Freelancers and businesses around the world use electronic payment platforms, such as PayPal or Payoneer, to pay their bills and receive the money they earn. If you are taking your first steps as a digital entrepreneur, you may be wondering if it is better to use PayPal or Payoneer as a payment method. We invite you to see what the main characteristics of these platforms are.
PayPal or Payoneer, which one to use?
A good number of users are familiar with how PayPal and Payoneer work, two very popular electronic payment gateways. Both companies have been in business for over a decade, and are available in hundreds of countries. Over time they have been incorporating various functionalities to facilitate the sending, receiving and use of money.
Do you need to send and receive money from another country to friends or family? Are you thinking of opening an online store and need to process the payments you receive? In any case, both PayPal and Payoneer are good options, offering great features to suit your needs. But which of the two is better?
In order for you to make an informed decision regarding these two payment platforms, it is convenient to know their most relevant characteristics. Next, we will talk a little about how PayPal and Payoneer work, what are their main advantages for the entrepreneur and are their drawbacks.
What is PayPal and how does it work?
PayPal is one of those companies that need little or no introduction, as its track record in the industry is recognized globally. This North American payment company was founded in 1998 and stands out for having revolutionized financial technology and the way of doing online banking.
Around the world, hundreds of millions of users trust PayPal to send and receive electronic payments. That is why many companies include PayPal among their main payment options, in order to reach a greater number of potential customers. How does this platform work?
Basically, PayPal is a secure and easy-to-use payment method that serves as an alternative to traditional payment methods. The user only has to associate their PayPal account with a bank account to be able to transfer the money directly to their bank, paying a minimum commission.
Read: How Does PayPal Works
Advantages of using PayPal
To better understand how PayPal works, take a look at its main advantages.
- Opening a PayPal account is free and very simple: you just need to enter your personal data and associate an email.
- To receive a payment, you only need to provide the associated email.
- To pay an invoice or buy a product online, you must approve the payment from the official PayPal page, which guarantees the protection of your financial data.
- Transfers are made instantly.
- The platform allows you to make currency exchanges quickly and easily.
- PayPal offers a MasterCard card with no annual maintenance fee.
- With a PayPal Business account, you will be able to perform many other management activities for your company.
Obviously, not all are advantages when we talk about PayPal. Some drawbacks of the platform are the following:
High commissions: PayPal commissions are high compared to other payment platforms: a variable percentage that ranges between 1.9% and 3.4% per operation, plus a fixed 0.35 euros.
Balance retention: Due to its strict security policies, the platform can hold balances for 24 hours, a week, or up to 21 days or even 180 days. It is possible to release the money earlier by following the system prompts.
Account Verification: To use all the features of your PayPal account, you must verify it by associating it with a bank account.
What is Payoneer and how does it work?
Payoneer is another alternative to sending and receiving payments online, mainly focused on promoting its services to companies, freelancers and independent professionals who sell products and services online. In addition, it offers other financial services, such as bulk payments and collections between providers and customers of online stores.
Renowned companies, such as Google, Amazon and Airbnb, use this platform to send mass payments around the world. Likewise, freelancers and companies of all sizes use Payoneer to make and receive international payments, access their working capital and carry out management activities in their businesses.
One of the reasons Payoneer has become a strong competitor to other payment platforms, such as PayPal, is that it works similar to how a bank account operates. In fact, the user is assigned a MasterCard debit card, which he will be able to use to withdraw cash at authorized ATMs.
Advantages of using Payoneer
What are the advantages of using Payoneer over other payment methods? In the following list you will see some:
- Creating a Payoneer account is completely free.
- Money transfers to users of the platform are free, even if it is necessary to convert currencies.
- You can convert foreign currency into local currency and vice versa, being able to choose between more than 160 different currencies.
- You can withdraw your money without having a bank account, just using your MasterCard card at an authorized ATM.
- Through this platform, you can receive payments from any affiliate network.
- Sending and receiving transfers to your Payoneer account is almost instant.
- It has lower commissions than other payment gateways, such as PayPal.
Disadvantages of Payoneer
- It does not have a fixed commission rate, which means that the percentage to pay for transferring money to your bank account will depend on the type of local currency and the average market rate.
- Credit card transactions are affected by certain limits and high commission fees.
- The platform deducts about 25 euros a year for debit card maintenance costs.
Wise (formerly TransferWise), the best option for international shipments
Many companies and entrepreneurs need to make payments in international currency, both on online platforms and to their suppliers. In these cases, the use of PayPal or Payoneer may incur a higher cost. This is because transfer costs and commission rates increase, affecting the profitability of the business.
In situations like these, it’s best to turn to international shipping platforms like Wise, formerly known as TransferWise. This London company uses a very particular exchange system so that its users exchange local currency for foreign currency without paying high commissions.
How does TransferWise work?
To understand how this payment platform works, let’s think of a person who is in the United Kingdom and needs to transfer money to a relative located in Spain.
- The person puts the money (Pounds) into a UK TransferWise account.
- The company converts that money by exchanging it with that of other users in Spain who wish to send money to the United Kingdom.
- The relative located in Spain withdraws the money that has been sent from the United Kingdom in local currency (Euros), from a Spanish TransferWise account.
This direct exchange system (peer-to-peer) prevents money from passing through banking systems, which means considerable savings in foreign exchange commissions. In addition, the real exchange rate is applied to the transfer so that the conversion between currencies is accurate and profitable.
Which payment platform is better?
To determine which electronic payment platform is better, you have to take into account factors such as the nature and scope of your business.
- PayPal makes it easy for more potential customers to buy your products and services.
- Payoneer is a good option for large companies and for those who receive payments from any affiliate network.
- TransferWise is ideal for exchanging currencies paying the lowest commissions.