Stripe’s New Online Payments Service: Where’s the Catch?
When I wrote about recurring payment solutions in March I called Saasy “without doubt the simplest recurring billing payments solution the world has ever seen.” I thought it was expensive though, and it doesn’t have data portability. You can’t move your customers’ credit card data to another provider. You are locked in.
Braintree was my overall favorite of all the options I looked at. Their cost was very reasonable and they are strong advocates of data portability. Having now completed the integration with our app I can say based on first hand experience that their API is easy to use and nicely thought out. Their transparent redirect is a clever way to eliminate most of the PCI compliance hassles associated with taking credit cards.
Stripe, which launched a few days ago, might have changed everything. It takes simplicity to a new level at what appears to be very low cost. They charge 2.9% of your transaction fee plus 30 cents per transaction. Nothing else. In their words:
No setup fees, no monthly fees, no card storage fees, no hidden costs: you only get charged when you earn money.
In reality there is one other potential cost: a $15 chargeback fee when someone reverses a payment.
I have updated my Recurring Payments Cost Calculator, so if you are looking for a subscription billing solution you can see for yourself how Stripe compares to Braintree, Chargify, Recurly and Saasy. If that’s too much work, just check out the two situations below, $5 and $50 subscription fees for up to 5000 subscribers. Stripe is the new low cost leader for small subscriptions, and is extremely competitive for larger ones. For $50 subscriptions, Chargify and Recurly are cheaper options, but not by much and they involve a lot more complexity because in both cases you bring your own merchant account and payment gateway.
Stripe also seems to meet all of my other requirements. You can use it to create a payment form that lives on your own site, which means the user experience is all within your control. And PCI compliance issues seem to be minimized because the credit card number never hits your server. As with Braintree and Saasy, you don’t need to worry about setting up your own payment gateway or merchant account.
This combination of price, functionality and simplicity seems too good to be true. My initial thought was that there must be a catch and I was smugly certain that I would find it as soon as I asked @stripe about data portability. But the answer was:
For sure! If you ever want to move to another provider, we’ll export your data for you.
I haven’t had a chance to use Stripe, so the catch might still be out there. And Stripe is a newcomer that doesn’t have the industry pedigree and experience of Braintree. But the service is interesting enough that I’m going to put the launch of our subscription offering on hold while I check it out.
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Updated 1/20/2012: A few people pointed out that Recurly has updated their pricing and I have modified the calculator (though not the charts above).
See the discussion on Hacker News.
Posted: October 2nd, 2011 under The Wild Web.
Comments
Thanks for the kind words re: SaaSy, Greg.
I think it makes sense to clarify a few things…
SaaSy’s pricing options of 5.9% + $.95 per order or a flat rate of 8.9% include the merchant account processing costs and everything else listed here that the others generally exclude:
http://saasy.com/matrix.php
It’s important to note that the true processing costs are in fact 3.5-4% when you factor in American Express transactions, non-US transactions, corporate credit cards, rewards cards, chargeback fees (we pay those when they occur), bank fees (we pay those too), etc. The common perception is that the expense is ~2%, and that is incorrect for those who sell globally and/or accept payment methods other than US Visa and MC “qualified” transactions.
Also, unlike the others, with SaaSy, end users can pay using US Dollar, Euro, Pound, Australian Dollar, Canadian Dollar, Yen, Swiss Franc, Danish Krone, Hong Kong Dollar, New Zealand Dollar and Singapore Dollar. Not offering order pages localized by language (we support 19 languages) and by currency means a far higher order page abondonment rate. Users don’t want to pay in a foreign currency, pay a price displayed like $24.93727272 vs $25.00, read an order page in a foreign language, or get charged surcharges on their credit card statements due to currency conversion. With SaaSy, all of this is addressed, leading to higher international sales.
SaaSy clients can be located almost anywhere; in fact, the majority of our clients and their end users are outside the US. Our clients don’t need to obtain a merchant account (incredibly difficult to do especially if you’re located outside the US or you are in the US and want to accept foreign currencies) because we are the reseller, the merchant of record, and so they don’t have to deal with PCI compliance, global tax compliance, chargebacks (we even pay the chargeback fees when we lose a battle), etc.
Hope that helps.
Dan, CEO, SaaSy.com
Dan, I’m feeling some deja vu here. As I explained after your comments on my previous post, the calculator does incorporate my an estimate of the costs you describe, so it is apples to apples (with one exception noted in the post and below – chargebacks) on the pricing aspect.
In fact, the pricing of the new option I am describing here, Stripe, is completely inclusive of processing costs. And they don’t require you to obtain a merchant account.
The one exception, a cost that Saasy covers and Stripe doesn’t, is chargebacks. I also don’t include this in the calculator.
The international aspect is an interesting one that I haven’t considered before.
With the release of Stripe, Saasy’s price now represents a hefty premium. Perhaps the fact that you absorb chargebacks and have better international support will justify that for some people. Of course, people will also have to trade that off against the lack of data portability. Stripe and Braintree are both strong in this respect.
It is all a trade off. I hope my posts help to make the factors more clear.
Hey aren’t there some averages on # of chargebacks per 1000 transactions you could just factor into your cost calculations? I mean, $15 is a lot but if it never happens, who cares right? I think it would also be a factor of your average transaction size. I can definitely see people who do lots of micro transactions + have a high chargeback rate, stripe might be much much more expensive.
“PCI compliance issues seem to be minimized because the credit card number never hits your server”
The credit card number is directly typed into your website, though. Not only does Stripe require full PCIDSS compliance from you (and may demand proof of it at any time, per their terms), but you absolutely need to be compliant. Any lapse in your security that lets someone edit your page means they can transparently steal the credit card number out of your form the same way Stripe steals it out of your form. It doesn’t matter that the form isn’t posted to your server.
Great breakdown! Few points on Recurly.com, as that’s what I’m using for a simple subscription service in the $20-$50 range.
1. Recurly had (and may still have) some type of a special relationship with Intuit Merchant Services in which you didn’t need some extras that were required with Authorize.net and Braintree. This brought my monthly fees way down to the point where I’m only paying Intuit a low monthly fee plus transaction fees.
2. Recurly now has their own gateway built-in: http://recurly.com/gateway
I don’t plan on using it but it sounds very interesting. Definitely take a look.
Cool calculator. FYI, recurly has new pricing: http://recurly.com/pricing
Kyle
Can you look into cheddargetter also? They seem pretty good to me…
Dan, thanks. This wasn’t in Stripe’s terms at the time of writing.
I’ll need to update with Recurly’s new pricing at some point. And perhaps add cheddargetter. If I can find some chargeback data I can include that per Foo’s suggestion.
Update: just added Recurly’s new pricing. Makes them the low price leader if you use their payment gateway.
Dan & Admin
I just got a chat with Stripe people – great support even on a Sunday! They clarify for me their term of service. The compliance to PCIDSS apply only if you are not using the Stripe.js. In this case you are responsible to store the sensitive data and so you need to be PCI compliant.
“The credit card number is directly typed into your website, though.” -> my understanding is that while using Stripe.js the sensitive data is never passed to you but stay between the customer browser and Stripe server and that this connection is protected via SSL. Braintree has something similar but I prefer the Stripe approach.
Colin8ch said on October 3, 2011 at 8:40 pm
Congrats to Stripe! They have officially launched and they look great for developers and US based businesses. If you’re not from the US, or your not a developer, or you want to get to market fast and grow quickly without limitations, you may be interested in http://www.SimplifiedEcommerce.com.
We support international businesses and you can get started right away with zero coding – without the long complicated hassle of getting your own merchant account. We cover the entire payments stack- gateway, vault, instant PCI compliance, recurring subscription management and Affiliate Marketing.
As you grow you may want to get your own merchant account. Transitioning is seamless- we’re a Level 1 PCI compliant gateway, certified and integrated with 97% of US and a bunch of the biggest international payment processors/ networks. Transition to your own merchant account any time, in 5 minutes without any coding- all your data, integrations, reporting, subscription plans, custom hosted payment pages, affiliate marketing… remains intact.
And your customer data is YOUR data, fully portable.