The 4 Best Alternatives to PayPal (PYPL, GOOG)

PayPal (NASDAQ: PYPL) is almost synonymous with online payments, but it is not alone in the growing digital money space. Nearly every consumer market is moving online; for example, consider Amazon overtaking Walmart as the world's largest retailer, and the fact that consumers are turning to online payment systems in record numbers every year. The industry for online payment platforms is always innovating, and major players are starting to take notice. There is a lot of room for competitor services. Apple, Google (NASDAQ: GOOG) and Samsung have all created rival platforms, and there are plenty of lesser-known alternatives already available in the online payments marketplace.

PayPal was founded in 1998 as a libertarian experiment by a group of tech superstars, including Elon Musk, Max Levchin and Peter Thiel. By 2002, it became the go-to brand name in online money management and was bought by eBay. Total PayPal volume hit a record in Q2 2015 with almost $66 billion in net total payments, but it is far from monopolizing the industry; 2015 is expected to see north of $430 billion in mobile payments alone.

One advantage PayPal has is it is a huge, multiservice platform; competitors are not always as diverse. For example, Payoneer, Inc. focuses on online shopping, and Stripe is designed for online businesses. Other options compete on multiple fronts, including Payza, Inc. and Google Wallet. Each brings something unique to the table, so the best alternative likely depends on the individual consumer's online money habits.

Skrill is probably the best-known PayPal alternative. The company boasts 36 million customers along with 150,000 merchants in 200 different countries. According to Skrill, the only countries without a presence are Afghanistan, North Korea, Nigeria, Cuba, Myanmar, Sudan and Iran.

The major area where Skrill, formerly Moneybookers, touts its services over PayPal is in terms of advertising fees and transaction costs. PayPal earns 4% or more for every transaction, while Skrill charges between 1.7 and 2.9% based on size.

Skrill offers debit cards to all customers, while PayPal limits debit cards to U.S. customers only. This is especially useful for travelers, since the card can be issued in euros, pounds sterling or other currencies; you do not have to pay a conversion fee. Skill also has a more straightforward fee schedule for business debit cards.

One area of concern for private users is the inactivity fees; if Skrill accounts are not used for 12 months, a small charge is assessed. PayPal does not have this feature. PayPal's biggest advantage over Skrill is in terms of merchant acceptance. It is simply easier for many shoppers to use PayPal because almost every major retailer is PayPal accessible. Skrill has some notable partnerships, including eBay, oDesk and Skype, but it is not as ubiquitous as PayPal.

Payza, a rebrand of the payment system AlertPay, is owned by the London-based company MH Pillars, Inc. It is one of the few apps that effectively competes with PayPal on personal and business accounts, and it uses a very similar, user experience-focused interface.

On the personal side, Payza contains most of the same functions as PayPal: money exchanges, free online transfers, smartphone functionality and bank account integration. Payza offers access to more than 190 countries, so it is nearly as universal as PayPal, which claims over 200. Personal accounts are free to establish and easy to use, with very similar customer service features to PayPal, though with a slightly better reputation. Incoming funds are subject to a 2.5% fee.

One interesting feature is the Payza Avatar, which uses a fun cartoon self as an extra layer of security. The Avatar has customizable greetings and displays that reduce the threat of reaching a phishing site, a particular danger when logging in with a new device.

Business accounts are also free. Customers can pay on the go through a credit card, e-wallet or other solutions based on their location. The Mass Pay feature allows users to upload a payroll spreadsheet and send money to employees, contractors, suppliers and other third parties. Invoicing is also free. Multiple businesses can be managed from one account.

Several big-name competitors could have been listed here, such as Amazon Payments, Apple Pay or Samsung Pay; however, none of these services have quite the full range of options of PayPal, although they do not lack for resources and are all determined to be serious competitors in the future. Instead, Google Wallet gets the nod for its ability to attach payments to Gmail messages, and the fact that Google is one of the few companies that dominates the online world.

Like PayPal, Google Wallet is great for sending money to and from anywhere for virtually any reason. Both companies charge 2.9% for debit cards, so linking to a bank account instead makes sense. Google Wallet synced up nicely with Google Checkout before that service went away in 2013.

There are no setup or cancellation fees for Google Wallet, and it is available for Android and iPhones. The Wallet won a major victory when the competing Softcard app was retired in March 2015, which opened up access to T-Mobile, Verizon and AT&T customers. The biggest advantage for Google Wallet is the merchant function that allows customer tracking and outreach. It makes a big difference for businesses to be able to put a "Buy with Google" tab on their websites.

Stripe competes against PayPal for online business customers but not much else. This service is only available to U.S. and Canada-based businesses, but payments can come in from any source. Fees are very clear; Stripe charges 2.9% plus 30 cents on every transaction. The checkout process for Stripe is self-hosted; it occurs on the business owner's site rather than sending customers to an external site such as PayPal, which saves businesses from monthly fees for the trouble.

Another convenience of using the Stripe platform is with bank account deposits. Suppose a customer purchases a product from a business through Stripe. The Stripe network automatically deposits the funds into an outside bank account; this means fewer manually initiated transfers, which is a constant hassle for many businesses, and fewer opportunities for disastrous events such as fraud or account holds.

The downside, which might not be much of a downside for the technically savvy, is that Stripe was built by and for Web developers. This involves a great deal of customization but also a great deal of small, tedious integration steps many users find frustrating.