Whether you are a blogger, YouTuber, artist or a gamer, the thing that is common between all you creative minds is making a living online. You run ads, sell products, and accept donations from your readers, viewers, and fans for your work. People like to show their appreciation by paying creative folks for their effort which is cool. Some of you use a subscription model with a members only area where content is locked behind a paywall.
The real question is what service or platform should we use to allow our fans to send donations or subscribe to our services? Today, we will be taking a look at two such services, each which it’s own set of advantages and disadvantages.
One is Patreon that was developed by a musician and has since then become a popular way to accept subscription payments for paywall content. The other is PayPal, a behemoth of a fintech company that was built to process payments, including but not limited to subscriptions and donations/tips. Tough call?
Patreon vs Paypal
If you are a blogger, chances are high that you are using WordPress, if you are a vlogger, YouTube would be high on your list, and if you are an app developer, it’s either Android or iOS. Both PayPal and Patreon support pretty much all the popular platforms with customized plugins and scripts that you can use out-of-box.
Patreon has an app directory where you can find some of the most popular platforms listed including Discord bots, MailChimp lists, and even Google Sheets. This makes Patreon easy to use across the board, and you can receive money from your patrons pretty much everywhere.
PayPal is equally popular if not more and has pre-built plugins and apps for most platforms including WordPress and other content CMS, websites, popular email subscription services like MailChimp, apps on both Android and iOS, and so on. This is where PayPal takes the lead.
You can’t use Patreon in your mobile apps to receive payments which is sad seeing how apps are used by people for pretty much everything today. PayPal bought Braintree which specializes in app and eCommerce payments.
Both have apps available for Android and iOS platform with a very beautiful and functional web interface.
I guess this is what it all boils down to. As a creator, you want to use a payment processor that is reliable, dependable, easy to use and affordable. Fee structure matters but this is also where things get complicated. You see, if you are using Patreon, you can collect subscription payments from fans and followers, but you will need a payment processor like PayPal or Payoneer to withdraw it to your bank account.
US creators have the option to withdraw money from Patreon via direct bank deposits but international creators will need a payment processor. We will see how it works and why people still use Patreon over PayPal in Features section below.
Patreon charges a fixed 5% deduction irrespective of the amount pledged to you and the total amount that you make each month. Easy to understand. Then there are payout fees. Direct Deposits in the US will cost $0.25. For PayPal payouts, it is $0.25 or 1% of the amount transferred capped at $20 per deposit. Payoneer seems to be more reasonable at $3 per deposit for international creators.
Patreon uses Stripe and PayPal to process payments from your patrons account to your Creator’s Balance account. Patreon batches these transactions to reduce the total fees paid by a patron but it will vary greatly depending on who patrons are paying and what the amount is.
Simply put, more patrons paying small amounts leads to higher processing fee and less number of patrons paying higher amounts will lead to a lower processing fee. Click here for always updated fee structure.
It is important to note here that Patreon only allows, and even encourages, the subscription model meaning you cannot accept one-time donations and tips. This is how it was built to be so I don’t see them changing it any time soon either.
PayPal’s fees structure has always been complicated and currency conversion charges that are not mentioned but are significant has been well-documented on the web. Let’s see. PayPal charges 2.9%+$0.30 per transaction. If you are receiving money in a foreign currency, you pay a fixed fee which is usually under $1.
The problem occurs when you ask PayPal to convert it to your country’s national currency. The conversion rate is always around 2-3% less than the market rates and PayPal never provides any kind of receipt for the same. I can confirm this personally because I have used PayPal to receive money in USD and converted it to INR every month. It can quickly add up. Plus, there is the standard $10/month for creating and managing subscriptions using Virtual Terminal or PayPal Payments Pro.
So, if you are using Patreon, you are paying double fees. 5% to Patreon and then some to the payment processor (usually another 4-5%). While on the other hand, as your income grows, PayPal can be actually cheaper than Patreon, especially when your subscription amount is over $10. Then PayPal’s 2.9% will seem low compared to Patreon.
Also Read: 6 Best PayPal Alternatives
Results: PayPal wins.
The basic distinction between Patreon vs Paypal is that; Patreon provides an easy way to accept the subscription-based donation. While PayPal is a payment processor for individuals, merchants, and businesses including companies like Patreon. In addition to providing payment processing, PayPal also allows users to accept donations and subscriptions payments.
Patreon was built from the ground up for creative folks as a way to accept subscriptions on their membership sites, communicate with their followers, and build a sustainable source of income. As such, using Patreon, you can create posts or content that is only visible to your paying members or to everyone in general. Patreon offers creators a way to reward their followers with exclusive content hidden behind the paywall. They want to create a subscription-based crowdfunding platform.
So what about one-time payments? If you are hung up on it, here is a way. Many Patreon users recommend Buy Me A Coffee to accept one-time payments from their fans. You can also use PayPal for the same.
PayPal, on the other hand, offers features like the ability to receive or make payments in multiple currencies, use the Bill Me Later feature where buyers can buy and pay later through a charge on their credit card, create invoices, and track inventory. As you can see, PayPal has a very different business model.
Another key distinction is that Patreon pays monthly while withdrawals in PayPal can be made daily, depending on the country you live in. This is important for those creators who don’t make enough and are cash-strapped. Patreon will also allow users to create a landing page, a sort of profile, that will help new fans understanding what you are offering, how it is unique, and how much it will cost them.
Patreon also has a community page where supporters and subscribers can interact with the creator, ask questions, and provide feedback. On the flip side, your entire business model depends on a single source – Patreon. If anything happens to Patreon or should they make changes that are not in your best interests, you run the risk of losing everything.
Something similar has happened in the past with YouTube creators. Something similar also happened at Patreon when several creators lost subscribers at an alarming rate because they decided to change their fee structure.
Creators still prefer Patreon over individual payment processors like PayPal and Stripe because it takes the guesswork out of the equation. There is no planning needed. You just open an account and start creating. Focus on what you do best. For 5% commission, Patreon will take care of payments, chargebacks, failed payments, and payout without you having to lift a single finger. It is also very popular and familiar which instills a feeling of trust and familiarity.
What does it mean for the Patrons? If you are a patron or a supporter who wants to pledge, say $500 per month, to various artists, how does it work out? Well, if you are using a payment processor like PayPal or Stripe, you will be making several small payments to different creators leading to higher fees. If you are using Patreon, you will be charged only once and payments would be distributed accordingly among all the creators. This means fewer fees for you as a supporter.
At the same time, it is easy to replicate most of the core features of Patreon using a combination of PayPal and MailChimp. You have PayPal to receive both onetime and subscription payments, and you have MailChimp to collect email IDs that can be used to send newsletters and collect feedback. This way, you have more control over your business but there is some learning curve and you will need to spend some time managing both.
Results: Patreon wins
Patreon vs Paypal: Which one to choose?
Here is the rundown. Patreon is slightly expensive for creators because you are paying double fees. One to Patreon and one to your payment processor, but Patreon offers an out of box solution that simply works with little to no know-how. More suitable for regular content creators like YouTubers and writers who are looking for subscription payments, but as you make more, you will pay more.
PayPal is cheaper, comparatively, but comes with a little learning curve and technical know-how, however, you are in more control of your business. You will need an email subscriber or a forum on your site to communicate with your followers here. You can also accept one-time payments which are better for creators who organize one-off events.
Which one do you prefer and why?