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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 number
by dkyc 4y ago
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.
- ecedeno 4y ago“+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%
- dkyc 4y agoYou 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".
- Dand313 4y agoI think they are comparing to MoRs like fastspring or paddle where the % is higher?
- newaccount74 4y agoIt'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.
- withinboredom 4y agoSign 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
- kuschku 4y agoGirocard (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?
- mardifoufs 4y agoDebit card transactions are basically free in the US too.
- blntechie 4y agoI 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.
- SeripisChad 4y agoPrior to those gimmicks the rates where higher than now. I hoped Google to follow through with their pricing cuts, but yielded rather quickly.
- fredophile 4y agoAs 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.
- dylan604 4y agoThere 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.
- GeneralTspoon 4y agoPayPal offers a micropayments option (5% + $0.05) - which reduces overall cost for businesses where the fixed fee eats a major part of their revenue.
- SXX 4y agoIs 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.
- ericd 4y agoThis 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.
- ivalm 4y agoMaybe, 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.
- ericd 4y agoMy 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.
- Terretta 4y agoIt 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%.
- username_my1 4y agoI 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
- dkyc 4y agoIs 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.
- username_my1 4y agoYes 160k extra a year out of 10m is a lot
- etothepii 4y agoThat rather depends on gross margin.
- treewalking 4y agoIf it costs 1 extra human to build everything you’re losing money leaving Stripe.
- 4y ago
- gizmo 4y ago> 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.
- dkyc 4y agoEven 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.
- sodality2 4y agoI 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%
- tyingq 4y agoThey also don't refund fees when a customer wants a refund.
- jessaustin 4y agoHave you tried encouraging longer subscriptions through steep discounts?
- sodality2 4y agoYep. I offer a yearly plan for $26. My customers are split almost exactly half and half with monthly and yearly subscribers
- jessaustin 4y ago
- AnhTho_FR 4y agoHi 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!
- dkyc 4y agoThanks 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.
- AnhTho_FR 4y agoGot it! Will iterate on the article based on your inputs, thanks for the constructive feedback!
- danielskogly 4y agoJust a heads up that "More about our story here." at the very end is a 404: https://www.getlago.com/company/about-us https://www.getlago.com/company/about-us
- 4y ago
- chinathrow 4y agoIf 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.
- the_chatman 4y ago
- the_chatman 4y ago
- deegles 4y agoIt 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.
- aliswe 4y agoAre you serious? This is very concerning
- jgust 4y agoYou either die a hero or live long enough to become Paypal.
- Spivak 4y agolive long enough to understand why Paypal became Paypal.
- steve_adams_86 4y agoIs the answer simply money?
- aga98mtl 4y agoNo, 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.
- Alupis 4y agoAlso... 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!
- croes 4y agoThey 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.
- dkyc 4y agoWell, 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.
- pattrn 4y agoI'm a B2C SAAS founder and paid 7.1% to Stripe last month.
- pattrn 4y agoAs a single sample: my SAAS startup pays just over 7% to Stripe.
- krallja 4y agoGood grief, talk to your account rep.
- notatoad 4y ago>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.
- that_guy_iain 4y agoWhy 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.
- lcnPylGDnU4H9OF 4y agoI 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.
- notatoad 4y agoelsewhere 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.
- lolinder 4y agoStripe'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-facebook https://www.wired.co.uk/article/stripe-payments-apple-amazon...
- MuffinFlavored 4y ago> - 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.
- plantain 4y agoForced currency conversion. International fees versus local. Low average charge (so the per tx fee is more significant)
- deleted 4y ago[deleted]