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%
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".
Why are US-based payment services so fucking expensive?
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.
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.
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.
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.
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 biggest variances involve non-exempt (Durbin amendment) debit cards.
I guess the lowest tier cards really do subsidize the rest.
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?"
(I grew up in France but part of my family lives in the US).
Some of the interchange fees are paid back to the customer in the form of cash back and other perks and rewards.
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.
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.
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.
* 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...
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)
Id rather take the benefits.
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.
I don’t mean to defend credit card companies, but it’s not as black and white either.
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.
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.
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.
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.
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.
At that point, the mobile app store offering is effectively costing well under 10%.
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.
> “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...
Why would GitHub add authority?
(To be clear, I was just casually browsing HN on a work break, not actually shopping for a payment solution and reading with diligence)
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.
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.
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.
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.
[1] https://support.stripe.com/questions/understanding-daily-aut...
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...
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.
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.
Blatant FUD. https://support.stripe.com/questions/export-customer-card-da...
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.
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).
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 [email protected]
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!
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
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.
But yes their documentation can be a bit poor around the edges and if you don’t really know what you’re doing
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
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.
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.
I switched to Wise and pay now an order of magnitude less for that.
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!
Otherwise, the "no one knows exactly how much but up to 8%" framing reads like FUD to me.
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.
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.
>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.
I'm a B2B SaaS founder and paid 2.7% to stripe last month. OP, feel free to update post with new lower bound.
Stripe Radar, Stripe Identity, Stripe Sigma? It all adds up.
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.
2.5 * 0.029 = 0.0725 + 0.3 = 0.3725 / 2.5 = 14.9%
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.