Pads have often been rather taboo when associated with Fighting games because the majority of people who play on pads tend to use their thumbs for attack inputs instead of their finger tips. This is not really ideal because of the differences between using thumbs and finger tips. The idiom "You're all thumbs." has always been an expression to imply a person is awkward at handling things, because thumbs just are simply not as dexterous or swift as the other fingers. When one uses finger tips in lieu of your right thumb on a pad it is sometimes referred to as Claw-Style.
Here's some reasons why Claw-Styling is superior to Thumbing, which are also reasons why Sticks are often thought of as superior to Pads:
#1 - Rapid Tapping. Fingers are able to rapidly tap buttons much faster than thumbs. You can test this on your computer by rapidly tapping a letter for a given amount of time and then comparing your input per-minute speed with your index finger.
#2 - Simultaneous Inputs. Finger tips allow you to input any kind of two or three button combination much better than with thumbs. While thumbs can push two buttons that are vertically aligned with one another, it's difficult to input diagonally aligned or horizontally aligned buttons, as seen with this image of a PS2 pad:
The first examples of □ and X being pressed and the second example of Δ and O being pressed are examples of easy simultaneous inputs for thumbs. However, all the other examples are difficult for thumbs because it is necessary to contort and move the hand in order to press them. The last example of □ and O being simultaneously pressed is practically impossible with a thumb. But all of these inputs are rather trivial with finger tips. When there are even more buttons involved the task becomes even more difficult, as in pressing three buttons simultaneously. While button mapping is allowed in tournaments it's widely looked down upon (note that macros and autofire are not allowed).
#3 - Sliding/Pianoing. Thumb Movement is slow. Moving your thumb to each of the attacks on the face of the pad is significantly slower than having your finger tips already on the buttons. For example, first pressing X then pressing O with your thumb is a lot slower than if you had your index finger on X and middle finger on O. While sliding (kara/RC) inputs and piano inputs are possible with a thumb, it's not nearly so easy as with finger tips. This is especially important for reversals and such.
#4 - Hovering. It can also make a big difference for things like simply having your finger on the attack button you need when you need it. Like with the example of CvS2 footsies: if your thumb is hovering over light kick and you need a medium punch to anti-air a short jump. But it takes time to move your thumb from light kick to medium punch, time you don't have. And you can't say you could just hover over medium punch because if the opponent dashes or rolls in at you instead then you're likely to need light kick pretty fast. Here's a nice little quote from Bob Sagat that really illustrates this point.
#5 - Mashing. Most games allow you to mash out of dizzies by rapidly tapping buttons and wiggling your directionals. Some games, like MvC2, allow you to cause more hits from a super by mashing buttons. And other games, like SFA3, allow you to reduce damage on hits by mashing buttons while getting hit. In any case, mashing with fingertips is significantly superior than mashing with a thumb for the sole reason that you can hit more buttons much faster when you're using more fingers, obviously.
#6 - Holding. This may not apply to every character in every game, but holding buttons while fighting can be difficult with thumbs. For example Balrog (Street Fighter, boxer) and Shizumaru (Samurai Shodown) and Aoko (Melty Blood) gain moves from holding multiple buttons, or rather they can execute special moves by holding and releasing a button. And they are still able to fight while charging these moves, which would prove rather difficult with thumbs.
Using a Keyboard is in a bit of a gray area. In theory, since you'll be using finger tips for both attack inputs and directional inputs, it would be acceptable. However, keyboards are rather bulky and blocky, so it can be difficult to input motion/directional inputs such a 214 (QCB) or 623 (DP). The good news is that you'll most certainly not have difficulty inputting commands from either the left or right side, which is something that many Fighting game players have an issue with on both Sticks and Pads.
Example video of claw-style, while playing Vampire Savior.
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