You should use something like Recurly or Chargify + a real payment gateway/merchant account for subscriptions. Using Paypal is just asking for trouble. We've been using Recurly for our clients and it's been working flawlessly (kind of expensive at $70/m, but IMO it's completely worth it for any kind of business.)
232 million people use PayPal. A couple hundred at most use Recurly. Recurly's screwed a higher percentage of its users than PayPal, by far. If you're not aware of how, go back and read Recurly's blog posts from just after their beta days, when they massively raised prices and removed API access from plans of users that had already invested time in fully integrating those APIs with their live websites.
I think the track record points to PayPal as a safer choice. Once the new business is established, it can build its own in-house billing to support additional payment types. Writing your own subscription management for most sites is not hard.
If Recurly had some issues in their beta/early after beta days, that's understandable. But Paypal has been screwing users for 10+ and counting. I have myself heard at least 20 horror stories about PayPal freezing money for no reason. It happened to one of my businesses just half a year ago. They've decided to freeze all payments, and only after a month they've decided to "verify" whether we're a legitimate business or not by calling our customers and asking whether they've received the product or not. Thankfully, after that they unfroze the money, but for a young business, that was almost a death blow.
It's not about percentages, but about total numbers. Paypal fucked over tens of thousands, if not hundreds of thousands merchants. If you want some reading material, go to http://paypalsucks.com/
And with all due respect, building in-house billing may not be as easy as you think. I run a software development company, and I recommend my clients to use Recurly.
PayPal is no worse than any other merchant account provider in regards to their policies for risk reviews and what happens when an account is frozen. The policies are essentially word for word the same at PayPal and at the major banks underwriting most merchant accounts. Sticking a subscription-management-as-a-service startup on top of your payment processor does not alleviate any of these issues.
I know exactly how easy/hard building in-house billing is, thank you very much. I've built many, for my own business which supports over 80,000 users with a myriad of complex one-time/subscription/overage/special-rate/etc. payment plans, and for others. You can look at my profile if you wish some evidence.
