayPal business account is relatively straightforward, making it a convenient option for small businesses or startups. It also offers user-friendly mobile apps for easy access to funds and transactions on the go.

Cons of PayPal

  • High transaction fees: One major drawback of PayPal is its transaction fees, which can be relatively high, especially for international payments. These fees can eat into business profits, particularly for companies that process a significant volume of transactions.
  • Limited customer support: PayPal’s customer support has been known to be lacking, with many businesses reporting difficulties in reaching a prompt resolution to their issues. This can be frustrating and time-consuming for businesses that rely on efficient customer support.

Pros of Wise

  • Competitive exchange rates: Wise offers highly competitive exchange rates, often outperforming traditional banks and other payment providers. This can result in significant savings for businesses, especially those involved in frequent international transactions.
  • Low transaction fees: Wise charges a transparent and low percentage fee on each transfer, making it an affordable option for businesses. The fee structure is clear and easy to understand, eliminating any hidden costs or surprises.
  • Multi-currency accounts: Wise enables businesses to hold and manage funds in multiple currencies, providing greater flexibility and minimising currency conversion fees. This feature is particularly beneficial for businesses operating in different countries or dealing with international clients and suppliers.
  • Local bank accounts: Wise offers local bank account details in various countries, allowing businesses to receive payments in local currencies. This can streamline cross-border transactions, reduce costs, and enhance cash flow management.
  • Integration with Xero and QuickBooks: Wise integrates seamlessly with popular accounting software like Xero and QuickBooks. This simplifies the reconciliation process, making it easier for businesses to manage their finances efficiently.

Cons of Wise

  • Limited e-commerce solutions: Unlike PayPal, Wise doesn’t offer a comprehensive suite of e-commerce tools, such as invoicing, payment gateways, and recurring billing. Businesses requiring these features may need to integrate Wise with other platforms or use additional services.
  • Limited customer support channels: While Wise provides customer support, it primarily relies on email and chat-based systems. Some businesses may prefer more immediate support options, such as phone or live chat, especially for time-sensitive issues.
  • Familiarity and recognition: While Wise has gained popularity in recent years, it may not be as well-known or recognised as PayPal, especially among certain customer demographics. This could potentially lead to a slight hesitation or unfamiliarity when it comes to payments or receiving funds via Wise.

PayPal vs Wise – Key differences

  1. Currency conversion: Wise specialises in international transfers and offers highly competitive exchange rates. It allows businesses to hold and manage funds in multiple currencies, reducing currency conversion costs. PayPal, on the other hand, has higher currency conversion fees and limited options for holding different currencies.
  2. Transfer speed: Wise typically provides faster transfer times compared to PayPal, especially for international transactions. This can be crucial for businesses requiring timely payments and cash flow management.
  3. Business features: While PayPal offers a comprehensive suite of business tools, Wise primarily focuses on international money transfers. It provides businesses with local bank accounts in various countries, facilitating faster and cheaper transfers to those regions.

PayPal vs Wise – Costs and fees

PayPal costs and fees

PayPal’s fee structure includes transaction fees, currency conversion fees, and withdrawal fees. The exact rates vary depending on the transaction type, country, and currency involved. Businesses should carefully review PayPal’s fee schedule to assess the impact on their specific operations.

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Wise costs and fees

Wise operates on a transparent fee structure, charging a small percentage fee on each transfer. The exchange rates provided by Wise are typically more competitive than traditional banks, potentially resulting in substantial savings for businesses.

PayPal vs Wise – Other considerations

  1. Scale and transaction volume: PayPal is a suitable choice for businesses of all sizes, from small to enterprise-level. Wise, on the other hand, is particularly advantageous for businesses engaged in international trade or requiring multi-currency accounts.
  2. Payment method preferences: It is essential to consider the payment preferences of your customers and partners. While PayPal is widely recognised and accepted, Wise may not be as familiar to everyone. Assessing the target market’s preferred payment methods can help determine the most suitable platform.

PayPal vs Wise – Verdict

In conclusion, both PayPal and Wise offer unique advantages and cater to different business requirements.

PayPal is advantageous for businesses seeking a comprehensive e-commerce solution and broad acceptance, while Wise excels in cost-effective international transfers and multi-currency accounts.

Assessing transaction volume, currency needs, customer preferences, and cost structures will help UK businesses make an informed decision regarding their banking needs.

PayPal vs Wise – FAQ

Can I use PayPal or Wise for domestic business transactions within the UK?

Yes, both PayPal and Wise can be used for domestic transactions within the UK. However, it’s worth noting that Wise primarily focuses on international transfers and may offer additional benefits for businesses dealing with cross-border transactions.

Are there any limits on transaction amounts with PayPal and Wise?

Both PayPal and Wise have different limits on transaction amounts, depending on various factors such as account verification, business type, and transaction history. It’s advisable to review the terms and conditions of each platform to understand the specific limits that may apply to your business.

How secure are PayPal and Wise for business banking?

Both PayPal and Wise prioritise security and employ measures such as encryption, two-factor authentication, and anti-fraud systems to protect user accounts and transactions. However, it’s important for businesses to follow best practices for online security, such as using strong passwords and keeping their account information confidential.

Can I integrate PayPal or Wise with my existing accounting software?

Yes, both PayPal and Wise offer integration options with popular accounting software like Xero and QuickBooks. This integration can streamline financial management processes by automatically importing transaction data and simplifying reconciliation.

Which platform is more cost-effective for international transactions?

Wise is generally considered more cost-effective for international transactions due to its competitive exchange rates and low percentage fees. It provides businesses with a transparent fee structure, which can result in significant savings compared to traditional banks or PayPal’s currency conversion fees.

Can I receive payments from customers without them having a PayPal or Wise account?

With PayPal, customers can pay using various methods, including credit and debit cards, even if they don’t have a PayPal account. Wise also allows customers to make payments without an account through their “Pay with Wise” feature, but it is more commonly used for bank transfers.

How long does it take to set up a PayPal or Wise business account?

Setting up a PayPal business account is relatively quick and straightforward, often requiring basic information about your business. Wise also offers a straightforward signup process, but it may take slightly longer as the platform requires verification of business details and identification documents.

What support options are available for PayPal and Wise users?

PayPal provides customer support through email, chat, and an online help center. Wise primarily offers support through email and chat-based systems. It’s important to note that response times may vary, and businesses should consider their preference for support channels when choosing between the two platforms.

It’s important for businesses to conduct thorough research and carefully assess their specific banking needs before deciding between PayPal and Wise. Understanding the features, costs, and limitations of each platform will help businesses make an informed choice that best aligns with their requirements.

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Reviewed by , Managing Director

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