Working at a company that is currently making this decision, I appreciate the blog post. That being said, I absolutely don't see how they arrive at their numbers. They state that SaaS founders routinely pay "4-8% of revenue" to stripe. Then their own calculation ends up at 4.2% of revenue using a combination of all Stripe services possible (Billing, Payments, Tax, Data Pipeline). Where are the other ~4% supposed to come from?
If anything, the calculation is overstating the realistically expected cost in a few ways:
- Particularly B2B SaaS will likely have some % of invoice/bank transfer payment. Assuming 100% payment via credit card is a 'worst-case' assessment.
- Even given that, the bulk of the cost are credit card processing fees, which you would pay either way. Maybe not exactly at stripe's rate, but something similar.
- Stripe Tax for example doesn't charge 0.5% of revenue flat. It only charges for revenue where you’re registered to collect taxes, which for an international business will be far from every transaction (depends on locality & customer base, of course). In addition to that, the pricing drops to 0.4% if you process more than $50k per month.
All in all, I appreciate the effort, but given that Lago is a stripe competitor, this calculation dressed up as a 'neutral assessment' on Github seems disingenuous and makes me trust them less.
You are right, and I see how that would push up the bill as % of revenue.
That being said, this has nothing to do with stripe's software platform which this article focuses on, and all to do with credit card payment fees. Braintree charges "2.59% + $.49 per transaction". PayPal charges "3.49% + $.49 per transaction". Square payments charges "2.9% + $.30 per transaction".
Girocard (in person) is 0.25%. GiroPay is 0.09€ per transaction, no matter how large. PayDirekt is 0.35€ per transaction, no matter how large. SEPA Debit is about 0.10€ as well.
Why are US-based payment services so fucking expensive?
Credit card reward systems & points are not free. Comes at the cost of higher transaction fees that eventually get passed on to the customer.
I’ve found these schemes much less prevalent in Europe (with the exception of AMEX, but half of the vendors in Europe seems to not accept that anyway).
On top of that, in the EU, interchange fees are capped to 0.3% of the transaction for credit cards and to 0.2% for debit cards. This prevents it from becoming the points hell of the US market.
Girocard was actually still significantly cheaper than the capped credit and debit cards (0.125% end-to-end cost (!)), and yet now we're seeing banks drop it because MasterCard has threatened to stop business with any bank that doesn't drop it.
IMO, the EU should either break up MasterCard & VISA, nationalize them, or build their own system (maybe unify Girocard, Dankort, etc?) and make that mandatory.
The difference between the MasterCard & VISA fees and e.g. Girocard fees is almost 2%. That's equivalent to paying an additional 2% tax on everything.
With that amount of money we could make all transit in the EU entirely free of charge and expand it quite a bit, yet all it's doing right now is make some rich assholes even richer.
Nationalizing a company that isn't really incorporated in your state is funny.
EU has already limited the interchange fees on domestic cards. Plus, basically every EU country has some kind of a homegrown system.
> Credit card reward systems & points are not free.
I always treat them as a system for the corruption of myself. They pay me to use their card (for a payment!!!) and therefore I get corrupted and I become part of the problem.
Although I'm pretty sure most of the rewards go to people willing to pay for premium cards because they make a lot of transactions. Do the people with free credit cards subsidize them? Maybe but it's not obvious. Of course, the people with the biggest reward cards are probably not paying much interest or late fees either.
> Do the people with free credit cards subsidize them?
Depends on the card. Interchange fees are much lower for basic cards so if you get at least 2% cashback, that's break-even. Of course cards with annual fees get a lot more rewards in the form of transferable airline points and have much higher interchange fees to cover that.
The interchange fee differences between credit card types are not very high, usually around 0.5%. You can see the public Visa interchange rates at https://usa.visa.com/content/dam/VCOM/download/merchants/vis.... Credit card companies play a lot of games with this too and will “upgrade” your card type if they think it’s worth it, even if you don’t make any changes.
The biggest variances involve non-exempt (Durbin amendment) debit cards.
A historian, Walter McDougall, author of the excellent "Let the Sea Make a Noise", was planning to write a history of America around the duality of the word "hustle", which can mean both "energetic, go get 'em attitude" and "scam". In America we are very accepting of anti-social or exploitative behavior as long as somebody's getting rich.
I also think a lot about the term "puffery", which in American law is when companies make false claims about a product, but in a fashion where everybody is assumed to know that they're lying, which makes it ok: https://en.wikipedia.org/wiki/Puffery
It really says something to me that we supposedly have such a deep expectation of commercial lies that it's acceptable. I think in a healthier country someone would say, "Wait, what if they just didn't lie?"
Haha EU isn't perfect, but from a super high-level and personal point of view (and there are millions of nuances within Europe), but generally there's more emphasis on the common good as a society, than what I've seen in the US
(I grew up in France but part of my family lives in the US).
Nobody in your bubble. Just off the top of my head I know a couple people who don't have a single credit card, one is mid-50s, one just turned 70.
> US debit cards are basically free
I agree that they're basically free to process payments from, but there are invisible costs to the cardholder associated with using them vs credit cards (less buyer protection, overdraft storms if you accidentally zero your account).
I'm not aware of any downsides of keeping at least one or two credit cards, except for the potential to put oneself in debt. Unfortunately for some people, keeping a credit card is untenable because they're unable to stop themselves from using them.
Actually, I don't even have a credit card myself. My comment was about observing the general behavior of businesses I frequent—only one (a cost-conscious grocery store) won't take credit cards. I've just never needed to go through the hassle of getting one, myself.
Absolutely agree re: cardholder costs. In addition it what you said about fees and liability (although I'm lucky to have a bank that doesn't charge overdraft fees), I'm probably leaving a fair bit of money on the table that I could be making back up with credit card rewards / incentives if I wanted to spend the time on it. My comment was only about costs to the merchant, since that's what GP was talking about.
> I'm lucky to have a bank that doesn't charge overdraft fees
Name-and-fame them (if it wouldn't dox yourself), that's awesome! Are they more lik ea credit union or more like a bank?
> I'm probably leaving a fair bit of money on the table
I have some family who keep ~8 (rewards/travel) credit cards and maximize the incentives by keeping in mind all the categories + percentages for each card, including the couple of them that have rotating categories. It's not a whole lot but it makes my head spin.
I just have a Costco visa and I use it for everything that isn't from Amazon (for which I have a set-and-forget Amazon visa) or Apple (because I'm not going to turn down 0% financing for 24 months with the Apple card). I'm also leaving money on the table... but I don't exactly clip coupons and I even throw away produce (!) that has gone bad through neglect.
that's a bold claim. not everyone bows down to the uber robber barons of the credit companies. i have no credit cards and am surviving life just fine thank you very much. i know i'm not alone.
Right. Unpaid balance over at least one month. Although some people probably just have a credit card for emergency purposes, I assume that most people who have a credit card do use it over the course of a year.
There's a bit of HN bias here. Just thinking of the lower income or non-white side of the country. So many people don't even have a checking account (4.5% households or 5.9million )[0] let alone a debit card. There's no way they have credit cards.
While it may be a low percentage number, 5-7million people is not "nobody". Question I would stipulate would be adults vs minors in that number.
Yeah, no. In another comment, I mentioned shopping at places that give discounts for using cash/debit instead of credit. No all proprietors are greedy assholes to charge everyone for services not used. I choose to do business with these shops.
Sure some do, but it’s an exception rather than a rule. Generally you’re already paying the market up for the credit card fee but get none of the benefits.
I assume because the US credit card customers are obsessed with reward points and miles and it need to be paid by someone. It's usually the merchants through high MDR. The merchants pass on the costs to the card customers or debit card/cash payers.
As a consumer in the US I always pay with a credit card when I can. The businesses have already baked the credit card fees into their pricing so I might as well get a few percent back from my card plus the extra purchase protection, etc.
There are companies that offer lower prices when paying cash/debit specifically to only charge the credit card fees to those using credit cards.
It used to be a big thing in the US at gas stations where they advertised the 2 different prices. I don't know the details, but at some point that stopped happening. I was under the impression some rule change, but it is making a come back. I don't know if some consumer protection laws were made the revoked or whatnot, but it is possible to not have to automatically be charged for credit card fees if you're not using credit.
> It used to be a big thing in the US at gas stations
Hah, as a European that lived in California for a while this always seemed so odd to me. I just dug up a picture of my car that I took at a gas station, and there's prices in the background:
Cash $2.94, Credit $3.11, for regular gas, and the date on the picture is the 4th of July, 2017. That's quite the difference but roughly in line with credit card fees.
It makes sense that gas stations would do this, it's a pretty slim margin business.
In some situations, there is an allowance to demand a surcharge for accepting a card. It comes with very narrowly standardized rules, because it basically is supposed to be "exactly the cost to accept the card".
From what I've seen it turns into a compliance mess outside of in-person retail, because many states have regulations and gimmicks on top of it, and the system will end up kicking out a rejection code if you ask for the wrong amount, or on the wrong customer. It's obviously intended that you just bake the cost in for everyone because that avoids people blaming the card networks for higher prices.
The only time I've seen it in person was when I went to make the initial payment on an auto lease; the dealer had a sign up saying that there would be a 3% credit surcharge, which exceeded the 2% cash back I expected from Citibank, so I used a debit card instead.
You still sometimes see this. My understanding is that it's usually against merchant credit card contracts however. You also used to see cash only stations but that's almost certainly vanishingly rare these days.
based on experiences with vending machines, could you imagine the nightmare of cash only pay-at-the-pump? <shudder> we'd have gas lines like the 70s not because of shortages, but just from people trying to pull their bills along the corner of the pump to flatten them out.
psst, look up. over your head was a joke. nothing to be taken seriously. we have cashierless grocery stores, hardware stores, and every other store. why would you think a late night 24/7 gas station wouldn't go cashierless too?
Need to work on your jokes. ;) The reason is that a significant amount of the profit is in the convenience store. Also security reasons... someone to call the police.
have you honestly never seen a cashierless gas station? you suggest that convenience store is profit center, but as you say, those have to be staffed. what do the numbers look like if it's just gas with cashless pumps and no staff? then, raise the rates of the fuel because "shortages", and I can see it being profitable for less headache. i can think of at least 3 of these stations within 20 miles of me. potentially faster turnover as you don't have people parking at the pump while they spend 15 mins inside. there's a lot of interesting positive aspects to this, and it seems that more are willing to try it.
Interchange fees were legally limited in the EU, not sure about the UK specifically. The reason why EU banks don't have these fancy premium credit cards with 2/3/5% cashback.
It's important to consider when you compare with App Stores or resellers that charge a flat fee of 15%-30%.
Another important factor that is missing is currency exchange rates. I don't know how Stripe handles them, but they always resulted in mysteriously missing money in my experience.
Sign you business up for something like Wise and take the money in its original form without conversion fees. In my experience, wiring up webhooks + API on wise to automate back to your own currency is less expensive than stripe. YMMV
Is PayPal work for small SaaS at all especially one with micropayments? I fear such business would generate more refunds than usually and PayPal is much worse when it's come to blocking your account and freezing your funds.
This is one of the major reasons I think that the lightning network backed by bitcoin could actually be useful, vs the totally useless waste of energy that everyone on here seems to believe it is - the fees are basically a tiny fraction of a cent, and so it could make it economically viable to have payments <$1, which currently isn't really the case with the credit card networks.
Maybe, but really it would just push credit cards to be cheaper. Fundamentally credit card processing tech is cheaper than lightning network (in terms of compute). Pushing CC to be cheaper ofc is a good in and of itself.
My understanding is that a marginal transaction on lightning is pretty lightweight, so it seems like the compute is kind of a non-issue in both cases?
But driving Visa et al to be cheaper sounds like a good outcome. I think it might be hard to get them to give up their current firehose of rent they're extracting by sitting in the middle of so many transactions.
It would be good if people remembered these piecemeal costs when comparing to Google Play or Apple App Store particular in year 2+ of a subscription user.
At that point, the mobile app store offering is effectively costing well under 10%.
>this calculation dressed up as a 'neutral assessment' on Github seems disingenuous and makes me trust them less
agreed. they have a corporate blog on their site, so there's no reason that advertorial content like this couldn't be posted there. posting on github just seems like a dirty trick to add authority to marketing content. and it feels especially dirty because they don't share their own pricing to compare it to.
Why would GitHub add authority? It only really helps when your target audience is technical. But choosing payment providers is not a technical decision for lots of companies.
Stripe's initial success was largely driven by technical people pushing for it because of how easy their API was. Don't underestimate the impact of technical leadership on decisions like this:
> “For us it was quite visceral: these products are not serving the needs of the customers, so let’s build something better,” John Collison argues. “In old-fashioned legacy companies it’s the CFO choosing the payments system. They think all systems are alike, so they just sort the bids from suppliers. But if ... you have a two-person team, both of you writing relatively complex code and solving complex infrastructural problem, you need a simple payments API that – once installed – doesn’t keep changing.”
> ... The company grew swiftly, driven largely by word-of-mouth between developers.
Stripe is a B2B company, and the hardest part of B2B, by a country mile, is sales.
If you have to do sales, selling to a small company is also far easier than to a large company. A startup that just joined ycombinator, and is setting up a marketplace, is easy to sell to: They need something that works, and they can integrate with tomorrow. If you are instead fighting for the ebay payment contract, expect to have a long negotiation process, multiple bidders, and a very narrow profit margin. And after all that work, which every bidder put in, only one company wins, and will probably not make a lot of money. If you are big, you shrug it off. If you are a small company, you die. On top of that, the large customer will always be afraid of you going away, while they will not with your larger competitor, so all else being equal, you are probably losing! So if you are a startup doing payments, you absolutely want to aim for small targets.
Also, startups grow. Sometimes they grow a lot. Stripe didn't get the lyft contract when they were a giant. They got the contract when they were a small company with their office down the street, and rode the growth of Lyft's processing volume. This kind of plan is something Lagos should be trying too.
So it makes perfect sense to try to sell to a technical audience: You aren't going to succeed selling to almost anyone else.
elsewhere in this thread, there's a tweet where OP is bragging about getting three articles onto the front page of HN this week. Whatever this audience is, we are apparently the target.
I might understand the reasoning that it could have reduced authority if hosted on their blog. Their branding makes them more recognizable, which makes them more likely to be noticed as a competitor, which removes neutrality.
> It only really helps when your target audience is technical.
Their product is an "Open Source Metering & Usage-Based Billing" solution on that Github repo, so it does seem like they're using posts on Github to drive people to use their product.
It can be up to 30% if they freeze your account for "suspicious activity." This is currently happening to someone I know who's had all of their November sales frozen. They say Stripe might return 70% of the funds... in February. They're trying to reach a human but no luck so far.
> This is currently happening to someone I know who's had all of their November sales frozen
Why on earth is this person not sweeping nightly into their business bank account? Never leave money in your processor account... they are not your bank!
This is the same stuff people complain about with PayPal - failing to realize this scenario (to this extent where it's threatening your business) is almost entirely the business operator's fault due to a severe lack of understanding of how to use a processor.
My guess is this person's processor account went from small benign numbers and then suddenly had a surge of business (possibly seasonal). This sudden increase in volume can (and will) trigger anti-fraud audits from your processor if you do not already have a well established history with them. You go through it, and move on. Generally it's not an issue if you sweep nightly!
Spread the word - your payment processor is not your bank. Sweep nightly, it's almost always a free service they offer.
Absolutely, payment providers block/suspend accounts left and right, and you're out of luck to find any humans to talk to. If you manage to find a human, 99% chance is that it triggered something in their "anti fraud" systems and then they'll simply state "We can't tell you why, and we can't unsuspend your account, sorry".
Best course of action I've found, is to build your initial MVP with one payment provider but as soon as you've validated there is a market and before you move on with other features, add a backup provider you can switch to at any time because chances are you will get blocked at one point. If not permanent, at least temporary.
If you're clever enough when you build the initial integration, you make sure to abstract out the specific payment provider so it's easy to plug in a new one. Shouldn't add too much complexity.
This works for normal payment processing, but Connect is something that doesn't have a viable alternative. Lago wants to abstract the Connect functionality and allow you to use Stripe Payments, Paypal, other processors, and get the Connect functionality to be open-source. Looking forward to their work and it is sorely needed.
If you have recurring payments, moving the payment methods over is a non-trivial amount of time and coordination to get done (and I'm not even sure how cooperative Stripe will be if you're on a fraud radar somewhere), and usually only involves the raw methods themselves, stuff like subscriptions you'll need to rebuild.
I don't think it's a bad idea necessarily, but it's very difficult to almost impossible to make this a "flip the switch" setup, particularly for SaaS businesses which are almost always recurring payments.
We're a largish Connect user and for us the key thing is just establishing good relationships with reps in the company and maintaining those. We've had a couple of customers run into freezes and other issues and while standard support is basically a brick wall in those cases, getting someone internal to escalate can be hugely beneficial.
I generally agree, but if you go through the process at your bank and get your own merchant account(it's a long drawn out process), then the risk for the bank/visa/mastercard/etc is much, much less, and you can generally always reach out to humans and get answers. It's worth the headache if you live or die on credit card payments.
Completely agree, that's why this Lago is interesting to me instead of using Stripe services. I'd rather use Stripe for the bare minimum so I can implement support for a backup provider as well.
This happens far too often. And because stripe handles the PCI compliance, you can't even take your customer's CC info to another merchant account. This is why people need to be using a PCI tokenizer like BasisTheory. Then you own the rights to the CC, without needing to handle PCI compliance, and you can switch vendors easily.
"dear auditor, i do not store the credit card number, only an unique index to fetch it at any time on this rest service. i promisse it is totally not the same thing"
good luck trying to make thay avoid compliance work.
For low risk clients, were the results different? Which platforms (First Data, Tsys, etc) and ISO (FDMS, Gravity, Bank of America, etc) were you seeing success with?
I don't think the average ISO has the knowledge let alone a published set of credentials to receive card data, the ISO industry really sticks to the tooling platforms provide.
More issues with ISOs than PayFacs. I can speak to one platform (a PayFac) that seemed to bat 1.000 here: Tilled. Not only did they seem to have no issue with migrating low risk clients but they likewise migrated dozens of mid/high risk firms without a single rejection from Tilled themselves or refusal from Stripe to provide the requested data.
Conversely, if you’re anything but the most plain jane business, I would avoid transitioning from Stripe to Gravity like the plague. I watched them reject a candy company and a knitting goods business that were both reputable, over a decade in business each, and never had an abnormal spike in sales or questionable products on offer. Gravity either couldn’t get Stripe data transferred or properly integrated and ended up turning away both businesses (while blaming them for noncompliance).
I work at Tilled and we appreciate the shout out because we have worked tirelessly to make this experience possible with Stripe migrations in particular. While it is ultimately up to the incumbent processor to release the data, from a technology standpoint there is nothing that stands in the way to make this possible, especially here at Tilled since we have built our own API's from the ground up.
If anyone wants to learn more about how Tilled works directly with ISO's who need a payfac solution for ISV customers email us at partners@tilled.com
No, the answer is that credit cards allow chargebacks for up to 180 days. Stripe or Paypal is betting on your honesty by allowing you to withdraw sooner. Stray out of their secret "safe" behavior allowed and they deem the risk too high.
Also... new accounts that experience sudden surges of transactions without well established seasonal patterns and account history are very risky for all processors.
The processor has to protect themselves from being used in some sort of Carding-Farm Scheme, has to protect other merchants from the processor being cut off by issuers (for having too many fraudulent transactions/chargebacks), and protect actual Card Holder's from fraud (since the processor/merchant ultimately are responsible for the chargeback).
People are always surprised when their new account with a few hundred a day in revenue suddenly surges to thousands a day in a short period, and the processor wants to investigate why...
Use the tools freely provided by your processor to protect yourself. Sweep the balance into your business bank account every single day - it's usually automatable and free. There is never a reason to store more than 24 hours of revenue in a processor account... they are not a bank!
Is there any processor which puts the funds to themselves, with the legal binding that unless customer charge backs I will get the money after the chargeback period? Seems like this could save payment processor with lot of headaches while reducing their fees.
I genuinely don't understand why anyone would use stripe for any scaled up business compared to adyen for example.
stripe has a lot of value for out of the box integration, but if you're running your own custom solution you will need to put the same effort to integrate stripe at a 3x cost compared to adyen.
I understand it's a silicon valley thing and most likely those who use it don't get the same public pricing other people get, but aside from branding stripe is extremely expensive compared to comparable solutions.
It’s been a long time, but having dealt with Adyen a few years ago my take away was they are way more punishing regarding your implementation (we had calls randomly fail, users not getting redirected, notifications out of order etc.), with more options but also more rope to hang yourself.
Those are all use cases we needed to cover either way and we did, but errors were part of the routine more than exceptional events. In comparison Stripe was way smoother and documentation/support a lot easier to grasp.
I’m pretty sure adyen requires a decent amount of volume before they will allow you to use them, like in the 10s of millions.
Stripe provides self serve with is nice for getting started and I’m guessing once you’re big enough to jump to adyen, you can likely get a discount on the sticker price since you have bargaining power
Is it really though? It very much depends on your definition of 'scaled up'. Sure, you wouldn't run a Fortune 500's payment processing through stripe's public pricing plan.
But for a $10M SaaS startup, this would come to $350k/yr (assuming some amount of non-credit-card and non-taxed payments). I would say at least 60% of that you would pay anyway to other payments processors, even doing all the software stack yourself (nothing is free in the world of finance, after all). So that leaves you with $140k p.a. for a software stack that covers billing UI, invoicing, taxes, financial reporting. It's far from obvious how you can come up with a comparable solution yourself with a budget of at most 0.5 developers and 0.5 designers that your $140k would get you.
If it costs 1 extra human 1 full year to build then you (roughly) broke even on that year and are up every subsequent year. And it doesn't cost nearly that much.
If someone has revenue $10M per year, I guess it would be more than 1. Also probably they would get discount in stripe if some trusted business has revenue in that range.
i can tell you firsthand that Stripe rates can be very competitive, and if you’re looking to enable some complicated fund flows it can be a great fit. I saw companies with transactions numbers in billions of dollars considering moving to Stripe.
The real question is how much do you want to put your eggs in a single basket. The company I’m at now has a multiprocessing setup that requires more work but isn’t completely dependent on a single provider.
If you let Stripe convert e.g. USD (when you charge USD) to your local currency (when you run your account e.g. in EUR), then you pay them another 2% for that convenience.
I switched to Wise and pay now an order of magnitude less for that.
Hi dkyc,
OP here. Sorry to read this was your impression, two points:
1/ To prevent such a feeling, we've included this disclaimer at the beginning of the post, (i) to state where we stand vs Stripe, (ii) the source data is Stripe's pricing, happy to share more details about the hypothesis
"Disclaimer: This analysis is based on Stripe’s public pricing as of July 21, 2022. Some merchants may be able to negotiate fees or benefit from grandfathered plans. Lago partners with 'Stripe Payments' and can be used as a complement or replacement of 'Stripe Billing'."
2/ I think below comments (to be clear: comments from people completely unrelated to Lago) show how you can reach 4 to 8%. It's also one of the reasons why 'Paddle' is an attractive solution in Europe, it's an all-in-one solution that takes 5-6% on revenue and provides subscription management, payments, invoicing, tax management.
Let us know if you need more info, or if you have feedback on what we could have done differently. In any case, I genuinely appreciate that you took the time to comment!
Thanks for the reply! I just couldn't follow how you end up paying 8% to stripe, save some very non-standard requirements or setup. You can relieve my concerns by telling me the stripe product setup that results in a $100k MRR SaaS company to pay $8k per month to stripe. Might very well be that I'm overlooking something!
Otherwise, the "no one knows exactly how much but up to 8%" framing reads like FUD to me.
I just couldn't follow how you end up paying 8% to stripe, save some very non-standard requirements or setup.
You can easily get close to that if you run a B2C subscription service charging at typical consumer price points - think Netflix but small enough to pay Stripe its standard fees - and you're outside the US so you have a lot of international cards and currency conversions to deal with.
They state that SaaS founders said it's 4-8%. It's not their statement but the SaaS founders
>We asked this question to dozens of SaaS founders and none of them was able to provide a precise figure. Answers ranged from 4 to 8% of their revenue.
Well, for reasons stated I don't believe it was a fair and representative sample then, and that 4% is closer to the upper bound than the lower. Also no idea how "no one was able to give a precise figure" – go into stripe dashboard, open most recent invoice, divide amount paid through payments processed (which are both stated right there on the invoice!)
I'm a B2B SaaS founder and paid 2.7% to stripe last month. OP, feel free to update post with new lower bound.
Even including those, I don't see how you would get to 8%. Apart from the fact that 'Stripe Identity' isn't something I'd expect a standard SaaS company to need (or a tool like Lago to provide), the cost simply isn't that high. Radar and Sigma together for 1,000 monthly transactions adds like ~$130 to your monthly bill.
I challenge the authors of this blog post to provide me a Stripe product setup that would result in an $8,000 monthly cost for a $100,000 MRR SaaS company. It must be very unusual.
[I work at Stripe]
As a practical matter, this guide is somewhat misleading in the sense that it very substantially overestimates what a typical B2B SaaS business pays for Stripe.
For example:
• Cards pricing. The guide assumes a B2B SaaS business accepts 100% of payments via cards. B2B SaaS businesses on Stripe tend to encourage payments via bank transfers and other lower-cost payment method, especially for their biggest customers, and we try to make it as easy as possible for businesses to do this. Bank transfers are priced at 0.8% in the US. The guide states that “additional fees apply for bank transfers, additional payment methods”, which is not true. We encourage users to use alternative payment methods for this reason.
• Stripe Tax. The 0.5% per transaction cost is incurred only in jurisdictions where the business is obligated to collect taxes. For US-based businesses, this generally represents a very small fraction of total payment volume. (And, of course, the tax collection itself is mandatory, and so some tax provider or calculation engine presumably has to be paid for.)
• Stripe Data Pipeline. Including this as a default cost is misleading. It isn’t. While we think it’s a great product (especially if you have a sophisticated ETL pipeline), most Stripe users don’t find themselves needing it.
More broadly, I think it’s important for onlookers to know that OP is the founder of a business that runs on Stripe and positions itself as an alternative to Stripe Billing. They seem to be trying to write deliberately-provocative posts to go viral, as described in this tweet: https://twitter.com/byAnhtho/status/1601197512227885056. Competition is good, and anyone is of course very welcome to analyze Stripe’s pricing. But, in the spirit of transparency, we’d welcome a slightly more realistic analysis.
Stripe Tax. The 0.5% per transaction cost is incurred only in jurisdictions where the business is obligated to collect taxes. For US-based businesses, this generally represents a very small fraction of total payment volume. (And, of course, the tax collection itself is mandatory, and so some tax provider or calculation engine presumably has to be paid for.)
That's obscenely high compared to what we pay one of your competitors for more functionality than what Stripe Tax provides.
Your customers are easily pay a 100% premium over alternatives just to keep everything within Stripe.
Sort of. You need to do a minimum of business in the state, usually $100,000/yr or 200 transactions. I don’t have enough customers in Utah to require tax payments.
I use a 'full-service' payment provider. I send the customer to their shopping cart page. The customer buys the software license from them. And they buy the license from me. They are the 'merchant of note' and collect and remit the VAT/sales tax. They pay me once a month, minus fees.
So how does Stripe tax work? Can Stripe function as the 'merchant of note'? If I am based in the UK and selling to someone in the UK, Germany or the US, will it collect and remit the taxes for me? Or just tell me how much I owe?
Who said anything different or implied they didn’t understand this?
Nobody is arguing that Stripe Tax is not a valuable product, or that the tax landscape is not extremely complicated and worth 0.5% of a transaction.
I am, explicitly, saying that your framing as taxed transactions being “a very small fraction” of US transactions seems false. You are making it sound like the Stripe Tax surcharge will generally speaking not apply to a business, and therefore shouldn’t be used when calculating the amount your company charges.
“ Understanding the state sales tax rules for your SaaS business is difficult due to the many different definitions and categorizations. SaaS for personal use is taxable in Louisiana, Maryland, Massachusetts. SaaS for business use is taxable in Nevada, North Dakota, Ohio.”
Meaning that you don’t have to charge tax in the majority of states. Meaning that it can be negligible. IANAL
From TaxJar, Stripe's own subsidiary, and also the first result on Google:
> Alabama – SaaS is considered a taxable service. Computer software is tangible personal property. (Source)
> Alaska – SaaS is taxable in Alaska. (Source)
> Arizona – SaaS is taxable in Arizona. (Source)
> Connecticut – SaaS is taxable in Connecticut. SaaS for personal use is taxed at the full state rate, but SaaS for business use is only taxed at the rate of 1%. (Source)
> Hawaii – SaaS (and computer services) is taxable in Hawaii. Hawaii’s general excise tax applies to every good and service not tax exempt. (Source)
> Iowa – SaaS is taxable, except when being used for business purposes, then it is exempt. (Source)
> Louisiana – SaaS is taxable. (Source)
> Massachusetts – SaaS and cloud computing are taxable in Massachusetts. (Source)
> New Mexico – SaaS is taxable in New Mexico. (Source)
> New York – SaaS is taxable in New York. (Source)
> Ohio – SaaS is taxable for business use in Ohio and non-taxable for personal use. (Source)
> Pennsylvania – SaaS is taxable in Pennsylvania. (Source)
> Rhode Island – SaaS is taxable in Rhode Island. (Source)
> South Carolina – SaaS is considered a taxable service in South Carolina, as are other charges to access a website. (Source)
> South Dakota – SaaS is considered a taxable service in South Dakota, as are other charges to access software. (Source)
> Tennessee – SaaS is taxable in Tennessee. (Source)
> Texas – SaaS is considered part of a data processing service in Texas and is 80% taxable and 20% exempt from sales tax. (Source)
> Utah – SaaS is taxable in Utah. (Source)
> Washington – SaaS is taxable in Washington since all software, delivered by whatever means, is considered taxable in the state. (Source)
> Washington D.C. – SaaS is considered a taxable service in Washington D.C. (Source)
> West Virginia – SaaS is considered a taxable service in West Virginia. (Source)
SaaS is also far from the only industry Stripe serves. But even if it were, close to half the states require taxes on it in some way, shape or form. Meaning it's not nearly as negligible as you're making it seem.
I also want to reiterate the bar is "very small fraction of total payment volume". Very small really implies single or low double digit percentage. While some of the biggest states are missing, you still have around 40% of the population represented in those states. It seems very unlikely, even with tech's concentration in California, that 40% of the population results in "very small fraction of total payment volume".
OP here. I appreciate the inputs, we're big fans of Stripe at Lago. We operate in the billing space, and are alternatives to home-grown billing systems, Chargebee, Recurly, etc. and Stripe Billing.
1/ Some users use Lago as a complement of Stripe Billing, or don't even consider Stripe Billing, and we built a native integration with Stripe payments.
Out of transparency, the first lines we wrote in this post stated that:
"Disclaimer: This analysis is based on Stripe’s public pricing as of July 21, 2022. Some merchants may be able to negotiate fees or benefit from grandfathered plans. Lago partners with 'Stripe Payments' and can be used as a complement or replacement of 'Stripe Billing'."
2/
> 'write deliberately-provocative posts to go viral'
Thanks for quoting my tweet. I actually shared 2 old articles I wrote in 2021 this week, that made the front page of HN, unrelated to Fintech:
- One on my personal blog sharing what I learnt about press relations, main message being 'don't waste money on an agency if you're early stage' because I've seen this happen too often, and too many founders asked me the same questions about this topic [1] I was actually surprised it was read, as HN is known for being more 'engineering oriented' than 'marketing oriented'.
- Another one about 'scouts' not being necessarily a good thing for founders, with Sifted (TC for EU) which is a position I stand for as a founder and as an investor, and I think Europe should mature towards this topic [2]
The TLDR is: I've been writing about a wide range of topics for a long time, things I like to share, things I stand for and want to have an impact on and was grateful it resonated within my community.
Btw I think the HN ring vote is pretty strong, and HN community very 'fierce' (at times), so I don't think we could have got attention by just 'clickbaiting' and attempting to go viral.
Like any startup, we're excited to share our vision of the world, and this is why we're writing.
Lastly, here are two other examples of content that were intended to spark a discussion in our community (and it did) and don't bring much to Lago as a business:
a/ What not to say to someone who has just been laid off [3]
I wrote it after my partner was laid off and too many people around him just did not know what to say, which amplified the 'grief'. It reminded me of my personal history of grief, and wrote the post. I received dozens of messages of people who have been laid off recently, or whose friend/closed ones had been fired. Founders reached out to say they would share it with their team (it's not an easy topic to discuss).
b/ I recently shared my thought process about moving to the US after YC, as it's a recurring question we have as YC founders based in Europe. This sparked a lot of discussions and helped me iterate on how I approach the question, in a scalable way. I believe other founders learned things by the discussion it sparked, some founders reached out to help me with the US visa etc. Feel free to read it here [4]. Took me some time to write it, but the main ROI was how I've been able to connect with other founders, at the same stage, or 5 steps ahead, and learn from them. And, based on the comments/discussions, I believe other founders in the same situation benefited from this too.
My point is: not all content is written in an attempt to go viral, but I just write about what I believe brings value, and it happens to go viral (whatever you mean by that) when it does have an impact. Regarding my tweet, I think a lot of people wonder how to approach HN, and make a lot of rookie mistakes, and I could also write about what I've learned. This would (if I write it successfully) in fine help having better content on HN.
YC says 'build something people want', I also happen to (occasionally) write things people want. And there's no better gift for a writer.
I think the point here is that this post was optimized to try to go viral. Most startups won’t have 4% as a minimum revenue cost.
For example, you chose the most expensive Billing plan (Scale), which includes things startups don’t need. Similarly assuming the most pessimistic payment mix where everyone is using international cards along with currency conversion, which will never be true. Similarly adding data pipeline.
It’s not “Stripe’s real pricing”, as you’re no doubt aware. That’s where it turns from informative to marketing.
If there’s a way that Lago, or any other Stripe competitor for any product, cuts down on fees, that’s fantastic. There are definitely ways to beat Stripe’s fees on payments, for example, though they’re as difficult as the are transformative.
The point was showing how the pricing and costs adds up.
A lot of founders don’t get what products they use at Stripe and that the cost adds up as a % of revenue.
% of revenue makes sense for payment processing, does it really make sense for SaaS products (billing, tax?) ? What’s the rationale?
About offering alternatives for fintech software (such as billing, tax), with a pricing that does not take a cut on revenue, this is exactly what we are building.
Also the point of my initial comment was that even if you consider this post optimised for vitality, pointing that we are optimising on only that in our content seemed a bit extreme, hence the examples.
In the USA, there is a huge payment processing API industry. Stripe is a great company and it has this family of products that work great together but it has lots of competitors that have better pricing and better service.
I work in the industry for a payment processor. It's not a silicon valley startup (it's basically run by salespeople) but we have way better pricing and you can get someone on the phone if you have an issue.
Reading HN, you might think Stripe is the only option.
Sure but the reason Stripe became Stripe is due to the fact that they have an excellent API and dev experience. Most old school processors are too difficult to setup and manage and have horrendous APIs.e.g: authorize.net
Having said that, feel free to share your company becaise I m always open to evaluatin for our company (low 7 figures ARR)
The association of Stripe with simplicity and good dev experience could be more due to Stripe's marketing/PR than the views of devs who've used Stripe APIs, at least from the few things I've read.
Stripe did actually have a great API at one point, when they just appeared. Their basics of charging a card and managing subscriptions was incredibly simple and developer-friendly compared to their competition at the time, like Authorize.net or PayPal. I don't think PayPal even had a real API back then - you had to use a `<form>` element with hidden fields.
Of course things change, and now Stripe's API has been rewritten to extreme complexity with scattershot documentation and unintuitive terminology. (I sell products, but in the API I have to sell prices??)
>The association of Stripe with simplicity and good dev experience could be more due to Stripe's marketing/PR ...
I don't think it's marketing/PR so much as a halo effect and reputation from years ago. My experience with stripe 5 years ago was/is simpler and easier than it is looking at it today. More products/services/options/requirements - it's more complicated than it was years ago.
But looking at it for a project 5 years ago, it was certainly simpler compared to authorize.net for what my project needed. Just the UI alone to go in and manage/test things was more straightforward and pleasant, even when I hit issues and roadblocks. Authorize.net looked like it hadn't changed much since 2005 or so when I'd looked at it then. May be better now - haven't looked since 2017.
my recent experience working with the Stripe API lines up with this. Based on the reputation I was expecting a lot less complexity and strange default behavior when it comes to subscriptions/invoicing. Still a good dev experience, but not the greatest, most straightforward API ever like its reputation.
For example, Stripe applies discounts prior to proration. So if a customer applies a $100 per month discount on a $1000 subscription, and signs up halfway through the month, they're charged (1000 - 100 * 0.5), not the more intuitive ((1000 * 0.5) - 100). Nitpicky, but not what I expected.
A common problem with payment processors is international support. Stripe isn’t perfect by any means, but they support much more than than most of the US focused competitors.
As an example, a few years ago the EU brought in Strong Customer Authentication (SCA). Stripe was one of the few companies ready for this, being ready about a year before. I used them at the time and adopted their SCA support and it worked well.
We also happened to be considering alternative payment processors at the time. Braintree had some basic support for it, not fully ready, and seemingly undocumented. Other suppliers didn’t even know about SCA despite notionally taking GBP payments.
Of course it’s fine to only sell to the US market, but Stripe is pretty good in many places and I suspect that’s a significant contributor to their popularity.
We are paying roughly 9% fees to stripe which includes currency conversion charges.
So if a customer pays us $100, we are getting $91 to our bank account which is absolutely ridiculous.
If anyone looking for next $10B-$100B business idea, work on making the transaction fees to 1% and you can take business from stripe and PayPal immediately.
Wise.com is doing this and I hope more such companies work on this.
The disruption has to come from bypassing credit card companies like Visa and Mastercard.
In India, almost every merchant is using UPI which saves them fees of credit card processing.
The world banking is getting more advanced and technical and I am sure payment gateways can bypass the credit card and currency conversion fees with direct bank to bank transfer.
For larger Amount, we are asking our customers to use Wise instead of stripe or PayPal as the saving for us is significant.
Could crypto help here, at least for customers who have some in a wallet ready to use?
When I checked about 2 years ago, transferring bitcoin from one wallet to another was negligibly cheap, although I think it took about 20 minutes for the seller to be certain that the bitcoin had been sent to them (too slow for most website payments).
Curious to know if crypto could solve this problem though, if not now, maybe in the future. If some of the 9% fees were passed on to customers in the form of lower prices, it could be quite appealing and give a price advantage (if only a few %) over competitors.
USDC + L2 would be a suitable protocol for day-to-day purchases and nearly 0% fee, at least for those already in the system. But most of this tech is still basically in beta.
USDC hasn't collapsed, and it never should (or at least, no more than any other financial services you use daily) if it is properly regulated by US enforcement agencies.
Depending on where you're located you should potentially consider a solution that looks more like Payment Processor -> Hold in Currency -> Bulk Fx to Local currency. Typically business level Fx processing is 2% - with 3% for credit card fees.
At scale your Fx fees can be less than 2% of the conversion amount, I know that at scale the fees can get down to <0.2% if you're moving multiple millions (USD) in a month.
I know that both Adyem and Braintree will capture into local currency, so you can avoid Fx fees by the payment processor themselves.
Are there any companies arbitraging this % difference by collating lots of different businesses transactions into larger sums to then move into a particular currency for business owners who transact in non local currencies?
I’m pretty sure Wise does something like this. Protip, you can get a Wise business account and collect stripe payments in a local currency, then bulk fx it to your local currency.
Why Stripe isn’t partnering with them, I don’t know. My bank partners with Wise to get the best exchange rate possible (Bunq) when I’m out of the EU. It’s fantastic.
I'm not an expert, I think by default they payout in the currency of the country that your business is located in.
In not sure about India, but in AU, we have the option to receive USD payouts to USD accounts in Australian banks, so you can avoid Stripe's conversion fees. But now you have USD in an AU bank. What are your options? Convert to AUD at the bank's terrible exchange rate. Or send the money to a US bank (or Wise), paying horrendous international transfer fees.
I hope I'm missing something but I don't see this offering from Stripe as being very useful.
> In not sure about India, but in AU, we have the option to receive USD payouts to USD accounts in Australian banks, so you can avoid Stripe's conversion fees.
I tried that, didn't work. I opened a local USD account in my non-US country and tried to add it for payout to Stripe. Stripe only allows (at the time I checked, please correct me if that has changed) US based USD accounts with ACH routing information.
I don't know about AU banks but in India, most big banks allow you to convert at 0.3-0.4% + FIRA and interbank charge which is around $10. Not great but it's better than stripe for bigger amount.
You can also get a multi currency bank account. There are some options available to Indians which provide US based ACH and IBAN. Be careful with FEMA compliance.
Not sure about wise's offering in AU but CA and UK you could just receive the USD into your AU Wise account and pay basically nothing <.5% for FX when compared to spot.
Yes. They only do bank to bank. But there is definitely a business model here.
If you can offer subscription model and can do bank to bank transfer with 0.5% fees, you will disrupt the whole subscription industry relying on visa/Master card monopoly. Not only this, banks also charge very high currency conversion fees which you can disrupt.
You of course need to build lot of things from scratch but with most of the banking now a days going online with new APIs, it is possible.
Thanks, I don't doubt that, just wanted to know more wise.com or if I misunderstood something.
You're right also, I live in Germany since a couple years and and businesses taking money off your bank account is definitely a thing here, I don't know for how long. But mostly it's done by your electricity utility or by the tax man, various fees e.g. the fee for public tv etc. I don't know if there are costs to it, but probably yes.
A workaround to Stripe fees for FX card payments would be to have a set of Wise accounts to receive the money in the local currency (one account or wallet for each currency)
but then you'd still need to pay Wise conversion fees, once you want to gather the money from the different wallets into a master account
I know that I started and shutdown a company through Stripe Atlas a year and a half ago and they're still charging me recurring fees for it. I'm not convinced that Atlas was ever fully thought out on their end and I regret using it.
Fellow Stripe Atlas-er here. I have no experience with corporate anything and started my C Corp because I won the Pioneer Tournament and they said I had to to give them a 1% SAFE to claim my winnings, even though I'd made it clear I did not intend to try to monetize my project at all. The company has literally done zero things since inception except cost me money for my registered agent, Delaware corporation tax, and having to pay someone to file taxes for $0 of income because I am too terrified of the tax legal system to do it myself.
If you don't mind me asking, what was your process for dissolving the corporation? I'd love to shut down mine but last time I looked it up I got bogged down in all the legalese about Notices of Dissolution and Board Approval and all that jazz.
There’s no charge to use Stripe after the $500 Atlas fee to form a company. What fees are you seeing? If you’ve maintained a presence in Delaware, perhaps you’re still paying for your registered agent? (You can also email me at edwin@stripe.com and we can look into this.)
Yeah Stripe is a joke considering its size. I much rather use Square which is saying a lot because that is also a poorly run company. Fintech space is a big joke. They were selling more fluid payment platforms with less fees/cost to consumers. Instead all-in prices have actually gone up.
Almost as if all the "meatspace banking" regulations had their purpose, born out of decades of experience with the many, MANY, M A N Y weird edge cases that crop up sooner or later.
Not to say that the meatspace regulations and practices are fine (from an European POV, the fact y'all still use literal paper cheques instead of bank transfers and credit cards instead of direct debit because consumer protection is way easier on CCs), but still... it's amazing none of the fintechs ever really got hit hard by regulation agencies despite the continuous complaints.
I used to work at Stripe, specifically on Connect, and I want to point out one thing that's not quite accurate:
> and there’s also a transaction fee of $0.25 + 0.25% (in addition to the cost of Stripe Payments and other Stripe products)
This is not a per-transaction fee. That implies that the fee is per-payment. This fee is per-payout, which is the ACH credit (or debit rails transfer) to the account holder from their Stripe balance. It's not uncommon for the payout schedule on accounts to be at least weekly, so you have many payments worth of funds batched together into a single payout. The per-payout fee of $0.25 ends up being a lot smaller as a percentage in practice.
There is no company (that we're at least aware of) on Stripe that is using this combo of Stripe products and paying the "total cost" outlined in the post. Our pricing scales with the size (and needs) of the business. If a business on Stripe is large enough to use our highest billing tier, quotes, revenue recognition, and data pipeline together, then Stripe would've bundled the products together. (And then we charge for them at the end of the month with a volume-based rate of bundled products + payments.) These products are built for the companies who've asked us for these enterprise features and aren't necessarily meant to be used one-off, as the post implies.
As a retail customer, there are three payment processors which I notice “convert” me into a sale more often purely because I’m confident the process will be fast, safe, convenient, and familiar: Apple Pay, Stripe, and Square.
I would have been surprised to learn that they aren’t priced at a premium on the back end, because they certainly feel better and more trustworthy.
Did an AB test a while back and mere presence of the PayPal option boosts sales through all other options plus generates extra sales through PayPal itself. Not something that I was expecting at all, but the confidence level was over 99%.
Most people also don't understand that with Stripe, you don't actually have your own merchant account (this is why they can setup your account so fast).
This can become hugely problematic as your business grows since you're a sub-account of Stripe business, making you beholden to their business practices and costs.
My comments aren't intended to sound negative. There's Pro's and Con's to different business models. Getting quick access to the robust tools Stripe offers comes at the cost of you giving up some control over your companies operations.
Been using Stripe for years but now I realise that I don't even know what plan I'm on and can't see what Stripe is charging me. I get a monthly "tax invoice" which includes all charges done through Stripe and comes out at ~ 2.9% of the volume, but I don't see any line items for Billing or anything else. Where do I find this stuff?
Those are the same numbers as on the tax invoice, and in that section it just says "Fees for all charges, including card charges and other payment methods." Curious if that number already includes charges for things like Subscriptions.
My biggest issue is that they keep all the fees in case of a refund. Sometimes customers just change their mind, and this will cost you. It will cost you a lot if you’re selling high value items.
Same. We're losing thousands of dollars because customers change their mind or made a mistake in their purchase, mostly because we're dealing with high value items.
The payment processors are only charged a tiny fee, not a percentage of the transaction. Up until a few years ago Stripe, Paypal and others had no issues with refunding the entire amount.
Stripe isn't cheap even on IC++ pricing by time you add the bare minimum basics - Adyen is much cheaper but a much poorer dev experience since they are big Kafka advocates and unfortunately this leaks that you can't even GET a transaction by id - if you didn't listen to event stream and persist this yourself then its back to CSV reporting. TBH, even though it costs us more, I'm happier working with Stripe vs event stream advocates that want to leak this everywhere... (I like Kafka to be fair, just Adyen takes it too far, their implementation their problem, now let me get a transaction from 3 weeks ago over REST)
When did stripe start charging extra 0.8% for recurring billing? I remember building my first online business with stripe api right when it came out and recurring billing was a feature, not an add on.
This came up two months ago, the pricing was described as "insidious." [1]
I replied that this description could be extended to include how it generated and associated unique customer IDs. The way it is built now-a-days it is trying to be the central key for SaaS user accounts. Effectively: store all your user data with us.
I thought it was some kind of oversight but it is most likely about lock in.
I am actually working on https://tier.run in part to help create a clean separation of interests between billing (and entitlement, and metering, and feature flagging) systems and how you store and access application and user data.
With Tier we have `tier whois` [1] which lets you get the Stripe Customer ID based on your own userId.
I'd love your feedback if you think there are improvements we could make.
It's funny to observe the tide shift against Stripe on HN in recent years. I think they are a phenomenal, once in a generation company. Their APIs are beautiful (still, even though fewer people agree these days) and the use cases that can be built upon those APIs are endless and amazing. I always felt the pricing was a steal for what the product delivered.
Their support, on the other hand :(. ! Maybe it will get better with advances in LLMs, because I'd be shocked if I was ever talking to a human.
This is one of the many reasons that banks will remain an institution for a long time to come. Automatic Clearing House (ACH, or Auto debit) comes with a host of consumer protections that are completely lacking from payment processors.
I wish legislators would force all payment processors to play by the same book banks have to play by; the same consumer protections.
Totally agree on diversifying payment solution part.
But in terms of pricing, from what I have researched for my SaaS website, Stripe is not bad at all.
When it comes to choosing payment solutions, we need to consider the reliability/quality. You might be able to pay x% less fees with other options but 0.2% more of the down time will cost you much more.
As a developer it's easy to forget how insanely hard it can be to run a business. After all the time, effort, and energy that goes into actually making and selling something, you still have to go through all this additional nonsense just to get the customer's money from their hands into yours.
So does this effectively mean Apple charges 25.2% in the base case, and potentially teens-low twenties in low price point apps ($10 and below)? PayPal, BrainTree and others seem to also be in this range - so backing out market payment rates, the App Store is not as egregious?
So it's 30% charged by Apple with monopoly and no possibility to use something else vs 8% charged by Stripe. And you can also switch to anything else. Sure, it's more work than Apple, but freedom is also more work than being told what to do and how to live.
But stripe doesn’t give you a distribution channel or any other type of platform to build on. And it doesn’t give me access to x billion people with payment details on file, one double click away, without any fraud
Apple is not just charging for payment processing, you get access to the App Store marketplace with more than billion devices. With Stripe you only get payment processing.
For the other fees discussed in this article, you do get additional capabilities. Distribution is not one of them, but it's not an apples to apples comparison.
It does seem that long term Europe should be segregated from the www.
For small entities Euro compliance is impossible. Say for Michigan's largest Mustang parts website. Euro's often respond this they would never bother and their targets are big tech, but illegal and not prosecuted is not the same as legal. And it is telling that the law doesn't say "this only applies to corps with more the 100 million in Euro revenue". It applies to all companies and individuals. It should be possible for such a site to "opt out of Europe" and have safe harbor.
And there is no way it makes sense for the whole world's web to be regulated by a Euro court. There is no reason for a user in the US to see GDPR banners.
Maybe a great firewall to id Europe users, and if you use a vpn to escape it US law doesn't recognize it as valid.
Working at a company that is currently making this decision, I appreciate the blog post. That being said, I absolutely don't see how they arrive at their numbers. They state that SaaS founders routinely pay "4-8% of revenue" to stripe. Then their own calculation ends up at 4.2% of revenue using a combination of all Stripe services possible (Billing, Payments, Tax, Data Pipeline). Where are the other ~4% supposed to come from?
If anything, the calculation is overstating the realistically expected cost in a few ways:
- Particularly B2B SaaS will likely have some % of invoice/bank transfer payment. Assuming 100% payment via credit card is a 'worst-case' assessment.
- Even given that, the bulk of the cost are credit card processing fees, which you would pay either way. Maybe not exactly at stripe's rate, but something similar.
- Stripe Tax for example doesn't charge 0.5% of revenue flat. It only charges for revenue where you’re registered to collect taxes, which for an international business will be far from every transaction (depends on locality & customer base, of course). In addition to that, the pricing drops to 0.4% if you process more than $50k per month.
All in all, I appreciate the effort, but given that Lago is a stripe competitor, this calculation dressed up as a 'neutral assessment' on Github seems disingenuous and makes me trust them less.
“+33c per transaction”
For a B2B SaaS this likely represents a minuscule percentage of the revenue. For a $5/month subscription, this fee alone is more than 6%
You are right, and I see how that would push up the bill as % of revenue.
That being said, this has nothing to do with stripe's software platform which this article focuses on, and all to do with credit card payment fees. Braintree charges "2.59% + $.49 per transaction". PayPal charges "3.49% + $.49 per transaction". Square payments charges "2.9% + $.30 per transaction".
Girocard (in person) is 0.25%. GiroPay is 0.09€ per transaction, no matter how large. PayDirekt is 0.35€ per transaction, no matter how large. SEPA Debit is about 0.10€ as well.
Why are US-based payment services so fucking expensive?
Credit card reward systems & points are not free. Comes at the cost of higher transaction fees that eventually get passed on to the customer.
I’ve found these schemes much less prevalent in Europe (with the exception of AMEX, but half of the vendors in Europe seems to not accept that anyway).
On top of that, in the EU, interchange fees are capped to 0.3% of the transaction for credit cards and to 0.2% for debit cards. This prevents it from becoming the points hell of the US market.
Girocard was actually still significantly cheaper than the capped credit and debit cards (0.125% end-to-end cost (!)), and yet now we're seeing banks drop it because MasterCard has threatened to stop business with any bank that doesn't drop it.
IMO, the EU should either break up MasterCard & VISA, nationalize them, or build their own system (maybe unify Girocard, Dankort, etc?) and make that mandatory.
The difference between the MasterCard & VISA fees and e.g. Girocard fees is almost 2%. That's equivalent to paying an additional 2% tax on everything.
With that amount of money we could make all transit in the EU entirely free of charge and expand it quite a bit, yet all it's doing right now is make some rich assholes even richer.
Nationalizing a company that isn't really incorporated in your state is funny. EU has already limited the interchange fees on domestic cards. Plus, basically every EU country has some kind of a homegrown system.
Mastercard has warned banks that it'd stop cooperating with banks that still support the national card systems.
It's clear they're trying to kill those off, and it's working.
That's why merging the national systems and making that new, merged, EU wide system mandatory is absolutely essential.
Credit cardholders mostly get 1-3% back so it’s a bit of a wash.
> Credit card reward systems & points are not free.
I always treat them as a system for the corruption of myself. They pay me to use their card (for a payment!!!) and therefore I get corrupted and I become part of the problem.
Although I'm pretty sure most of the rewards go to people willing to pay for premium cards because they make a lot of transactions. Do the people with free credit cards subsidize them? Maybe but it's not obvious. Of course, the people with the biggest reward cards are probably not paying much interest or late fees either.
> Do the people with free credit cards subsidize them?
Depends on the card. Interchange fees are much lower for basic cards so if you get at least 2% cashback, that's break-even. Of course cards with annual fees get a lot more rewards in the form of transferable airline points and have much higher interchange fees to cover that.
The interchange fee differences between credit card types are not very high, usually around 0.5%. You can see the public Visa interchange rates at https://usa.visa.com/content/dam/VCOM/download/merchants/vis.... Credit card companies play a lot of games with this too and will “upgrade” your card type if they think it’s worth it, even if you don’t make any changes.
The biggest variances involve non-exempt (Durbin amendment) debit cards.
Ah I thought the interchange rates would be 1% higher for the best cards, not 0.5% higher
I guess the lowest tier cards really do subsidize the rest.
Why are so many things better in the EU?
A historian, Walter McDougall, author of the excellent "Let the Sea Make a Noise", was planning to write a history of America around the duality of the word "hustle", which can mean both "energetic, go get 'em attitude" and "scam". In America we are very accepting of anti-social or exploitative behavior as long as somebody's getting rich.
I also think a lot about the term "puffery", which in American law is when companies make false claims about a product, but in a fashion where everybody is assumed to know that they're lying, which makes it ok: https://en.wikipedia.org/wiki/Puffery
It really says something to me that we supposedly have such a deep expectation of commercial lies that it's acceptable. I think in a healthier country someone would say, "Wait, what if they just didn't lie?"
it's a way to exhert maximum control with minimal effort (in this case, talking about flow of capital)
https://en.m.wikipedia.org/wiki/Normalization_(sociology)
Haha EU isn't perfect, but from a super high-level and personal point of view (and there are millions of nuances within Europe), but generally there's more emphasis on the common good as a society, than what I've seen in the US
(I grew up in France but part of my family lives in the US).
The EU has a cap on interchange fees, by law. The US has no such law, so they charge more, because they can.
Some of the interchange fees are paid back to the customer in the form of cash back and other perks and rewards.
All of the services you mentioned are debit cards, not credit cards. US debit cards are basically free as well, it's just that nobody uses them.
> it's just that nobody uses [debit cards]
Nobody in your bubble. Just off the top of my head I know a couple people who don't have a single credit card, one is mid-50s, one just turned 70.
> US debit cards are basically free
I agree that they're basically free to process payments from, but there are invisible costs to the cardholder associated with using them vs credit cards (less buyer protection, overdraft storms if you accidentally zero your account).
I'm not aware of any downsides of keeping at least one or two credit cards, except for the potential to put oneself in debt. Unfortunately for some people, keeping a credit card is untenable because they're unable to stop themselves from using them.
Actually, I don't even have a credit card myself. My comment was about observing the general behavior of businesses I frequent—only one (a cost-conscious grocery store) won't take credit cards. I've just never needed to go through the hassle of getting one, myself.
Absolutely agree re: cardholder costs. In addition it what you said about fees and liability (although I'm lucky to have a bank that doesn't charge overdraft fees), I'm probably leaving a fair bit of money on the table that I could be making back up with credit card rewards / incentives if I wanted to spend the time on it. My comment was only about costs to the merchant, since that's what GP was talking about.
> I'm lucky to have a bank that doesn't charge overdraft fees
Name-and-fame them (if it wouldn't dox yourself), that's awesome! Are they more lik ea credit union or more like a bank?
> I'm probably leaving a fair bit of money on the table
I have some family who keep ~8 (rewards/travel) credit cards and maximize the incentives by keeping in mind all the categories + percentages for each card, including the couple of them that have rotating categories. It's not a whole lot but it makes my head spin.
I just have a Costco visa and I use it for everything that isn't from Amazon (for which I have a set-and-forget Amazon visa) or Apple (because I'm not going to turn down 0% financing for 24 months with the Apple card). I'm also leaving money on the table... but I don't exactly clip coupons and I even throw away produce (!) that has gone bad through neglect.
>it's just that nobody uses them.
that's a bold claim. not everyone bows down to the uber robber barons of the credit companies. i have no credit cards and am surviving life just fine thank you very much. i know i'm not alone.
this discussion would be more productive with some data:
* 83% of adults have at least one credit card
* 41% adults actually used a credit card in 2020
https://www.federalreserve.gov/publications/2021-economic-we...
41% had credit card debt, presumably a larger amount used them.
Right. Unpaid balance over at least one month. Although some people probably just have a credit card for emergency purposes, I assume that most people who have a credit card do use it over the course of a year.
absolutely, just replying to the poster saying that only 41% used a credit card, which would imply majority of americans don't.
There's a bit of HN bias here. Just thinking of the lower income or non-white side of the country. So many people don't even have a checking account (4.5% households or 5.9million )[0] let alone a debit card. There's no way they have credit cards.
While it may be a low percentage number, 5-7million people is not "nobody". Question I would stipulate would be adults vs minors in that number.
[0]https://news.yahoo.com/number-americans-without-bank-account... (households translates to how many people?) [1]https://www.gao.gov/blog/more-7-million-u.-s.-households-hav... (7.1million from April 2022)
But you’re paying the fee for credit cards anyways, just not getting anything in return including consumer protection that credit cards offer.
Yeah, no. In another comment, I mentioned shopping at places that give discounts for using cash/debit instead of credit. No all proprietors are greedy assholes to charge everyone for services not used. I choose to do business with these shops.
Sure some do, but it’s an exception rather than a rule. Generally you’re already paying the market up for the credit card fee but get none of the benefits.
Id rather take the benefits.
Yes credit cards are insane.
There should be no difference between buying a 50k car with a bank card or a 50 cent plastic bag. Both transactions use the exact same network.
One of the transactions carries more risk. Risk has a cost.
I don’t mean to defend credit card companies, but it’s not as black and white either.
I assume because the US credit card customers are obsessed with reward points and miles and it need to be paid by someone. It's usually the merchants through high MDR. The merchants pass on the costs to the card customers or debit card/cash payers.
As a consumer in the US I always pay with a credit card when I can. The businesses have already baked the credit card fees into their pricing so I might as well get a few percent back from my card plus the extra purchase protection, etc.
There are companies that offer lower prices when paying cash/debit specifically to only charge the credit card fees to those using credit cards.
It used to be a big thing in the US at gas stations where they advertised the 2 different prices. I don't know the details, but at some point that stopped happening. I was under the impression some rule change, but it is making a come back. I don't know if some consumer protection laws were made the revoked or whatnot, but it is possible to not have to automatically be charged for credit card fees if you're not using credit.
> It used to be a big thing in the US at gas stations
Hah, as a European that lived in California for a while this always seemed so odd to me. I just dug up a picture of my car that I took at a gas station, and there's prices in the background: Cash $2.94, Credit $3.11, for regular gas, and the date on the picture is the 4th of July, 2017. That's quite the difference but roughly in line with credit card fees.
It makes sense that gas stations would do this, it's a pretty slim margin business.
In some situations, there is an allowance to demand a surcharge for accepting a card. It comes with very narrowly standardized rules, because it basically is supposed to be "exactly the cost to accept the card".
From what I've seen it turns into a compliance mess outside of in-person retail, because many states have regulations and gimmicks on top of it, and the system will end up kicking out a rejection code if you ask for the wrong amount, or on the wrong customer. It's obviously intended that you just bake the cost in for everyone because that avoids people blaming the card networks for higher prices.
The only time I've seen it in person was when I went to make the initial payment on an auto lease; the dealer had a sign up saying that there would be a 3% credit surcharge, which exceeded the 2% cash back I expected from Citibank, so I used a debit card instead.
You still sometimes see this. My understanding is that it's usually against merchant credit card contracts however. You also used to see cash only stations but that's almost certainly vanishingly rare these days.
based on experiences with vending machines, could you imagine the nightmare of cash only pay-at-the-pump? <shudder> we'd have gas lines like the 70s not because of shortages, but just from people trying to pull their bills along the corner of the pump to flatten them out.
Doesn't preclude a cashier that typically still exists. Also Arco had cash machines up until a few years ago and I never encountered a line at one.
psst, look up. over your head was a joke. nothing to be taken seriously. we have cashierless grocery stores, hardware stores, and every other store. why would you think a late night 24/7 gas station wouldn't go cashierless too?
Need to work on your jokes. ;) The reason is that a significant amount of the profit is in the convenience store. Also security reasons... someone to call the police.
have you honestly never seen a cashierless gas station? you suggest that convenience store is profit center, but as you say, those have to be staffed. what do the numbers look like if it's just gas with cashless pumps and no staff? then, raise the rates of the fuel because "shortages", and I can see it being profitable for less headache. i can think of at least 3 of these stations within 20 miles of me. potentially faster turnover as you don't have people parking at the pump while they spend 15 mins inside. there's a lot of interesting positive aspects to this, and it seems that more are willing to try it.
I haven’t but don’t go to a lot of them. Too much vandalism here, but could see it in a safer place.
Prior to those gimmicks the rates where higher than now. I hoped Google to follow through with their pricing cuts, but yielded rather quickly.
Debit card transactions are basically free in the US too.
Interchange fees were legally limited in the EU, not sure about the UK specifically. The reason why EU banks don't have these fancy premium credit cards with 2/3/5% cashback.
It's important to consider when you compare with App Stores or resellers that charge a flat fee of 15%-30%.
Another important factor that is missing is currency exchange rates. I don't know how Stripe handles them, but they always resulted in mysteriously missing money in my experience.
Sign you business up for something like Wise and take the money in its original form without conversion fees. In my experience, wiring up webhooks + API on wise to automate back to your own currency is less expensive than stripe. YMMV
PayPal offers a micropayments option (5% + $0.05) - which reduces overall cost for businesses where the fixed fee eats a major part of their revenue.
Is PayPal work for small SaaS at all especially one with micropayments? I fear such business would generate more refunds than usually and PayPal is much worse when it's come to blocking your account and freezing your funds.
This is one of the major reasons I think that the lightning network backed by bitcoin could actually be useful, vs the totally useless waste of energy that everyone on here seems to believe it is - the fees are basically a tiny fraction of a cent, and so it could make it economically viable to have payments <$1, which currently isn't really the case with the credit card networks.
Maybe, but really it would just push credit cards to be cheaper. Fundamentally credit card processing tech is cheaper than lightning network (in terms of compute). Pushing CC to be cheaper ofc is a good in and of itself.
My understanding is that a marginal transaction on lightning is pretty lightweight, so it seems like the compute is kind of a non-issue in both cases?
But driving Visa et al to be cheaper sounds like a good outcome. I think it might be hard to get them to give up their current firehose of rent they're extracting by sitting in the middle of so many transactions.
It would be good if people remembered these piecemeal costs when comparing to Google Play or Apple App Store particular in year 2+ of a subscription user.
At that point, the mobile app store offering is effectively costing well under 10%.
I think they are comparing to MoRs like fastspring or paddle where the % is higher?
>this calculation dressed up as a 'neutral assessment' on Github seems disingenuous and makes me trust them less
agreed. they have a corporate blog on their site, so there's no reason that advertorial content like this couldn't be posted there. posting on github just seems like a dirty trick to add authority to marketing content. and it feels especially dirty because they don't share their own pricing to compare it to.
Why would GitHub add authority? It only really helps when your target audience is technical. But choosing payment providers is not a technical decision for lots of companies.
Stripe's initial success was largely driven by technical people pushing for it because of how easy their API was. Don't underestimate the impact of technical leadership on decisions like this:
> “For us it was quite visceral: these products are not serving the needs of the customers, so let’s build something better,” John Collison argues. “In old-fashioned legacy companies it’s the CFO choosing the payments system. They think all systems are alike, so they just sort the bids from suppliers. But if ... you have a two-person team, both of you writing relatively complex code and solving complex infrastructural problem, you need a simple payments API that – once installed – doesn’t keep changing.”
> ... The company grew swiftly, driven largely by word-of-mouth between developers.
https://www.wired.co.uk/article/stripe-payments-apple-amazon...
(To be clear, I was just casually browsing HN on a work break, not actually shopping for a payment solution and reading with diligence)
Stripe is a B2B company, and the hardest part of B2B, by a country mile, is sales.
If you have to do sales, selling to a small company is also far easier than to a large company. A startup that just joined ycombinator, and is setting up a marketplace, is easy to sell to: They need something that works, and they can integrate with tomorrow. If you are instead fighting for the ebay payment contract, expect to have a long negotiation process, multiple bidders, and a very narrow profit margin. And after all that work, which every bidder put in, only one company wins, and will probably not make a lot of money. If you are big, you shrug it off. If you are a small company, you die. On top of that, the large customer will always be afraid of you going away, while they will not with your larger competitor, so all else being equal, you are probably losing! So if you are a startup doing payments, you absolutely want to aim for small targets.
Also, startups grow. Sometimes they grow a lot. Stripe didn't get the lyft contract when they were a giant. They got the contract when they were a small company with their office down the street, and rode the growth of Lyft's processing volume. This kind of plan is something Lagos should be trying too.
So it makes perfect sense to try to sell to a technical audience: You aren't going to succeed selling to almost anyone else.
elsewhere in this thread, there's a tweet where OP is bragging about getting three articles onto the front page of HN this week. Whatever this audience is, we are apparently the target.
I might understand the reasoning that it could have reduced authority if hosted on their blog. Their branding makes them more recognizable, which makes them more likely to be noticed as a competitor, which removes neutrality.
> It only really helps when your target audience is technical.
Their product is an "Open Source Metering & Usage-Based Billing" solution on that Github repo, so it does seem like they're using posts on Github to drive people to use their product.
It can be up to 30% if they freeze your account for "suspicious activity." This is currently happening to someone I know who's had all of their November sales frozen. They say Stripe might return 70% of the funds... in February. They're trying to reach a human but no luck so far.
> This is currently happening to someone I know who's had all of their November sales frozen
Why on earth is this person not sweeping nightly into their business bank account? Never leave money in your processor account... they are not your bank!
This is the same stuff people complain about with PayPal - failing to realize this scenario (to this extent where it's threatening your business) is almost entirely the business operator's fault due to a severe lack of understanding of how to use a processor.
My guess is this person's processor account went from small benign numbers and then suddenly had a surge of business (possibly seasonal). This sudden increase in volume can (and will) trigger anti-fraud audits from your processor if you do not already have a well established history with them. You go through it, and move on. Generally it's not an issue if you sweep nightly!
Spread the word - your payment processor is not your bank. Sweep nightly, it's almost always a free service they offer.
> Never leave money in your processor account... they are not your bank!
Reminds me of crypto exchanges too. Don't leave money in an exchange, use it to, well, exchange money, then move it to your bank account or wallet.
Stripe auto sweeps but not nightly. Not sure you have any control over when they sweep funds over
Stripe does support nightly sweeps, and according to their documentation[1] it's the default when you enable sweeping.
[1] https://support.stripe.com/questions/understanding-daily-aut...
I can set daily/weekly or monthly payouts just fine.
Isn't the a function of not having your own merchant account? By using Stripe, you're actually just a sub-account to them.
Are you serious? This is very concerning
Absolutely, payment providers block/suspend accounts left and right, and you're out of luck to find any humans to talk to. If you manage to find a human, 99% chance is that it triggered something in their "anti fraud" systems and then they'll simply state "We can't tell you why, and we can't unsuspend your account, sorry".
Best course of action I've found, is to build your initial MVP with one payment provider but as soon as you've validated there is a market and before you move on with other features, add a backup provider you can switch to at any time because chances are you will get blocked at one point. If not permanent, at least temporary.
If you're clever enough when you build the initial integration, you make sure to abstract out the specific payment provider so it's easy to plug in a new one. Shouldn't add too much complexity.
Sucks but the reality we live in...
This works for normal payment processing, but Connect is something that doesn't have a viable alternative. Lago wants to abstract the Connect functionality and allow you to use Stripe Payments, Paypal, other processors, and get the Connect functionality to be open-source. Looking forward to their work and it is sorely needed.
If you have recurring payments, moving the payment methods over is a non-trivial amount of time and coordination to get done (and I'm not even sure how cooperative Stripe will be if you're on a fraud radar somewhere), and usually only involves the raw methods themselves, stuff like subscriptions you'll need to rebuild.
I don't think it's a bad idea necessarily, but it's very difficult to almost impossible to make this a "flip the switch" setup, particularly for SaaS businesses which are almost always recurring payments.
We're a largish Connect user and for us the key thing is just establishing good relationships with reps in the company and maintaining those. We've had a couple of customers run into freezes and other issues and while standard support is basically a brick wall in those cases, getting someone internal to escalate can be hugely beneficial.
I generally agree, but if you go through the process at your bank and get your own merchant account(it's a long drawn out process), then the risk for the bank/visa/mastercard/etc is much, much less, and you can generally always reach out to humans and get answers. It's worth the headache if you live or die on credit card payments.
Completely agree, that's why this Lago is interesting to me instead of using Stripe services. I'd rather use Stripe for the bare minimum so I can implement support for a backup provider as well.
This happens far too often. And because stripe handles the PCI compliance, you can't even take your customer's CC info to another merchant account. This is why people need to be using a PCI tokenizer like BasisTheory. Then you own the rights to the CC, without needing to handle PCI compliance, and you can switch vendors easily.
nice try mr sales person.
PCI tokenizer is pure snake oil.
"dear auditor, i do not store the credit card number, only an unique index to fetch it at any time on this rest service. i promisse it is totally not the same thing"
good luck trying to make thay avoid compliance work.
> you can't even take your customer's CC info to another merchant account
Blatant FUD. https://support.stripe.com/questions/export-customer-card-da...
I ran a medium/high risk payments firm and Stripe followed through on customers’ transfer requests perhaps 10% of the time. One cannot rely on it.
For low risk clients, were the results different? Which platforms (First Data, Tsys, etc) and ISO (FDMS, Gravity, Bank of America, etc) were you seeing success with?
I don't think the average ISO has the knowledge let alone a published set of credentials to receive card data, the ISO industry really sticks to the tooling platforms provide.
More issues with ISOs than PayFacs. I can speak to one platform (a PayFac) that seemed to bat 1.000 here: Tilled. Not only did they seem to have no issue with migrating low risk clients but they likewise migrated dozens of mid/high risk firms without a single rejection from Tilled themselves or refusal from Stripe to provide the requested data.
Conversely, if you’re anything but the most plain jane business, I would avoid transitioning from Stripe to Gravity like the plague. I watched them reject a candy company and a knitting goods business that were both reputable, over a decade in business each, and never had an abnormal spike in sales or questionable products on offer. Gravity either couldn’t get Stripe data transferred or properly integrated and ended up turning away both businesses (while blaming them for noncompliance).
I work at Tilled and we appreciate the shout out because we have worked tirelessly to make this experience possible with Stripe migrations in particular. While it is ultimately up to the incumbent processor to release the data, from a technology standpoint there is nothing that stands in the way to make this possible, especially here at Tilled since we have built our own API's from the ground up.
If anyone wants to learn more about how Tilled works directly with ISO's who need a payfac solution for ISV customers email us at partners@tilled.com
You either die a hero or live long enough to become Paypal.
live long enough to understand why Paypal became Paypal.
Is the answer simply money?
No, the answer is that credit cards allow chargebacks for up to 180 days. Stripe or Paypal is betting on your honesty by allowing you to withdraw sooner. Stray out of their secret "safe" behavior allowed and they deem the risk too high.
Also... new accounts that experience sudden surges of transactions without well established seasonal patterns and account history are very risky for all processors.
The processor has to protect themselves from being used in some sort of Carding-Farm Scheme, has to protect other merchants from the processor being cut off by issuers (for having too many fraudulent transactions/chargebacks), and protect actual Card Holder's from fraud (since the processor/merchant ultimately are responsible for the chargeback).
People are always surprised when their new account with a few hundred a day in revenue suddenly surges to thousands a day in a short period, and the processor wants to investigate why...
Use the tools freely provided by your processor to protect yourself. Sweep the balance into your business bank account every single day - it's usually automatable and free. There is never a reason to store more than 24 hours of revenue in a processor account... they are not a bank!
Is there any processor which puts the funds to themselves, with the legal binding that unless customer charge backs I will get the money after the chargeback period? Seems like this could save payment processor with lot of headaches while reducing their fees.
Probably not because it would be hard for most businesses to wait 180 days to get paid.
It’s a bummer that Stripe didn’t enter the market to be better than this and to bring something new to the table.
I genuinely don't understand why anyone would use stripe for any scaled up business compared to adyen for example.
stripe has a lot of value for out of the box integration, but if you're running your own custom solution you will need to put the same effort to integrate stripe at a 3x cost compared to adyen.
I understand it's a silicon valley thing and most likely those who use it don't get the same public pricing other people get, but aside from branding stripe is extremely expensive compared to comparable solutions.
and 4% of your top line is a huge thing to pay
It’s been a long time, but having dealt with Adyen a few years ago my take away was they are way more punishing regarding your implementation (we had calls randomly fail, users not getting redirected, notifications out of order etc.), with more options but also more rope to hang yourself.
Those are all use cases we needed to cover either way and we did, but errors were part of the routine more than exceptional events. In comparison Stripe was way smoother and documentation/support a lot easier to grasp.
We’ve been a customer for 7 years now and it has been exceptionally stable setup
But yes their documentation can be a bit poor around the edges and if you don’t really know what you’re doing
I’m pretty sure adyen requires a decent amount of volume before they will allow you to use them, like in the 10s of millions.
Stripe provides self serve with is nice for getting started and I’m guessing once you’re big enough to jump to adyen, you can likely get a discount on the sticker price since you have bargaining power
Is it really though? It very much depends on your definition of 'scaled up'. Sure, you wouldn't run a Fortune 500's payment processing through stripe's public pricing plan.
But for a $10M SaaS startup, this would come to $350k/yr (assuming some amount of non-credit-card and non-taxed payments). I would say at least 60% of that you would pay anyway to other payments processors, even doing all the software stack yourself (nothing is free in the world of finance, after all). So that leaves you with $140k p.a. for a software stack that covers billing UI, invoicing, taxes, financial reporting. It's far from obvious how you can come up with a comparable solution yourself with a budget of at most 0.5 developers and 0.5 designers that your $140k would get you.
Yes 160k extra a year out of 10m is a lot
If it costs 1 extra human to build everything you’re losing money leaving Stripe.
If it costs 1 extra human 1 full year to build then you (roughly) broke even on that year and are up every subsequent year. And it doesn't cost nearly that much.
If someone has revenue $10M per year, I guess it would be more than 1. Also probably they would get discount in stripe if some trusted business has revenue in that range.
That rather depends on gross margin.
i can tell you firsthand that Stripe rates can be very competitive, and if you’re looking to enable some complicated fund flows it can be a great fit. I saw companies with transactions numbers in billions of dollars considering moving to Stripe.
The real question is how much do you want to put your eggs in a single basket. The company I’m at now has a multiprocessing setup that requires more work but isn’t completely dependent on a single provider.
If you let Stripe convert e.g. USD (when you charge USD) to your local currency (when you run your account e.g. in EUR), then you pay them another 2% for that convenience.
I switched to Wise and pay now an order of magnitude less for that.
Hi dkyc, OP here. Sorry to read this was your impression, two points:
1/ To prevent such a feeling, we've included this disclaimer at the beginning of the post, (i) to state where we stand vs Stripe, (ii) the source data is Stripe's pricing, happy to share more details about the hypothesis
"Disclaimer: This analysis is based on Stripe’s public pricing as of July 21, 2022. Some merchants may be able to negotiate fees or benefit from grandfathered plans. Lago partners with 'Stripe Payments' and can be used as a complement or replacement of 'Stripe Billing'."
2/ I think below comments (to be clear: comments from people completely unrelated to Lago) show how you can reach 4 to 8%. It's also one of the reasons why 'Paddle' is an attractive solution in Europe, it's an all-in-one solution that takes 5-6% on revenue and provides subscription management, payments, invoicing, tax management.
Let us know if you need more info, or if you have feedback on what we could have done differently. In any case, I genuinely appreciate that you took the time to comment!
Thanks for the reply! I just couldn't follow how you end up paying 8% to stripe, save some very non-standard requirements or setup. You can relieve my concerns by telling me the stripe product setup that results in a $100k MRR SaaS company to pay $8k per month to stripe. Might very well be that I'm overlooking something!
Otherwise, the "no one knows exactly how much but up to 8%" framing reads like FUD to me.
I just couldn't follow how you end up paying 8% to stripe, save some very non-standard requirements or setup.
You can easily get close to that if you run a B2C subscription service charging at typical consumer price points - think Netflix but small enough to pay Stripe its standard fees - and you're outside the US so you have a lot of international cards and currency conversions to deal with.
Got it! Will iterate on the article based on your inputs, thanks for the constructive feedback!
Just a heads up that "More about our story here." at the very end is a 404: https://www.getlago.com/company/about-us
Thanks a lot! I've just fixed it, it was supposed to redirect to https://www.getlago.com/about-us
As a single sample: my SAAS startup pays just over 7% to Stripe.
Good grief, talk to your account rep.
Forced currency conversion. International fees versus local. Low average charge (so the per tx fee is more significant)
> - Particularly B2B SaaS will likely have some % of invoice/bank transfer payment.
At what price point? I would imagine anything lower than... $200/mo? $500/mo? isn't worth ACH setup?
I could be wrong. Would love to hear relevant experience on what the cutoff is.
They state that SaaS founders said it's 4-8%. It's not their statement but the SaaS founders
>We asked this question to dozens of SaaS founders and none of them was able to provide a precise figure. Answers ranged from 4 to 8% of their revenue.
Well, for reasons stated I don't believe it was a fair and representative sample then, and that 4% is closer to the upper bound than the lower. Also no idea how "no one was able to give a precise figure" – go into stripe dashboard, open most recent invoice, divide amount paid through payments processed (which are both stated right there on the invoice!)
I'm a B2B SaaS founder and paid 2.7% to stripe last month. OP, feel free to update post with new lower bound.
I'm a B2C SAAS founder and paid 7.1% to Stripe last month.
> all Stripe services possible (Billing, Payments, Tax, Data Pipeline). Where are the other ~4% supposed to come from?
Stripe Radar, Stripe Identity, Stripe Sigma? It all adds up.
Even including those, I don't see how you would get to 8%. Apart from the fact that 'Stripe Identity' isn't something I'd expect a standard SaaS company to need (or a tool like Lago to provide), the cost simply isn't that high. Radar and Sigma together for 1,000 monthly transactions adds like ~$130 to your monthly bill.
I challenge the authors of this blog post to provide me a Stripe product setup that would result in an $8,000 monthly cost for a $100,000 MRR SaaS company. It must be very unusual.
I pay 15% fees because of a very low subscription fee ($2.50).
2.5 * 0.029 = 0.0725 + 0.3 = 0.3725 / 2.5 = 14.9%
They also don't refund fees when a customer wants a refund.
Have you tried encouraging longer subscriptions through steep discounts?
Yep. I offer a yearly plan for $26. My customers are split almost exactly half and half with monthly and yearly subscribers
Thanks for the information; you're probably pretty close to optimal with those prices!
[I work at Stripe] As a practical matter, this guide is somewhat misleading in the sense that it very substantially overestimates what a typical B2B SaaS business pays for Stripe.
For example:
• Cards pricing. The guide assumes a B2B SaaS business accepts 100% of payments via cards. B2B SaaS businesses on Stripe tend to encourage payments via bank transfers and other lower-cost payment method, especially for their biggest customers, and we try to make it as easy as possible for businesses to do this. Bank transfers are priced at 0.8% in the US. The guide states that “additional fees apply for bank transfers, additional payment methods”, which is not true. We encourage users to use alternative payment methods for this reason.
• Stripe Tax. The 0.5% per transaction cost is incurred only in jurisdictions where the business is obligated to collect taxes. For US-based businesses, this generally represents a very small fraction of total payment volume. (And, of course, the tax collection itself is mandatory, and so some tax provider or calculation engine presumably has to be paid for.)
• Stripe Data Pipeline. Including this as a default cost is misleading. It isn’t. While we think it’s a great product (especially if you have a sophisticated ETL pipeline), most Stripe users don’t find themselves needing it.
More broadly, I think it’s important for onlookers to know that OP is the founder of a business that runs on Stripe and positions itself as an alternative to Stripe Billing. They seem to be trying to write deliberately-provocative posts to go viral, as described in this tweet: https://twitter.com/byAnhtho/status/1601197512227885056. Competition is good, and anyone is of course very welcome to analyze Stripe’s pricing. But, in the spirit of transparency, we’d welcome a slightly more realistic analysis.
Stripe Tax. The 0.5% per transaction cost is incurred only in jurisdictions where the business is obligated to collect taxes. For US-based businesses, this generally represents a very small fraction of total payment volume. (And, of course, the tax collection itself is mandatory, and so some tax provider or calculation engine presumably has to be paid for.)
That's obscenely high compared to what we pay one of your competitors for more functionality than what Stripe Tax provides.
Your customers are easily pay a 100% premium over alternatives just to keep everything within Stripe.
> For US-based businesses, this generally represents a very small fraction of total payment volume.
Didn’t “S Dakota vs Wayfair” require sellers to charge interstate tax regardless of physical presence in the state?
I don’t see how it would be a small fraction given that.
Sort of. You need to do a minimum of business in the state, usually $100,000/yr or 200 transactions. I don’t have enough customers in Utah to require tax payments.
That’s fair. I’m guessing it’s also state-dependent with each state having its own rules.
I still would disagree on it being framed as “a very small fraction” of payments even given those stipulations.
I would say, from the consumer end, it’s been the exception rather than the rule that I don’t have to pay WA sales tax.
To clarify, Stripe Tax is our product that helps you automatically calculate taxes.
If you'd like to do it yourself, you can manually define rates at no cost: https://stripe.com/docs/billing/taxes/tax-rates.
I use a 'full-service' payment provider. I send the customer to their shopping cart page. The customer buys the software license from them. And they buy the license from me. They are the 'merchant of note' and collect and remit the VAT/sales tax. They pay me once a month, minus fees.
So how does Stripe tax work? Can Stripe function as the 'merchant of note'? If I am based in the UK and selling to someone in the UK, Germany or the US, will it collect and remit the taxes for me? Or just tell me how much I owe?
Who said anything different or implied they didn’t understand this?
Nobody is arguing that Stripe Tax is not a valuable product, or that the tax landscape is not extremely complicated and worth 0.5% of a transaction.
I am, explicitly, saying that your framing as taxed transactions being “a very small fraction” of US transactions seems false. You are making it sound like the Stripe Tax surcharge will generally speaking not apply to a business, and therefore shouldn’t be used when calculating the amount your company charges.
Do you have anything to back up this claim?
From google:
“ Understanding the state sales tax rules for your SaaS business is difficult due to the many different definitions and categorizations. SaaS for personal use is taxable in Louisiana, Maryland, Massachusetts. SaaS for business use is taxable in Nevada, North Dakota, Ohio.”
Meaning that you don’t have to charge tax in the majority of states. Meaning that it can be negligible. IANAL
That's not a complete list (e.g. SaaS is taxed in New York) but there are also large states where it is not taxed (e.g. California).
From TaxJar, Stripe's own subsidiary, and also the first result on Google:
> Alabama – SaaS is considered a taxable service. Computer software is tangible personal property. (Source)
> Alaska – SaaS is taxable in Alaska. (Source)
> Arizona – SaaS is taxable in Arizona. (Source)
> Connecticut – SaaS is taxable in Connecticut. SaaS for personal use is taxed at the full state rate, but SaaS for business use is only taxed at the rate of 1%. (Source)
> Hawaii – SaaS (and computer services) is taxable in Hawaii. Hawaii’s general excise tax applies to every good and service not tax exempt. (Source)
> Iowa – SaaS is taxable, except when being used for business purposes, then it is exempt. (Source)
> Louisiana – SaaS is taxable. (Source)
> Massachusetts – SaaS and cloud computing are taxable in Massachusetts. (Source)
> New Mexico – SaaS is taxable in New Mexico. (Source)
> New York – SaaS is taxable in New York. (Source)
> Ohio – SaaS is taxable for business use in Ohio and non-taxable for personal use. (Source)
> Pennsylvania – SaaS is taxable in Pennsylvania. (Source)
> Rhode Island – SaaS is taxable in Rhode Island. (Source)
> South Carolina – SaaS is considered a taxable service in South Carolina, as are other charges to access a website. (Source)
> South Dakota – SaaS is considered a taxable service in South Dakota, as are other charges to access software. (Source)
> Tennessee – SaaS is taxable in Tennessee. (Source)
> Texas – SaaS is considered part of a data processing service in Texas and is 80% taxable and 20% exempt from sales tax. (Source)
> Utah – SaaS is taxable in Utah. (Source)
> Washington – SaaS is taxable in Washington since all software, delivered by whatever means, is considered taxable in the state. (Source)
> Washington D.C. – SaaS is considered a taxable service in Washington D.C. (Source)
> West Virginia – SaaS is considered a taxable service in West Virginia. (Source)
https://www.taxjar.com/sales-tax/saas-sales-tax
SaaS is also far from the only industry Stripe serves. But even if it were, close to half the states require taxes on it in some way, shape or form. Meaning it's not nearly as negligible as you're making it seem.
I also want to reiterate the bar is "very small fraction of total payment volume". Very small really implies single or low double digit percentage. While some of the biggest states are missing, you still have around 40% of the population represented in those states. It seems very unlikely, even with tech's concentration in California, that 40% of the population results in "very small fraction of total payment volume".
Hi Sam,
OP here. I appreciate the inputs, we're big fans of Stripe at Lago. We operate in the billing space, and are alternatives to home-grown billing systems, Chargebee, Recurly, etc. and Stripe Billing.
1/ Some users use Lago as a complement of Stripe Billing, or don't even consider Stripe Billing, and we built a native integration with Stripe payments.
Out of transparency, the first lines we wrote in this post stated that: "Disclaimer: This analysis is based on Stripe’s public pricing as of July 21, 2022. Some merchants may be able to negotiate fees or benefit from grandfathered plans. Lago partners with 'Stripe Payments' and can be used as a complement or replacement of 'Stripe Billing'."
2/ > 'write deliberately-provocative posts to go viral'
Thanks for quoting my tweet. I actually shared 2 old articles I wrote in 2021 this week, that made the front page of HN, unrelated to Fintech:
- One on my personal blog sharing what I learnt about press relations, main message being 'don't waste money on an agency if you're early stage' because I've seen this happen too often, and too many founders asked me the same questions about this topic [1] I was actually surprised it was read, as HN is known for being more 'engineering oriented' than 'marketing oriented'. - Another one about 'scouts' not being necessarily a good thing for founders, with Sifted (TC for EU) which is a position I stand for as a founder and as an investor, and I think Europe should mature towards this topic [2]
The TLDR is: I've been writing about a wide range of topics for a long time, things I like to share, things I stand for and want to have an impact on and was grateful it resonated within my community. Btw I think the HN ring vote is pretty strong, and HN community very 'fierce' (at times), so I don't think we could have got attention by just 'clickbaiting' and attempting to go viral.
Like any startup, we're excited to share our vision of the world, and this is why we're writing.
Lastly, here are two other examples of content that were intended to spark a discussion in our community (and it did) and don't bring much to Lago as a business:
a/ What not to say to someone who has just been laid off [3] I wrote it after my partner was laid off and too many people around him just did not know what to say, which amplified the 'grief'. It reminded me of my personal history of grief, and wrote the post. I received dozens of messages of people who have been laid off recently, or whose friend/closed ones had been fired. Founders reached out to say they would share it with their team (it's not an easy topic to discuss).
b/ I recently shared my thought process about moving to the US after YC, as it's a recurring question we have as YC founders based in Europe. This sparked a lot of discussions and helped me iterate on how I approach the question, in a scalable way. I believe other founders learned things by the discussion it sparked, some founders reached out to help me with the US visa etc. Feel free to read it here [4]. Took me some time to write it, but the main ROI was how I've been able to connect with other founders, at the same stage, or 5 steps ahead, and learn from them. And, based on the comments/discussions, I believe other founders in the same situation benefited from this too.
My point is: not all content is written in an attempt to go viral, but I just write about what I believe brings value, and it happens to go viral (whatever you mean by that) when it does have an impact. Regarding my tweet, I think a lot of people wonder how to approach HN, and make a lot of rookie mistakes, and I could also write about what I've learned. This would (if I write it successfully) in fine help having better content on HN.
YC says 'build something people want', I also happen to (occasionally) write things people want. And there's no better gift for a writer.
[1] https://anhtho.substack.com/p/pr-for-startups-is-it-only-for... [2] https://sifted.eu/articles/vc-scout-programme-problems/ [3] https://sifted.eu/articles/what-not-to-say-layoff/ [4] https://github.com/getlago/lago/wiki/Moving-to-the-US-after-...
I think the point here is that this post was optimized to try to go viral. Most startups won’t have 4% as a minimum revenue cost.
For example, you chose the most expensive Billing plan (Scale), which includes things startups don’t need. Similarly assuming the most pessimistic payment mix where everyone is using international cards along with currency conversion, which will never be true. Similarly adding data pipeline.
It’s not “Stripe’s real pricing”, as you’re no doubt aware. That’s where it turns from informative to marketing.
If there’s a way that Lago, or any other Stripe competitor for any product, cuts down on fees, that’s fantastic. There are definitely ways to beat Stripe’s fees on payments, for example, though they’re as difficult as the are transformative.
The point was showing how the pricing and costs adds up.
A lot of founders don’t get what products they use at Stripe and that the cost adds up as a % of revenue.
% of revenue makes sense for payment processing, does it really make sense for SaaS products (billing, tax?) ? What’s the rationale?
About offering alternatives for fintech software (such as billing, tax), with a pricing that does not take a cut on revenue, this is exactly what we are building.
Also the point of my initial comment was that even if you consider this post optimised for vitality, pointing that we are optimising on only that in our content seemed a bit extreme, hence the examples.
In the USA, there is a huge payment processing API industry. Stripe is a great company and it has this family of products that work great together but it has lots of competitors that have better pricing and better service.
I work in the industry for a payment processor. It's not a silicon valley startup (it's basically run by salespeople) but we have way better pricing and you can get someone on the phone if you have an issue.
Reading HN, you might think Stripe is the only option.
Sure but the reason Stripe became Stripe is due to the fact that they have an excellent API and dev experience. Most old school processors are too difficult to setup and manage and have horrendous APIs.e.g: authorize.net
Having said that, feel free to share your company becaise I m always open to evaluatin for our company (low 7 figures ARR)
> the reason Stripe became Stripe is due to the fact that they have an excellent API and dev experience.
That's their reputation, but it doesn't always stack up in reality.
Recent example: https://twitter.com/levelsio/status/1600316372344373249
Canonical HN example: https://news.ycombinator.com/item?id=30535572
The association of Stripe with simplicity and good dev experience could be more due to Stripe's marketing/PR than the views of devs who've used Stripe APIs, at least from the few things I've read.
Stripe did actually have a great API at one point, when they just appeared. Their basics of charging a card and managing subscriptions was incredibly simple and developer-friendly compared to their competition at the time, like Authorize.net or PayPal. I don't think PayPal even had a real API back then - you had to use a `<form>` element with hidden fields.
Of course things change, and now Stripe's API has been rewritten to extreme complexity with scattershot documentation and unintuitive terminology. (I sell products, but in the API I have to sell prices??)
>The association of Stripe with simplicity and good dev experience could be more due to Stripe's marketing/PR ...
I don't think it's marketing/PR so much as a halo effect and reputation from years ago. My experience with stripe 5 years ago was/is simpler and easier than it is looking at it today. More products/services/options/requirements - it's more complicated than it was years ago.
But looking at it for a project 5 years ago, it was certainly simpler compared to authorize.net for what my project needed. Just the UI alone to go in and manage/test things was more straightforward and pleasant, even when I hit issues and roadblocks. Authorize.net looked like it hadn't changed much since 2005 or so when I'd looked at it then. May be better now - haven't looked since 2017.
my recent experience working with the Stripe API lines up with this. Based on the reputation I was expecting a lot less complexity and strange default behavior when it comes to subscriptions/invoicing. Still a good dev experience, but not the greatest, most straightforward API ever like its reputation.
For example, Stripe applies discounts prior to proration. So if a customer applies a $100 per month discount on a $1000 subscription, and signs up halfway through the month, they're charged (1000 - 100 * 0.5), not the more intuitive ((1000 * 0.5) - 100). Nitpicky, but not what I expected.
His email is in his profile.
A common problem with payment processors is international support. Stripe isn’t perfect by any means, but they support much more than than most of the US focused competitors.
As an example, a few years ago the EU brought in Strong Customer Authentication (SCA). Stripe was one of the few companies ready for this, being ready about a year before. I used them at the time and adopted their SCA support and it worked well.
We also happened to be considering alternative payment processors at the time. Braintree had some basic support for it, not fully ready, and seemingly undocumented. Other suppliers didn’t even know about SCA despite notionally taking GBP payments.
Of course it’s fine to only sell to the US market, but Stripe is pretty good in many places and I suspect that’s a significant contributor to their popularity.
We are paying roughly 9% fees to stripe which includes currency conversion charges.
So if a customer pays us $100, we are getting $91 to our bank account which is absolutely ridiculous.
If anyone looking for next $10B-$100B business idea, work on making the transaction fees to 1% and you can take business from stripe and PayPal immediately.
Wise.com is doing this and I hope more such companies work on this.
Problem being that the credit card processor already takes 1%, so that won’t happen.
Yes.
The disruption has to come from bypassing credit card companies like Visa and Mastercard.
In India, almost every merchant is using UPI which saves them fees of credit card processing.
The world banking is getting more advanced and technical and I am sure payment gateways can bypass the credit card and currency conversion fees with direct bank to bank transfer.
For larger Amount, we are asking our customers to use Wise instead of stripe or PayPal as the saving for us is significant.
Could crypto help here, at least for customers who have some in a wallet ready to use?
When I checked about 2 years ago, transferring bitcoin from one wallet to another was negligibly cheap, although I think it took about 20 minutes for the seller to be certain that the bitcoin had been sent to them (too slow for most website payments).
Curious to know if crypto could solve this problem though, if not now, maybe in the future. If some of the 9% fees were passed on to customers in the form of lower prices, it could be quite appealing and give a price advantage (if only a few %) over competitors.
Crypto is too volatile to really make day-to-day purchases realistic.
USDC + L2 would be a suitable protocol for day-to-day purchases and nearly 0% fee, at least for those already in the system. But most of this tech is still basically in beta.
I saved your comment to reply to when USDC collapsed - sooner than expected!
USDC hasn't collapsed, and it never should (or at least, no more than any other financial services you use daily) if it is properly regulated by US enforcement agencies.
Depending on where you're located you should potentially consider a solution that looks more like Payment Processor -> Hold in Currency -> Bulk Fx to Local currency. Typically business level Fx processing is 2% - with 3% for credit card fees.
At scale your Fx fees can be less than 2% of the conversion amount, I know that at scale the fees can get down to <0.2% if you're moving multiple millions (USD) in a month.
I know that both Adyem and Braintree will capture into local currency, so you can avoid Fx fees by the payment processor themselves.
Are there any companies arbitraging this % difference by collating lots of different businesses transactions into larger sums to then move into a particular currency for business owners who transact in non local currencies?
I’m pretty sure Wise does something like this. Protip, you can get a Wise business account and collect stripe payments in a local currency, then bulk fx it to your local currency.
Why Stripe isn’t partnering with them, I don’t know. My bank partners with Wise to get the best exchange rate possible (Bunq) when I’m out of the EU. It’s fantastic.
Does stripe restrict payout currency to INR in India?
Can you add a bank account which can handle alternative currency payout and let your bank handle do conversion?
I'm not an expert, I think by default they payout in the currency of the country that your business is located in.
In not sure about India, but in AU, we have the option to receive USD payouts to USD accounts in Australian banks, so you can avoid Stripe's conversion fees. But now you have USD in an AU bank. What are your options? Convert to AUD at the bank's terrible exchange rate. Or send the money to a US bank (or Wise), paying horrendous international transfer fees.
I hope I'm missing something but I don't see this offering from Stripe as being very useful.
> In not sure about India, but in AU, we have the option to receive USD payouts to USD accounts in Australian banks, so you can avoid Stripe's conversion fees.
I tried that, didn't work. I opened a local USD account in my non-US country and tried to add it for payout to Stripe. Stripe only allows (at the time I checked, please correct me if that has changed) US based USD accounts with ACH routing information.
I don't know about AU banks but in India, most big banks allow you to convert at 0.3-0.4% + FIRA and interbank charge which is around $10. Not great but it's better than stripe for bigger amount.
You can also get a multi currency bank account. There are some options available to Indians which provide US based ACH and IBAN. Be careful with FEMA compliance.
Not sure about wise's offering in AU but CA and UK you could just receive the USD into your AU Wise account and pay basically nothing <.5% for FX when compared to spot.
But wise.com is not a card processor?
Yes. They only do bank to bank. But there is definitely a business model here.
If you can offer subscription model and can do bank to bank transfer with 0.5% fees, you will disrupt the whole subscription industry relying on visa/Master card monopoly. Not only this, banks also charge very high currency conversion fees which you can disrupt.
You of course need to build lot of things from scratch but with most of the banking now a days going online with new APIs, it is possible.
Thanks, I don't doubt that, just wanted to know more wise.com or if I misunderstood something.
You're right also, I live in Germany since a couple years and and businesses taking money off your bank account is definitely a thing here, I don't know for how long. But mostly it's done by your electricity utility or by the tax man, various fees e.g. the fee for public tv etc. I don't know if there are costs to it, but probably yes.
From my understanding, they are not. They provide payment cards but don't process payment by cards.
I think what Merek meant is:
A workaround to Stripe fees for FX card payments would be to have a set of Wise accounts to receive the money in the local currency (one account or wallet for each currency) but then you'd still need to pay Wise conversion fees, once you want to gather the money from the different wallets into a master account
I really like how wise.com made themselves #2 in that chart instead of #1. Very clever.
I know that I started and shutdown a company through Stripe Atlas a year and a half ago and they're still charging me recurring fees for it. I'm not convinced that Atlas was ever fully thought out on their end and I regret using it.
Fellow Stripe Atlas-er here. I have no experience with corporate anything and started my C Corp because I won the Pioneer Tournament and they said I had to to give them a 1% SAFE to claim my winnings, even though I'd made it clear I did not intend to try to monetize my project at all. The company has literally done zero things since inception except cost me money for my registered agent, Delaware corporation tax, and having to pay someone to file taxes for $0 of income because I am too terrified of the tax legal system to do it myself.
If you don't mind me asking, what was your process for dissolving the corporation? I'd love to shut down mine but last time I looked it up I got bogged down in all the legalese about Notices of Dissolution and Board Approval and all that jazz.
There’s no charge to use Stripe after the $500 Atlas fee to form a company. What fees are you seeing? If you’ve maintained a presence in Delaware, perhaps you’re still paying for your registered agent? (You can also email me at edwin@stripe.com and we can look into this.)
Yeah Stripe is a joke considering its size. I much rather use Square which is saying a lot because that is also a poorly run company. Fintech space is a big joke. They were selling more fluid payment platforms with less fees/cost to consumers. Instead all-in prices have actually gone up.
> Fintech space is a big joke.
Almost as if all the "meatspace banking" regulations had their purpose, born out of decades of experience with the many, MANY, M A N Y weird edge cases that crop up sooner or later.
Not to say that the meatspace regulations and practices are fine (from an European POV, the fact y'all still use literal paper cheques instead of bank transfers and credit cards instead of direct debit because consumer protection is way easier on CCs), but still... it's amazing none of the fintechs ever really got hit hard by regulation agencies despite the continuous complaints.
Why are they charging you for something that doesn’t exist? Is it a mistake on their end?
I used to work at Stripe, specifically on Connect, and I want to point out one thing that's not quite accurate:
> and there’s also a transaction fee of $0.25 + 0.25% (in addition to the cost of Stripe Payments and other Stripe products)
This is not a per-transaction fee. That implies that the fee is per-payment. This fee is per-payout, which is the ACH credit (or debit rails transfer) to the account holder from their Stripe balance. It's not uncommon for the payout schedule on accounts to be at least weekly, so you have many payments worth of funds batched together into a single payout. The per-payout fee of $0.25 ends up being a lot smaller as a percentage in practice.
There is no company (that we're at least aware of) on Stripe that is using this combo of Stripe products and paying the "total cost" outlined in the post. Our pricing scales with the size (and needs) of the business. If a business on Stripe is large enough to use our highest billing tier, quotes, revenue recognition, and data pipeline together, then Stripe would've bundled the products together. (And then we charge for them at the end of the month with a volume-based rate of bundled products + payments.) These products are built for the companies who've asked us for these enterprise features and aren't necessarily meant to be used one-off, as the post implies.
As a retail customer, there are three payment processors which I notice “convert” me into a sale more often purely because I’m confident the process will be fast, safe, convenient, and familiar: Apple Pay, Stripe, and Square.
I would have been surprised to learn that they aren’t priced at a premium on the back end, because they certainly feel better and more trustworthy.
As a retail online vendor - PayPal is the fourth.
Did an AB test a while back and mere presence of the PayPal option boosts sales through all other options plus generates extra sales through PayPal itself. Not something that I was expecting at all, but the confidence level was over 99%.
What do you sell? As a techie, I have the opposite reaction to seeing Paypal, and would probably avoid a Paypal-only purchase.
Backup software.
Most people also don't understand that with Stripe, you don't actually have your own merchant account (this is why they can setup your account so fast).
This can become hugely problematic as your business grows since you're a sub-account of Stripe business, making you beholden to their business practices and costs.
My comments aren't intended to sound negative. There's Pro's and Con's to different business models. Getting quick access to the robust tools Stripe offers comes at the cost of you giving up some control over your companies operations.
Been using Stripe for years but now I realise that I don't even know what plan I'm on and can't see what Stripe is charging me. I get a monthly "tax invoice" which includes all charges done through Stripe and comes out at ~ 2.9% of the volume, but I don't see any line items for Billing or anything else. Where do I find this stuff?
Reports > Financial Reports > under "Fees" in the report.
Those are the same numbers as on the tax invoice, and in that section it just says "Fees for all charges, including card charges and other payment methods." Curious if that number already includes charges for things like Subscriptions.
This is a native advertising piece. The author is associated with a Stripe competitor.
My biggest issue is that they keep all the fees in case of a refund. Sometimes customers just change their mind, and this will cost you. It will cost you a lot if you’re selling high value items.
Same. We're losing thousands of dollars because customers change their mind or made a mistake in their purchase, mostly because we're dealing with high value items.
Braintree and Adyden do as well to my understanding.
Payment processors are low-margin. It costs interchange fees and scheme fees to reverse a transaction, it’s not free.
It’s unfortunate for the businesses that process a lot of returns, but processing fees would go up for everyone if returns were free.
The payment processors are only charged a tiny fee, not a percentage of the transaction. Up until a few years ago Stripe, Paypal and others had no issues with refunding the entire amount.
Seems like "A Breakdown of Stripe's Pricing" would be a clearer title.
Probably yes! Will think about this structure for next title, thanks for the feedback!
Stripe isn't cheap even on IC++ pricing by time you add the bare minimum basics - Adyen is much cheaper but a much poorer dev experience since they are big Kafka advocates and unfortunately this leaks that you can't even GET a transaction by id - if you didn't listen to event stream and persist this yourself then its back to CSV reporting. TBH, even though it costs us more, I'm happier working with Stripe vs event stream advocates that want to leak this everywhere... (I like Kafka to be fair, just Adyen takes it too far, their implementation their problem, now let me get a transaction from 3 weeks ago over REST)
When did stripe start charging extra 0.8% for recurring billing? I remember building my first online business with stripe api right when it came out and recurring billing was a feature, not an add on.
In 2018: https://news.ycombinator.com/item?id=16766846
This came up two months ago, the pricing was described as "insidious." [1]
I replied that this description could be extended to include how it generated and associated unique customer IDs. The way it is built now-a-days it is trying to be the central key for SaaS user accounts. Effectively: store all your user data with us.
I thought it was some kind of oversight but it is most likely about lock in.
[1] https://news.ycombinator.com/item?id=33269824
I am the original commenter you had replied to.
I am actually working on https://tier.run in part to help create a clean separation of interests between billing (and entitlement, and metering, and feature flagging) systems and how you store and access application and user data.
With Tier we have `tier whois` [1] which lets you get the Stripe Customer ID based on your own userId.
I'd love your feedback if you think there are improvements we could make.
1: https://www.tier.run/docs/cli/whois/
It's funny to observe the tide shift against Stripe on HN in recent years. I think they are a phenomenal, once in a generation company. Their APIs are beautiful (still, even though fewer people agree these days) and the use cases that can be built upon those APIs are endless and amazing. I always felt the pricing was a steal for what the product delivered.
Their support, on the other hand :(. ! Maybe it will get better with advances in LLMs, because I'd be shocked if I was ever talking to a human.
This is one of the many reasons that banks will remain an institution for a long time to come. Automatic Clearing House (ACH, or Auto debit) comes with a host of consumer protections that are completely lacking from payment processors.
I wish legislators would force all payment processors to play by the same book banks have to play by; the same consumer protections.
Totally agree on diversifying payment solution part.
But in terms of pricing, from what I have researched for my SaaS website, Stripe is not bad at all.
When it comes to choosing payment solutions, we need to consider the reliability/quality. You might be able to pay x% less fees with other options but 0.2% more of the down time will cost you much more.
As a developer it's easy to forget how insanely hard it can be to run a business. After all the time, effort, and energy that goes into actually making and selling something, you still have to go through all this additional nonsense just to get the customer's money from their hands into yours.
What I would love is a USPS money solution. Extremely low fees, just works, hooked up with USPS. Fraud would be under bank AND mail fraud.
All these companies in this realm are vultures. They add nothing - they just take their cut to do something that should be easy.
Not exactly on topic but Lago has been killing it when it comes to making the HN front page, nice job.
Thanks
So does this effectively mean Apple charges 25.2% in the base case, and potentially teens-low twenties in low price point apps ($10 and below)? PayPal, BrainTree and others seem to also be in this range - so backing out market payment rates, the App Store is not as egregious?
Yup. For that 30% you get everything. Payment processing, reports, coverage in all countries, vat handling.
But people like to bash Apple.
Thy don’t bash other platforms or channels which charge 30% or even more
So it's 30% charged by Apple with monopoly and no possibility to use something else vs 8% charged by Stripe. And you can also switch to anything else. Sure, it's more work than Apple, but freedom is also more work than being told what to do and how to live.
But stripe doesn’t give you a distribution channel or any other type of platform to build on. And it doesn’t give me access to x billion people with payment details on file, one double click away, without any fraud
Apple is not just charging for payment processing, you get access to the App Store marketplace with more than billion devices. With Stripe you only get payment processing.
Stripe payment processing fee is 2.9% + C$0.30
For the other fees discussed in this article, you do get additional capabilities. Distribution is not one of them, but it's not an apples to apples comparison.
This is really clever marketing by Lago. Good inspiration for other startups.
It does seem that long term Europe should be segregated from the www.
For small entities Euro compliance is impossible. Say for Michigan's largest Mustang parts website. Euro's often respond this they would never bother and their targets are big tech, but illegal and not prosecuted is not the same as legal. And it is telling that the law doesn't say "this only applies to corps with more the 100 million in Euro revenue". It applies to all companies and individuals. It should be possible for such a site to "opt out of Europe" and have safe harbor.
And there is no way it makes sense for the whole world's web to be regulated by a Euro court. There is no reason for a user in the US to see GDPR banners.
Maybe a great firewall to id Europe users, and if you use a vpn to escape it US law doesn't recognize it as valid.
>There is no reason for a user in the US to see GDPR banners.
GDPR is based on citizenship, not location.
Because the metodologies are proce