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Comment by dkyc | Hacker News Reader

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.

View on HN

“+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".

I think they are comparing to MoRs like fastspring or paddle where the % is higher?

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

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?

Debit card transactions are basically free in the US too.

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.

Prior to those gimmicks the rates where higher than now. I hoped Google to follow through with their pricing cuts, but yielded rather quickly.

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.

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.

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.

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.

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.

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.

Credit cardholders mostly get 1-3% back so it’s a bit of a wash.

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 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.

Why are so many things better in the EU?

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).

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)

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 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)

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.

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.

> 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.

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.

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%.

>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.

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.

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.

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...

    Why would GitHub add authority?

Well, there's no real reason it would. But I'll admit: it did fool me into thinking it was some neutral source.

(To be clear, I was just casually browsing HN on a work break, not actually shopping for a payment solution and reading with diligence)

> 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.

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.

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.

Are you serious? This is very concerning

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.

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.

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

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.

Isn't the a function of not having your own merchant account? By using Stripe, you're actually just a sub-account to them.

> 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.

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.

> 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.

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

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

That rather depends on gross margin.

If it costs 1 extra human to build everything you’re losing money leaving Stripe.

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.

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.

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

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.

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

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.

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!

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