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I am continuously shocked by the amount of defense that people have towards Stripe. I remember mentioning Stripe's 3% fee being too high for me the other day a

I am continuously shocked by the amount of defense that people have towards Stripe. I remember mentioning Stripe's 3% fee being too high for me the other day at a community event and I was attacked by people defending Stripe and their fee. These are people that don't work there, and have no true involvement with them (other than using their APIs). Sorry everyone, but you really don't understand that Stripe's position is literally the middleman of everything. Their "product" is the API. Simplifying and unifying what the various processors have done and marketing the hell out of it. That 3% fee that everyone defends is truly almost pure profit for them. I currently work with another payment processor (one of the top three largest in the world) and our credit card fees are measured in basis points. For those that don't know... a basis point is one-hundredth of a percent. The fees we are charged by our processor isn't even whole percentage points, it is measured in basis points. Granted it is more complicated because there are different fees for AMEX, Mastercard, Visa, etc. But it is still all totaled out to fractions of a percent. Keep in mind that my credit processor is still making money while charging me in basis points (and they have way more employees than Stripe does). Stripe is a competitor to this processor. So if this processor makes money charging fees in basis points, than Stripe could make money charging in basis points too. And before people think that I work for Walmart. I'll just say we charge about 2M a month in credit cards which is relatively small. I promise that Stripe is doing very well off their 3% charge. I am not saying that they aren't allowed to make good money, but I really hate when people defend them like they are barely scraping by. Stripe is laughing their way to the bank with your 3% processing fee. They laugh even harder when they read you defending their outrageous fees.

rossdavidh 8y ago
Uh, that 3% includes the amount they are passing on to the credit card company. Which, for a little guy like me, is around 3%. It is literally no more expensive to go with Stripe than to roll my own.
- slobotron 8y ago
  Yes. Years back we moved from Elavon to Stripe since 2.9% on each transaction sure beat uncertain 1.9-5% we were getting based on what card customer was using (corporate and point cards carried bigger fee).
- venganesh 8y ago
  Stripe might be taking 30% of that 3% and passes 70% to payment networks. please look at adeyn balance sheet(https://www.adyen.com/investor-relations https://www.adyen.com/investor-relations)
  - rossdavidh 8y ago
    Well I would assume Stripe gets a better deal than a little business would, and I would expect them to take some significant cut, otherwise they would not be a viable long-term provider, yes? I don't want to be exploited mercilessly, but I also don't want to rely on a payment processor that makes no profit, it seems like they would not stay around for the long term.
- ttcbj 8y ago
  Exactly. I signed up with stripe maybe 5 years ago. At that time, I was trying to find a processor, and came close to signing with a bank. The bank wanted me to sign a long-term agreement, the agreement had disadvantageous and confusing terms with unclear costs, and it was more expensive than stripe at baseline. The sales process was really sleezy: I only discovered all those terms because I read the contract carefully before signing. Before that I used two other processors, both of which had a confusing mix of monthly and per-transaction fees. If you are a very, very large business, maybe you can do better than stripe. But if you are small or even medium size, I am skeptical there is a better deal out there.
  - jjeaff 8y ago
    Even a small business can easily do better than A (when it comes to fees). The only time stripe would be a good deal is if you are processing almost exclusively high end corporate cards like Amex or corporate purchasing cards. Stripe and others like them is also the best rate if you are processing very small annual amounts. Because every merchant account has around $10 in monthly fees, minimum. If you are not paying a monthly fee, either your processor is paying it, assuming that they will make enough on the spread to make up for it, or they are running your processing under their own merchant account and taking on the risk. Which is likely what stripe does until an account is large enough to warrant moving it under its own merchant account.
    - StudentStuff 8y ago
      Here is an example of a relatively expensive rate for processing with a merchant account (2% plus 10 cents per transaction, with a 10 monthly fee) versus Stripe. Note how the breakeven for getting a merchant account is when you start processing more than $428 a month(assuming an average transaction is $15). https://www.desmos.com/calculator/zuzn1lhfdg https://www.desmos.com/calculator/zuzn1lhfdg
      - rossdavidh 8y ago
        My experience in the U.S., admittedly as a very small size merchant, is that 2% +10 cents is considerably better than I can get with a bank.
- astura 8y ago
  I was casually chatting with a small business owner about five years ago and he was raving about how much money moving to Stripe saved him, especially on AMEX cards.
- densone 8y ago
  stripe gets probably 0.8% + 5¢
epa 8y ago
I would love to know where you are obtaining an average sub 1% processing cost for US cards. USA has some of the highest interchange fees in the world.
- robryan 8y ago
  I wonder how this come about. Interchange in Australia is way lower, you can get rates around 1% without too much effort and interchange plus rates even lower on average. You would think a larger market like the US would be lower not higher because of the volume.
  - deleted 8y ago
    [deleted]
  - jjeaff 8y ago
    Is chip and pin ubiquitous in Australia? That would lower fraud rates. Also, the EU has a 0.3% cap on interchange. Average in US is 2%. My guess is Australia has a cap as well. So the answer is, lobbying.
    - robryan 8y ago
      Yeah turns out we do have a cap: The weighted-average credit benchmark of 0.50 per cent will be maintained. The weighted-average interchange fee benchmark for debit cards will be reduced to 8 cents per transaction, which will apply jointly to debit and prepaid cards in each scheme. Interchange fee caps will be supplemented by ceilings on individual interchange rates: 0.80 per cent for credit; and 15 cents, or 0.20 per cent if the interchange fee is specified in percentage terms, for debit and prepaid. To prevent interchange fees drifting upwards in the manner that they have previously, compliance with the benchmark will be observed quarterly rather than every three years. A scheme will be required to reset its interchange schedule in the event that its average interchange fee over the previous four-quarter period exceeds the benchmark. Also chip and pin is ubiquitous.
Veelox 8y ago
Hey if Stripe really is reaping in the profits I have great news for you! Someone, maybe even you, can launch a competing project, offer a similarly polished API, and charge 2.5% and reap slightly less profit but still almost pure profit! Once that happens, Stripe will be forced to reduce its fee and everyone on the internet will be able to keep a little bit more of their money. Everyone wins (except Stripe and NewCo)! In the meantime, people get to choose if paying Stripe 3% is worth all the headache that it saves or if they are better off with a different approach. Hopefully not to many people will get tricked into pay Stripe outrageous fees for being a middleman while we wait for capitalism to work.
pbreit 8y ago
This is wrong. Stripe passes 2% or more of it's 2.9% on to Visa/MC and the card issuers. And larger Stripe merchants can negotiate that down as well as enter into an "interchange plus" arrangement which would be measured in BPs.
- deleted 8y ago
  [deleted]
user5994461 8y ago
>>> I promise that Stripe is doing very well off their 3% charge. I will tell you a secret. Stripe is not doing very well because they have a small volume of payments, all clients combined. A percentage of peanuts is peanuts. I looked at them when I was working at a startup 2 years ago. The volume of transactions we were processing yearly was a 2 digits percentage of what Stripe was processing yearly across all their clients. Needless to say, they're not adequate as a payment processor for any medium or large company.
- citrablue 8y ago
  The numbers quoted here[0] are soft and from a year ago, but at that time, Stripe claimed to handled handles tens of billions of dollars in internet transactions annually. If you were doing 10+% of that, kudos to you! [0 ]https://www.bloomberg.com/news/features/2017-08-01/how-two-brothers-turned-seven-lines-of-code-into-a-9-2-billion-startup https://www.bloomberg.com/news/features/2017-08-01/how-two-b...
  - user5994461 8y ago
    Thank you. We were doing rather well by some metrics. Enough for the CEO to pay his first jet and for the yearly profit to fill a swimming pool in $1 bill. Not that we did that last part. Humor aside. A few billions is actually fairly little for many businesses, remember that a typical margin is only a few percents of revenues (customer payments). A billion dollar company with a 1% margin can only afford 100 employees. You wouldn't be impressed if I told you that we were a 100 people company, would you? Competing payment providers and banks are dealing in orders of magnitude above Stripe.
    - citrablue 8y ago
      I would be impressed if a company had 100 employees today and planned for exponential headcount growth (say, 50% growth per annum). And had taken $440 million in funding. And had a product that wiped the floor with the competition.* * YMMV, but for this dev, Stripe was a godsend.
Bluestrike2 8y ago
Yes, Stripe's product is literally playing the middleman, but there are a lot of contexts where a middleman is nevertheless a net positive. That said, are your numbers for just the network fees or do they include interchange fees as well? In any case, I remember the sort of hoops I had to jump through back around 2007 to setup a gateway through Authorize.net and a merchant account for a very small service (annual transactions around 150-200k). Every step of the process, from setting up the accounts to dealing with their API was a nightmare, and recurring billing threw some additional hurdles in for fun if I'm remembering correctly. Beyond that, there are a lot of ways to screw up with billing and payment processing. In my experience, Stripe's generally competitive and easy to deal with. That's not to say that they make sense for all scenarios. They don't. But if you're a startup looking to make it to launch, there's a strong argument for keeping the billing side of things as straightforward as possible.
jsjohnst 8y ago
1) Stripe pays around 1% give or take 25 basis points depending on card type and location. 2) I highly doubt you’re getting sub 1% rate in the US with only $2M monthly, especially if you do card not present transactions. (See sources, I won’t call you a liar, because you could be in a very tiny niche or not US based, but all signs point otherwise). 3) most folks who use Stripe aren’t doing $2M in volume and likely don’t have the business credit rating / history to get a very low take rate. Further, Stripe doesn’t nickel and dime customers with other fees, so for lower volume customers the 3% actually might be a savings. If not, it’s a low markup for ease of use. 4) was the hostile attitude really necessary? Sources: https://usa.visa.com/dam/VCOM/global/support-legal/documents/visa-usa-interchange-reimbursement-fees-april-2018.pdf https://usa.visa.com/dam/VCOM/global/support-legal/documents... https://usa.visa.com/dam/VCOM/download/merchants/interlink-interchange-reimbursement-fees.pdf https://usa.visa.com/dam/VCOM/download/merchants/interlink-i... https://www.mastercard.us/content/dam/mccom/en-us/documents/merchant-interchange-rates.pdf https://www.mastercard.us/content/dam/mccom/en-us/documents/...
jjeaff 8y ago
Are you in the US? Because interchange fees (which are the same whether you are Walmart or a hair salon) average about 2%. Unless stripe is processing mostly generic debit cards, then they are most certainly not pocketing that full 3%. I would guess that the makeup of stripe customers is similar to the US average, so they are probably paying close to 2% and then pocketing the 0.9% plus most of the 30 cents per transaction.

rossdavidh 8y ago

Uh, that 3% includes the amount they are passing on to the credit card company. Which, for a little guy like me, is around 3%. It is literally no more expensive to go with Stripe than to roll my own.

slobotron 8y ago
Yes. Years back we moved from Elavon to Stripe since 2.9% on each transaction sure beat uncertain 1.9-5% we were getting based on what card customer was using (corporate and point cards carried bigger fee).
venganesh 8y ago
Stripe might be taking 30% of that 3% and passes 70% to payment networks. please look at adeyn balance sheet(https://www.adyen.com/investor-relations https://www.adyen.com/investor-relations)
- rossdavidh 8y ago
  Well I would assume Stripe gets a better deal than a little business would, and I would expect them to take some significant cut, otherwise they would not be a viable long-term provider, yes? I don't want to be exploited mercilessly, but I also don't want to rely on a payment processor that makes no profit, it seems like they would not stay around for the long term.
ttcbj 8y ago
Exactly. I signed up with stripe maybe 5 years ago. At that time, I was trying to find a processor, and came close to signing with a bank. The bank wanted me to sign a long-term agreement, the agreement had disadvantageous and confusing terms with unclear costs, and it was more expensive than stripe at baseline. The sales process was really sleezy: I only discovered all those terms because I read the contract carefully before signing. Before that I used two other processors, both of which had a confusing mix of monthly and per-transaction fees. If you are a very, very large business, maybe you can do better than stripe. But if you are small or even medium size, I am skeptical there is a better deal out there.
- jjeaff 8y ago
  Even a small business can easily do better than A (when it comes to fees). The only time stripe would be a good deal is if you are processing almost exclusively high end corporate cards like Amex or corporate purchasing cards. Stripe and others like them is also the best rate if you are processing very small annual amounts. Because every merchant account has around $10 in monthly fees, minimum. If you are not paying a monthly fee, either your processor is paying it, assuming that they will make enough on the spread to make up for it, or they are running your processing under their own merchant account and taking on the risk. Which is likely what stripe does until an account is large enough to warrant moving it under its own merchant account.
  - StudentStuff 8y ago
    Here is an example of a relatively expensive rate for processing with a merchant account (2% plus 10 cents per transaction, with a 10 monthly fee) versus Stripe. Note how the breakeven for getting a merchant account is when you start processing more than $428 a month(assuming an average transaction is $15). https://www.desmos.com/calculator/zuzn1lhfdg https://www.desmos.com/calculator/zuzn1lhfdg
    - rossdavidh 8y ago
      My experience in the U.S., admittedly as a very small size merchant, is that 2% +10 cents is considerably better than I can get with a bank.
astura 8y ago
I was casually chatting with a small business owner about five years ago and he was raving about how much money moving to Stripe saved him, especially on AMEX cards.
densone 8y ago
stripe gets probably 0.8% + 5¢

epa 8y ago

I would love to know where you are obtaining an average sub 1% processing cost for US cards. USA has some of the highest interchange fees in the world.

robryan 8y ago
I wonder how this come about. Interchange in Australia is way lower, you can get rates around 1% without too much effort and interchange plus rates even lower on average. You would think a larger market like the US would be lower not higher because of the volume.
- deleted 8y ago
  [deleted]
- jjeaff 8y ago
  Is chip and pin ubiquitous in Australia? That would lower fraud rates. Also, the EU has a 0.3% cap on interchange. Average in US is 2%. My guess is Australia has a cap as well. So the answer is, lobbying.
  - robryan 8y ago
    Yeah turns out we do have a cap: The weighted-average credit benchmark of 0.50 per cent will be maintained. The weighted-average interchange fee benchmark for debit cards will be reduced to 8 cents per transaction, which will apply jointly to debit and prepaid cards in each scheme. Interchange fee caps will be supplemented by ceilings on individual interchange rates: 0.80 per cent for credit; and 15 cents, or 0.20 per cent if the interchange fee is specified in percentage terms, for debit and prepaid. To prevent interchange fees drifting upwards in the manner that they have previously, compliance with the benchmark will be observed quarterly rather than every three years. A scheme will be required to reset its interchange schedule in the event that its average interchange fee over the previous four-quarter period exceeds the benchmark. Also chip and pin is ubiquitous.

Veelox 8y ago

Hey if Stripe really is reaping in the profits I have great news for you! Someone, maybe even you, can launch a competing project, offer a similarly polished API, and charge 2.5% and reap slightly less profit but still almost pure profit! Once that happens, Stripe will be forced to reduce its fee and everyone on the internet will be able to keep a little bit more of their money. Everyone wins (except Stripe and NewCo)! In the meantime, people get to choose if paying Stripe 3% is worth all the headache that it saves or if they are better off with a different approach. Hopefully not to many people will get tricked into pay Stripe outrageous fees for being a middleman while we wait for capitalism to work.

pbreit 8y ago

This is wrong. Stripe passes 2% or more of it's 2.9% on to Visa/MC and the card issuers. And larger Stripe merchants can negotiate that down as well as enter into an "interchange plus" arrangement which would be measured in BPs.

deleted 8y ago
[deleted]

user5994461 8y ago

>>> I promise that Stripe is doing very well off their 3% charge. I will tell you a secret. Stripe is not doing very well because they have a small volume of payments, all clients combined. A percentage of peanuts is peanuts. I looked at them when I was working at a startup 2 years ago. The volume of transactions we were processing yearly was a 2 digits percentage of what Stripe was processing yearly across all their clients. Needless to say, they're not adequate as a payment processor for any medium or large company.

citrablue 8y ago
The numbers quoted here[0] are soft and from a year ago, but at that time, Stripe claimed to handled handles tens of billions of dollars in internet transactions annually. If you were doing 10+% of that, kudos to you! [0 ]https://www.bloomberg.com/news/features/2017-08-01/how-two-brothers-turned-seven-lines-of-code-into-a-9-2-billion-startup https://www.bloomberg.com/news/features/2017-08-01/how-two-b...
- user5994461 8y ago
  Thank you. We were doing rather well by some metrics. Enough for the CEO to pay his first jet and for the yearly profit to fill a swimming pool in $1 bill. Not that we did that last part. Humor aside. A few billions is actually fairly little for many businesses, remember that a typical margin is only a few percents of revenues (customer payments). A billion dollar company with a 1% margin can only afford 100 employees. You wouldn't be impressed if I told you that we were a 100 people company, would you? Competing payment providers and banks are dealing in orders of magnitude above Stripe.
  - citrablue 8y ago
    I would be impressed if a company had 100 employees today and planned for exponential headcount growth (say, 50% growth per annum). And had taken $440 million in funding. And had a product that wiped the floor with the competition.* * YMMV, but for this dev, Stripe was a godsend.

Bluestrike2 8y ago

Yes, Stripe's product is literally playing the middleman, but there are a lot of contexts where a middleman is nevertheless a net positive. That said, are your numbers for just the network fees or do they include interchange fees as well? In any case, I remember the sort of hoops I had to jump through back around 2007 to setup a gateway through Authorize.net and a merchant account for a very small service (annual transactions around 150-200k). Every step of the process, from setting up the accounts to dealing with their API was a nightmare, and recurring billing threw some additional hurdles in for fun if I'm remembering correctly. Beyond that, there are a lot of ways to screw up with billing and payment processing. In my experience, Stripe's generally competitive and easy to deal with. That's not to say that they make sense for all scenarios. They don't. But if you're a startup looking to make it to launch, there's a strong argument for keeping the billing side of things as straightforward as possible.

jsjohnst 8y ago

1) Stripe pays around 1% give or take 25 basis points depending on card type and location. 2) I highly doubt you’re getting sub 1% rate in the US with only $2M monthly, especially if you do card not present transactions. (See sources, I won’t call you a liar, because you could be in a very tiny niche or not US based, but all signs point otherwise). 3) most folks who use Stripe aren’t doing $2M in volume and likely don’t have the business credit rating / history to get a very low take rate. Further, Stripe doesn’t nickel and dime customers with other fees, so for lower volume customers the 3% actually might be a savings. If not, it’s a low markup for ease of use. 4) was the hostile attitude really necessary? Sources: https://usa.visa.com/dam/VCOM/global/support-legal/documents/visa-usa-interchange-reimbursement-fees-april-2018.pdf https://usa.visa.com/dam/VCOM/global/support-legal/documents... https://usa.visa.com/dam/VCOM/download/merchants/interlink-interchange-reimbursement-fees.pdf https://usa.visa.com/dam/VCOM/download/merchants/interlink-i... https://www.mastercard.us/content/dam/mccom/en-us/documents/merchant-interchange-rates.pdf https://www.mastercard.us/content/dam/mccom/en-us/documents/...

jjeaff 8y ago

Are you in the US? Because interchange fees (which are the same whether you are Walmart or a hair salon) average about 2%. Unless stripe is processing mostly generic debit cards, then they are most certainly not pocketing that full 3%. I would guess that the makeup of stripe customers is similar to the US average, so they are probably paying close to 2% and then pocketing the 0.9% plus most of the 30 cents per transaction.