Wise and PayPal are two popular payment platforms offering different business features and benefits. Wise (formerly TransferWise) is a peer-to-peer money transfer service that uses the mid-market rate for currency conversion. PayPal is a global payment platform that enables online payments, invoicing, and checkout services.
This article will compare Wise and PayPal and help you decide which platform to use based on your specific needs and goals.
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What is Wise?
Wise is a money transfer service founded in 2011 by two Estonian ex-pats who realized how much money they were losing by sending money internationally with traditional banks. Their mission is to make international money transfers cheaper and more transparent.
Wise works by matching your money with other users who are sending money in the opposite direction. For example, if you want to send money from the US to the UK, Wise will find someone who wants to send money from the UK to the US and swap your money with theirs. This way, your money never actually crosses borders, and you avoid paying high fees and markups.
Wise offers several features for businesses, such as:
- Borderless accounts: You can open a free multi-currency account that lets you hold over 50 currencies and get local bank account details for the US, UK, Europe, Australia, New Zealand, Singapore, Hong Kong, Japan, Canada, Poland, Hungary, Romania, Turkey, Bulgaria, Czech Republic, Croatia, Denmark, Norway, and Sweden. You can use this account to receive payments from customers or pay suppliers without any fees.
- Multi-currency wallets: You can convert your money between different currencies at the mid-market rate with a low conversion fee (usually between 0.35% and 1%). You can also lock in a rate before you need to send or spend your money.
- Batch payments: You can send up to 1,000 payments at once with a single click using a spreadsheet or an API integration. You can also automate your recurring payments with scheduled transfers.
- Low-cost transfers: You can send money to over 70 countries with low fees (usually between $1 and $10) and fast delivery times (usually within 1-2 business days).
Some of the advantages of using Wise for businesses are:
- Transparency: Wise shows you exactly how much your transfer will cost upfront and how much your recipient will get. There are no hidden fees or markups on the exchange rate.
- Speed: Wise transfers your money as quickly as possible using local bank transfers or card payments. You can also track your transfer status online or via email notifications.
- Convenience: Wise lets you manage your money online or via a mobile app. You can also integrate Wise with popular e-commerce platforms like Shopify or WooCommerce.
- Security: Wise is regulated by financial authorities around the world and uses advanced encryption to protect your data and funds.
What is PayPal?
PayPal is a payment platform founded in 1998 by a group of entrepreneurs who wanted to create a safer, simpler, and smarter way to send and receive money online. EBay later acquired it in 2002 before becoming independent again in 2015.
PayPal works by linking your email address to your card or bank account. You can use your PayPal account to shop online at millions of websites that accept PayPal as a payment method. You can also use your PayPal account to send money to friends and family in the same currency for free.
PayPal offers several features for businesses, such as:
- Accepting online payments: You can create a PayPal business account and accept payments from customers via credit cards, debit cards, PayPal balance, or PayPal Credit. You can also create and send invoices and reminders to your customers via email or text message.
- Sending invoices: You can create and send professional invoices to your customers with PayPal. You can customize your invoices with your logo, terms, and payment options. You can also track and manage your invoices online or via a mobile app.
- Providing a secure checkout experience: You can add a PayPal button to your website or use PayPal Checkout to offer a fast and secure checkout experience to your customers. You can also use PayPal to process payments on your mobile app or in person with a card reader.
- Buyer and seller protection: PayPal offers protection for both buyers and sellers in case of disputes, fraud, or unauthorized transactions. You can also access PayPal’s Resolution Center to resolve any issues with your payments.
Some of the advantages of using PayPal for businesses are:
- Wide acceptance: PayPal is one of the most widely used payment platforms in the world, with over 325 million users in over 190 countries.
- Trustworthiness: PayPal is a trusted and reputable brand that has been in the online payment industry for over 20 years. You can build trust and credibility with your customers by using PayPal.
- Integration: PayPal integrates with various e-commerce platforms and third-party services, such as Shopify, WooCommerce, WordPress, QuickBooks, Xero, Mailchimp, and more. You can also use PayPal’s APIs and SDKs to customize your payment solutions.
How Do Wise and PayPal Compare?
Now that you have a basic understanding of what Wise and PayPal are and what they offer for businesses let’s compare them in terms of fees, exchange rates, user experience, and integration options.
One of the most important factors to consider when choosing a payment solution for your business is how much it will cost you to send and receive money across borders. Both Wise and PayPal charge fees for different transactions, such as sending, receiving, converting, and withdrawing money.
The fees vary depending on the amount you are sending or receiving, the payment method you are using, the currency you are converting to or from, and the country you are sending to or from.
Another important factor to consider when choosing a payment solution for your business is how much money you will get or lose by converting your money from one currency to another. Both Wise and PayPal use different methods to calculate their exchange rates, and they can have a significant impact on the overall cost of your transactions.
Wise uses the mid-market exchange rate for currency conversion fees. The mid-market exchange rate is the average of the buy and sell rates on the global market at any given time. It is also known as the interbank rate or the spot rate. It is the fairest and most transparent exchange rate because it is the same rate you see on Google or Reuters.
PayPal uses a marked-up rate for currency conversion fees. The marked-up rate is the mid-market exchange rate plus a margin added by PayPal to cover their costs and make a profit. The margin can vary depending on the currency pair and the transaction type, but it is usually between 3.5% and 4%. PayPal does not disclose its margin upfront, so you may not know how much you are paying until after you complete your transaction.
Which platform offers faster transfers?
The speed of transfers depends on several factors, such as the payment method, the currency pair, the country pair, the transfer amount, and the verification process. Generally speaking, Wise transfers are faster than PayPal transfers because Wise uses local bank transfers or card payments that avoid crossing borders.
According to their websites, Wise transfers usually take 1-2 business days (or even less) to reach the recipient’s bank account. A PayPal bank transfer typically takes 3-5 business days (or even more) to reach the recipient’s bank account.
However, the actual time to transfer money may vary depending on the specific circumstances of each transaction. You can check the estimated delivery time of your transfer on both platforms before you confirm your transfer.
How secure are Wise and PayPal?
Both Wise and PayPal are secure and trustworthy payment platforms that use advanced encryption and fraud prevention measures to protect your data and funds. They are also regulated by financial authorities around the world and comply with the relevant laws and regulations.
Wise safeguards your money by holding it separately from its own money in major financial institutions. It also uses two-factor authentication, biometric verification, and email notifications to secure your account.
PayPal protects your money by offering buyer and seller protection in case of disputes, fraud, or unauthorized transactions. It also uses two-factor authentication, biometric verification, and email notifications to secure your account.
Choose Based on Your Needs
Wise and PayPal are both popular and reliable payment platforms that offer different features and benefits for businesses. However, when it comes to international money transfers, Wise offers a more specialized service that enables it to charge lower fees, offer better exchange rates, and deliver faster international transfers than PayPal.
Therefore, if you are looking for a cost-effective and transparent international money transfer service for your cross-border transactions, you may want to choose Wise over PayPal. However, if you are looking for a more widely accepted and trusted payment solution for your online payments within the same currency, you may want to choose PayPal over Wise.
Ultimately, the best payment solution for your business depends on your specific needs and goals. You should compare Wise and PayPal for yourself by using their online calculators or setting up test accounts to see how they work in practice. You should also consider other factors such as customer preference, integration options, security measures, and customer service.