Hacker News Reader

Comment by oliwarner | Hacker News Reader

~3%, dirt cheap?!

Why are so many of you so happy to throw so much cash away to process money? I know Stripe is lovely to integrate but as a business you have to shop around.

In the UK (and EU) card processing is much cheaper. Stripe is closer to 2% but if you shop around, you'll find somebody who'll offer you 0.8-0.9%, give you free terminals and no monthly contract fees.

Edit for those asking: Worldpay and Handepay are the best rates I've seen recently. Both for online and off. But again, don't just cluster around one company, harass a few yourself. They're willing to compete.

View on HN

If you are processing card present transactions, you shouldn't use Stripe, which is priced for online transaction fees.

I highly suggest reading up on interchange fees for various cards before taking a swipe at Stripe.

2.9% + $0.30 is absolutely rediculous to pay to transfer money, but blame the card companies. You simply can't get cheaper flat pricing on card transactions. Even online debit interchange fees are rediculous.

So if you do want cheaper, you need to try and find a provider that charges based on the underlying interchange fee. And then once you do so, you need to account for the variable rates in your accounting (can be a pain depending on your situation, especially if you don't know the interchange until the customer enters their card number), and even then, you're probably saving at max 1%, but likely a good bit lower on average.

You could always opt with ACH, but the more reliable way of authorizing ACH these days is using a service like Plaid that has the user log into their Bank on your site. Which is super sketch if it's the first time I'm purchasing on your site. I really wish Dwolla was able to upturn the industry ($0.25 flat fee for transfers was brilliant), but who wanted to sign up for yet another account to purchase stuff...

Payments suck.

Stripe has an extensive ecosystem of services that integrates with it, literally hundreds (https://stripe.com/works-with).

The services I need to run the back-office operations of my business including bookkeeping, invoicing, receipts, business metrics, customer support etc. all use Stripe data and APIs. Writing our own integrations, or worse, trying to poorly replicate some third party service, would be money poorly spent. It would take a very large transaction volume for it to make any sense to spend engineering time here, and arguably the end result will be qualitatively worse than just going with the market leader. Even if that calculation does come out positive, you still have to consider whether the engineering time wouldn't provide an even higher ROI by being invested into your core product instead.

Integrating with a merchant payment gateway isn't rocket science. A few weeks is easily worth the cost (it doesn't take that long, either, most have decent enough APIs or SDKs that may not be stripe quality but still are simple to integrate with).

It doesn't take a large transaction volume to justify the engineering cost at all. We're talking entire percentages of revenue. The ROI justification is going to be a hard one to beat in this case.

The point was that there are N other services you use when running a subscription service, that all integrate out of the box with Stripe and not at all with the cheaper alternative.

I agree with debaserab2. We use both PayPal Merchant Processing and Stripe. PayPal processes for us at 2.2% + $0.30. We use Stripe for the smaller charges where the $0.30 is prohibitive. There are many other options out there too. For any business to stay competitive it's important to keep costs down. Merchant fees are an easy one, do some research. For small businesses, the integration work isn't that hard. I suppose below a certain threshold it just isn't worth worrying about, but I would be wary of being too locked in with stripe or any other business for that matter.

re worldpay - they may be cheap, but you get what you pay for. Their backend still does not support SNI for payment callbacks. I had to debug once my client's integration with their hosted payment form (the one under https://mms.cardsaveonlinepayments.com) - and during debugging I have seen things like this: http://hiciu.org/2016-02-06-010735_1920x1043_scrot.png http://hiciu.org/2016-02-06-010743_1920x1043_scrot.png.

I believe you still can break their hosted payment form if you provide your telephone number with leading zero.

+1 even their website isn't https... (even for their contact-us page and quote page)

Also I think we just took it down...

Ahhh - this brings back memories. On a more significant note, our student association was able to get a merchant account up and running with them with _significantly_ less work than trying to re-enable our PayPal account after we hit their 'verification ceiling', and the fees worked out vastly cheaper although we did opt for a fixed monthly payment + lower per transaction cost. This was some years ago (in the UK) but I really second the argument that much cheaper rates can be had by simply shopping around (of course like any business/financial decision you'll want to factor in dev time / service levels etc etc) and getting a real merchant account isn't really that difficult.

I worked with an ecommerce shop for a while that wanted to go with the cheaper payment processor through their bank.

We spent a lot of developer time getting that 0.05% rate difference to work. Yes, that's a lot over a year, but we were constantly discovering undocumented error codes and "interesting" corner cases. The processor went down often enough that we actually ended up configuring a backup payment gateway on top of it (manual failover -- and yes it was well used). A year later and we still didn't have all the bugs ironed out.

Additionally the "PCI Scan" through the bank couldn't handle a DNS name, only a fixed IP address. This was one among many other issues with the PCI scan that ended up wasting weeks of developer time. In the end they literally gave up on scanning the site and just gave it a pass.

Believe it or not (I didn't at the time) there's actually more to card processing and banking than just a rate. You definitely get what you pay for.

I will second this. After using Worldpay for 5+ years decided to shop around for better rates - none! Depending on the level of integration you may have some issues during setup but once live it all goes smoothly. And just 10p fixed for processing debit card transactions! Nothing else comes even closer

The short answer is because time also costs money, whether it's your own or your employees -- both for setup and ongoing maintenance. Price is an important, but not the only part of the equation here.

Sounds like an opportunity for a person with a domain expertise could make a good living doing this for companies.

We had, at lockheed, hired a contracting company that would receive all our corp cell bills, go through them and go after the carriers for errors and savings and they just kept a percentage of the savings that we made from their efforts... it worked out well for both parties.

Hah. If you think 3% is bad, I'd love to know what you think about the 30% that Apple takes for in app purchases. You are forced to use their system (or your app gets rejected), so you have no option but to use their payment methods. Highway robbery if you ask me.

The difference is that Apple is providing you with tonnes of publicity and easy access through the app store, and is ensuring that your product works with all of their users. They are adding way more value than just convenient payments.

This is true, and that is definitely a difference worth pointing out.

I should have specified that even accounting for that difference 30% feels excessive considering your app, and the existence of it on their app store, also benefits their system (assuming your app is not completely pay locked).

It wasn't that long ago that Apple was using as a marketing tool, the number of App's on the app store.

> It wasn't that long ago that Apple was using as a marketing tool, the number of App's on the app store.

They literally marketed number of apps downloaded just yesterday in WWDC.

Isn't $100/year enough for the access and making sure that product works fine. For publicity, it's two way and nowhere should take 30% if there is a free market for app store.

For subscriptions, it drops to 15% after one year: https://developer.apple.com/app-store/subscriptions/

Back in the day when software was sold in boxes in retail stores, I guarantee those retail stores were taking well north of 30%.

Because they've stocked the products and paid for them, and threw away/discounted everything they did not sell. Vendors could only get <30% if taking back unsold merchandise.

It always amazes me how people do not understand the fundamentals of retailing.

Is that for offline processing in a lowest risk industry? Curious as never seen a client get such a rate. Esp once acquirer fees for online payments are factored in (UK experience only)

Both. Moderately low risk, moderate volume.

I'm not saying everybody will get those rates, just that I'm surprised that people settle for 3% without a fight. At scale, that's a huge amount of money for a little convenience.

Because people don't start off at scale, and because setting up a merchant bank can be a difficult hassle (more so if you're looking to accept multiple currencies), and because the cost of implementing features provided by stripe exceeds the amount lost in extra fees.

Once you hit scale it might be worth switching, but for many smaller sites Stripe is much more viable.

It's hassle. Much less than it used to be. It's also 2-point-whatever percent of all your revenue. The tipping point isn't as far out as you might think.

I'm not pretending it's for everybody, again, I'm just shocked that "oh we'll use Stripe because it's easy and cheaper than PayPal" is the group mentality (esp here).

If you're doing less than a hundred thousand a year in revenue, you will likely save in development costs what you would pay in fees (3% x $100,000 = $3,000 = ~week of development costs).

Depending on which Stripe features you make use of and would have to re-implement yourself it may even make Stripe more affordable up to a couple of hundred thousand in revenue.

That makes it very attractive for side projects or bootstrapped companies, and side projects and bootstrapped companies often grow in to larger things, and at that point, changing out the payment processing is low on the list of priorities.

If anything I think your estimation underscores the point that it quickly becomes worth the investment to shop for a cheaper payment option.

It always surprises me how quickly people are willing to adopt stripe without even making this calculation on their own and considering competitors.

I suspect since they are YC funded they give discounts to other YC companies which makes it a more viable option and helps foster the ultra positive stripe sentiment you see on HN. I think there are a lot of people who eat up the hype without doing any real analysis of their own.

The positive sentiment is because they are a credit card processor that has a good API and supporting libraries. For some payment processors you are stuck with "here is our Java Middleware and this is the only thing you are allowed to use."

Yeah, I understand that's the root of it, but I've never understood how that positive sentiment remains so dominant when you start digging under the hood and realize that you're paying a percentage of your revenue for what amounts to a slick API or integrations. You don't need to be a financial genius to understand how little that adds up. It's always surprised me given the Hacker News crowd tends to like to dig into the details on most things.

I've never seen rates that low for recurring payments. Swiped cards in a brick-and-mortar, sure. The kind that batch nightly. But not for a SaaS where someone types in a card and you keep charging it for the next 36 months.

Recurring payments is a minimal risk after the first payment processed. If you're going to set up recurring, having an ACH transfer from bank account is going to be cheapest, or debit card paid via ACH.

> Stripe is closer to 2% but if you shop around, you'll find somebody who'll offer you 0.8-0.9%, give you free terminals and no monthly contract fees. Edit for those asking: Worldpay and Handepay are the best rates I've seen recently.

Worldpay starts around 2.75% + £0.20 per transaction; I'm sure you can negotiate them down, but not THAT low. Not if you're asking them to provide the merchant account AND process online/card not present payments. You're not getting a merchant account + payment gateway for less than a 1% fee. Not without stupidly massive volume, anyhow.

The reality is Stripe's rates are actually competitive; they're not wildly expensive, and they're not even the most expensive.

> but not THAT low

Honestly, I have two clients with Wordpay at ~0.85%, no contract fees. Volume isn't crazy either. I can't tell you if they caught WP at a particularly giddy phase but I guess they're trying to compete again. They've been around for 28 years and these whippersnappers like Stripe must be starting to hurt their bottom line.

Currently it is legal for companies in the EU to ask the customer to pay the processing fees, some call it surcharging.

EU seems to want to get rid of this practice, I wonder if it becomes a company expense, that we will see companies caring more about the processing fees.

how can you get rid of it? I can always increase the price.

I think the point is that, you should increase your prices, instead of showing a lower price and then hitting your users with a "processing fee" during the payment process (whether online or offline).

I must say that I'm genuinely surprised by this phenomenon.

One would think that it is a business' business to figure out how much to charge a customer. A willing customer will pay, an unwilling one won't. How is it a question of legality?

I believe in the united states it is simply against the terms of service of the card provider. I imagine the law isn't "allowing" customers to pay processing fees, it's simply preventing the provider from setting those terms.

No longer true. Merchants can charge CC users in the US a surcharge.

Is there a current book that you can recommend to understand this very arcane business of credit card processing?

Unfortunately not. Online resources, experience, and payment processing consultants are the options available.

It's not actually illegal in the US to pass the processing fee to the customer, it's just against the contract you have to sign to get a merchant account. I don't know if the EU has a law or regulation prohibiting such contracts, but it seems possible.

Correct me if I'm wrong; what you're saying is that merchant account providers have terms that dictate to merchants how they should price their products i.e. as a merchant you cannot pass the fee? (It seems incredibly stifling for the merchant to me but may be you can enlighten me on why it is in the interest of MAPs to have such a condition)

Do majority of MAPs in the US have this condition in their terms? And which MAPs don't have this condition?

> Correct me if I'm wrong; what you're saying is that merchant account providers have terms that dictate to merchants how they should price their products i.e. as a merchant you cannot pass the fee?

They are not allowed to charge customers more for paying via credit card that for paying via cash. This is the law in some states, and in addition many merchant contracts stipulate it as well.

Sometimes you'll see merchants offer a "cash discount", which is technically prohibited too, but small merchants can sometimes fly under the radar if it's not too blatant.

>They are not allowed to charge customers more for paying via credit card that for paying via cash.

Now I get it. I'm not for it but I get it.

> It's not actually illegal in the US to pass the processing fee to the customer, it's just against the contract you have to sign to get a merchant account.

Depends on the state. It's no longer illegal federally, but many states, including the four largest states[0], still prohibit it. And if they pass the fees on, they have to pass it on for all credit cards, due to the specifics of a court settlement a few years back.

In addition, any merchant that accepts American Express is also prohibited from passing on fees for any credit card, because Amex prohibits passing on fees, and you can't pass fees for Visa/Mastercard and not Amex (see above).

So, very few merchants actually do.

[0] California, Colorado, Connecticut, Florida, Kansas, Maine, Massachusetts, New York, Oklahoma and Texas

> It's no longer illegal federally

Are you saying it _was_ actually illegal federally at some point or that no one had successfully brought a suit against the credit card companies' conditions until recently?

I didn't know about the state laws. That sure sounds like regulatory capture. It's hard to think of a legitimate reason for the state to do that.

Legality aside, which other posters have covered:

I dealt with a local mechanic (small shop) earlier this year who, when it came time to settle the bill, said he will do debit/check for no fee, or a 2% fee for a credit card. In addition, some local gas stations advertise cash rates for fuel, which are slightly discounted vs credit cards.

It's an interesting practice that I don't mind. Ultimately it provides transparency and options to consumers who may be unaware of interchange rates and such that factor into day-to-day transactions.

It's a question of "do you charge 3% more for credit card payments to cover the charges from the credit card companies, but leave off that fee for non-credit card payments?"

Most credit card companies _don't_ want you to do that because charging more to pay with a credit card makes using your credit card a less enticing idea. IIRC, this stuff is usually handled in your contract with the credit card processor.

The last company that I worked for that used a credit card processor other than Stripe, the rules were something like:

* 2-3% of the transaction is the processor's keep

* You are allowed to charge a surcharge, but _only_ if it's a flat fee. You cannot add a 2-3% fee to cover the credit card charges, nor can you have some sort of "flat-fee schedule" where the flat-fee changes based on the amount being charged (e.g. charges of $1 - $100 get a $0.50 fee, but charges $100+ get a $5 fee). You can only do something like $0.50 fee to all charges.

* You cannot charge a different price for products when they are purchased via credit card.

>Most credit card companies _don't_ want you to do that because charging more to pay with a credit card makes using your credit card a less enticing idea.

This is obviously good for the card companies and to a degree the digital payments landscape as a whole.

I do however see how it can be a problem for small merchants who can't negotiate for better rates with MAPs due to lack of volume. A 2 - 3% fee is quite significant seeing as though many retailers will have a 7-12% net margin. For a merchant not to be able to push the cost to a customer even if it is just part of it would be difficult for a business to sustain. There are other costs that merchants are dealing with such as cost of packaging and as such, a 2-3% fee is no mean feat.

Well, you're also missing things like the onerous process that some of the processors would have you go through to sign up. While I haven't been the person to actually setup a Stripe account, my impression is that it's pretty light-weight. From what I remember the business people having to go through to sign up for a merchant account with a processor (for a 100% online business) back in ~2010, it was practically like signing up for a mortgage. There was also back-and-forth between different "levels" of employees on the other side of things. At one point, IIRC the process even stalled because their end stopped responding to enquiries from our company. On top of that we were forced to use their Java middleware crap even though we weren't a Java shop. They made you feel like they couldn't care less about your business.

Well, the onboarding process in the past you've described seems like hell. May be merchants should simply accept to bite the bullet on this one and accept it as part of the cost of doing business.

Now that you've mentioned stripe; I am in the process of setting up an Australian company with stripe; so far the docs are easy to digest and it seems waaay easier (and cleaner) than my previous experience with paypal.

If you're a low volume business, then the difference of 1% probably isn't worth much headache. I can't comment on how easy those services are to integrate, but I've personally found Stripe super easy.

Even if a business is doing $500k of charges a year, I'd guess it's probably not worth the time to save $5k a year... there are usually more impactful uses of time. And when businesses get to high volumes, where integration costs become much smaller as a percent of revenue, then Stripe will give you a better deal.

Would you mind sharing those companies? I'm especially curious since Stripe is not supported in my Country.

https://www.paydoo.com/pricing is one example,

> starting at 0.59% + £0.20 adapted to industry type and risk level

Phwoar!

Edit: Weird that they don't appear to service bricks and mortar retail. They can be much more secure (cardholder present, PIN entered, telephone verified) and therefore lower risk.

That's really interesting. Do you have more examples? Thank you for the suggestion. Stripe is only the best known and is well integrated with other systems. When you use something like Paydoo you have to write e.g. your invoice email system yourself (and for stripe there are third party services which can handle that for you). So Stripe has benefits regarding the ecosystem around it.

Edit: Seeing there is also a currency conversion fee (is there something similar on stripe?). I mean with currency conversion+paydoo regular rates you get close to Stripe rates!

Many —I'd perhaps even stretch to "most"— processors have at least the basic functionality like email receipts and, to at least some degree, recurring payments. They're staples of e-commerce.

But yes, there is work involved in implementing each provider. Stripe has some but it is generally nicer to use. £100k of volume and you'll probably pay for that additional development time in Y1.

But also consider that you shouldn't irrevocably tie yourself to a single processor. Don't rely on them to do your business for you. Sometimes they're dicks. I know that applies more when we talk about PayPal and much less in the "real" merchant processing world, but it still happens. Having the ability to switch out processors is objectively useful so (eg) tying your basket UI into Stripe's checkout js lib looks nice, is super easy... But what happens if they start withholding funds? If all your emails are tied into their system, it's weeks of development to stop using them. Do business-critical stuff yourself and you're much more flexible to do sensible things in the future.

Regarding international rates, these are hard to compare because their claims are apples to oranges. Stripe say they go off their "banking partners'" daily rates and that those are approximately 2% above mid-market levels. Paydoo says they're 2.49% fixed above market levels. I suspect they're pretty close in practice. Stripe does let you accept multiple currencies (for free) if you have the bank accounts for it though. Not sure if Paydoo allow the same. Their wording suggests not... But if that's the deal-breaker, talk to them about it.

Looks great, maybe even too good.

> Highest level of processing uptime (99.9%)

It's not that high...

Also, it says about 10 years of experience, but site is seems to be really working only since 2016. And SSL certificate is just "let's encrypt", which is fine for most, but for payment processor I'd expect something more serious.

Have edited. Even if the rates you find aren't as good locally, still shop around and play them off each other to get a better rate.

I'd suggest Pineapple Payments. They are a new company based upon the CardConnect platform, which was just acquired by FirstData.

FirstData is one of the primary companies in the market, and the rates you get from Pineapple are "interchange optimized". Means you pay 2.9% for AMEX, but ~1.5% for VISA, Discover, etc.

For B2B and even B2C, it's a fantastic savings if you're willing to do just a tiny bit more legwork than Stripe requires.

From the Pineapple website: "We believe in transparent, simple pricing that is always customized to fit your usiness. Refreshing, right?"

But publishes no pricing and you have to click for a quote (fill in form for a call back). Really transparent!

Also when they quote low rates for Visa and MC are they including the rewards cards which carry higher fees and make up a majority of the transactions?

Reply on news.ycombinator.com