Is it practical to completely avoid the fees of payment processing companies like Stripe?
In general, let's say that you want to use credit card. That pretty much put you at the mercy of Visa & Mastercard. They charge you fees, and the cost of managing the interaction with them is significant.
You can accept wire transfers, but note that this probably means quite a bit of dealing with the backend financial stuff (user paid, but didn't add the right invoice number, for example).
PayPal or similar also have their fees.
Using crypto for payment is possible, but the wild swings in price means that this is a highly unstable option. There are fees there as well (0.5 USD - 1 USD), and the time to close a transaction is a lot (10 minutes, IIRC).
It is also making things like taxes a pain. And that is where you start to get into really "fascinating" territory.
A truly underrated value you get is the fact that payment processors deals with all those issues around taxes, VAT, etc.
I signed up for Stripe thinking it was the case but it turns out they don't handle VAT and taxes and I have to find something else (looking into Paddle and I would be grateful for suggestions and ideas). How are people here dealing with VAT and taxes for their SaaS in 2021. Company is in France, Europe. Clients could be anywhere.
I wanted a one stop shop and thought Stripe did that.
Given how much pain governments are increasingly inflicting in this area, and the EU more than most, I expect that the market for these services will grow and using a merchant of record will become the dominant mechanism for accepting online payments, at least for smaller online businesses with significant international or inter-state sales. (I'm not sure this will be a good thing for various other reasons but it's what I expect to happen if current trends continue.)
The tax products offered by Stripe and a few specialist providers seem to offer little more than tracking some VAT rates and doing some simple calculations. I don't understand who the target market is supposed to be for these services today. Anyone with the resources to handle reporting and remittance properly everywhere surely doesn't need to pay the extra fees just for a bit of tracking and arithmetic. Anyone who doesn't have those resources might prefer to outsource everything (including responsibility for compliance) to specialists who offer a comprehensive service.
If you're not in the US and will only process domestic transactions are are willing to skip acceptance of credit cards, you would want to look if your environment allows a much more simpler acceptance system (for example in Canada, parts of Europe and India a merchant bank account is relatively frictionless compared to American ones). Otherwise, read on.
Unless you're a very big company with dedicated accountants and backend logistics and in the fees collected by Stripe will be bigger than bringing it inhouse, it'll be much, much more expensive to be honest. Stripe probably is the least worst option right now since that you don't need to have a merchant bank account for example, which can be an headache.
However, if you want to minimise data collection at any cost, then probably only accept cash and cryptocurrencies (that is, if you run a node and not outsource it a la Stripe)?
If you are handling billions of dollars in sales, then yes, rolling your own payment infrastructure will probably be worthwhile, but at that scale you will also be getting a very different commercial offer from the payment gateways anyway.
If you 'only' have a million dollars in sales, then there isn't going to be a payback here (but there may be a cheaper payment gateway than Stripe).
The fees to Visa and MasterCard can't be avoided - even Amazon is having a public commercial spat Visa over fees.
Easy weekend project.
- You would immediately take a hit, because crypto payments are not popular.
- Currency/btc conversion fees are more expensive than any transaction fee.
Many ecoms added support in 2017 and removed that functionality again.
There's no interest for buying things that isn't part of the "pump and dump" scheme. NFT's are probably the only thing, since they hope to resell it for more money.
Not sure what exchange you're using, but 0.1% on market trades is pretty common. That's very low compared to most fees.
- Get BTC from customer with X value in USD at time of sale
- Trade to USD with Y value at time of trade
- Track AND report gain/loss between X and Y values
…so in addition to all of the accounting and reporting overhead you get the added benefit of never really knowing what you’re selling anything for in your local currency.
Unless you’re a cryptocurrency maximalist or selling to a cryptocurrency audience this just doesn’t make any sense.
What people might not realize is that these very standard accounting and taxation rules do apply to crypto.
It is a new way of payments that removes need for middleman and government even has a official app ( BHIM App ) for it and most importantly it is a protocol so anyone can use it without third parties ( private companies )involved.
It now also supports subscriptions.
Read more:
UPI transactions over $100bn in Oct
Read more at: 1. Wikipedia https://en.wikipedia.org/wiki/Unified_Payments_Interface 2. UPI transactions over $100bn in Oct http://timesofindia.indiatimes.com/articleshow/87474515.cms 3. Search Google for "UPI in India"
It's not practical really no. There are ways (the way people did it before stripe). But it's much more painful and buerocratic.
Stripe is quite friendly compared to the old way.
We run an SME (a boarding kennel, so nothing exactly cutting edge) and Square costs us 1.75% for cardholder present transactions. No minimum charge, cash is in the next working day, they do all the compliance so provided I don't do anything mental like taking pictures of payment cards, I'm sorted.
Obviously there's a higher cost for online processing and you could probably bring down the percentage cost if you shop around, but the ease of entry for card payments these days is absolutely astonishing.
The biggest problem with crypto is that you, as a business owner, want to make it as easy as possible for people to give you their money and crypto is a massive frction unless you're marketing to the tiny subset of people using it as a currency rather than a value store. It'd be a bit like accepting gold over the counter.
I used to help run a summer camp in Europe and we always took payment via direct transfer. None of us had the experience to write an e-commerce solution and we didn’t have the budget to buy one. Nowadays I guess we could use Stripe, but it’s still simpler to give people account details to pay into and to tell us when they sent it. We don’t have the numbers to justify anything complex either. Only recently we started accepting donations via PayPal and even then only because it’s very easy to generate the code for the button.
These were popular before Stripe arose.
You can save fees BUT the application process is often much more manual and long. Also don’t expect add-ons like having a good API or strong reporting or analytics.
The pricing is competitive as the currently charge a flat monthly fee which comes up much cheaper than stripe.
I know as I’m integrating stripe into the new member site im building for our client and they’ve come back saying the old option is much cheaper.
AUD $300-400/month flat fee from the top of my head.
It’s missing many of stripes features though as I said earlier, which I’m now having to try to sell the client on as the benefit of additional automation and reporting coming at additional cost.
Stripe is not straight up cheaper in this case.
I never sold things that way, but I bought stuff couple of times paying cash.
Likely only option is pickup and delivery with cash payment or keep crypto only never cash out. I don’t think the latter is convenient though.
Cards are a broken and expensive payment method that needs to go away, and in some parts of the world that is already starting to happen, but it really depends on where your sales are. If you are aiming for customers in the US you're probably stuck with cards for now because it's what people and businesses expect to use.
However if you're selling to somewhere like Europe you might get a much better deal with alternative payment methods like SEPA and the national schemes. There will still be fees and risks but they can be much lower than you'll ever get with card payments.
Whichever payment method(s) you decide to accept you will still have to deal with the admin around taxes that has been mentioned elsewhere in this discussion. An alternative strategy of outsourcing everything to a specialist that handles both payment processing and tax admin is becoming increasingly attractive. As always if you're running a small business you might want to concentrate on whatever products or service you offer and outsource as much of the rest as you can. In this case the question isn't about how to avoid fees, because obviously you can't, but whether the amount you save is worth the fees you spend, which it easily could be.
If you're looking to accept card payments, then no. Both credit and debit cards have interchange fees[0] that are unavoidable. Strong negotiation with a payment provider can land you on an "interchange plus"[1] type fee schedule, which means that they pass through their costs to process the transaction and add some small fixed amount. Note that card interchange fees can range from essentially 0% (debit cards) to >2% fees baked into them. Rewards cards can reach 2.5%+ -- merchants pay for rewards on these cards and eventually pass the cost onto everyone else in the form of higher prices.
Now you could look at using something like ACH to automate bank debits. On paper, this could be as cheap as $0.10/txn. However, there's a litany of new issues to worry about. ACH payments take days to clear. The information needed to debit someone is printed on checks and given out, so now you've got a new authorization problem. People usually solve this with microdeposits or something like Plaid -- you're looking at more time and friction or more cost. People are not trained as well as with cards to punch their bank details into every other website.
Crypto adds a bunch of friction for unsavvy users, has no dispute flow (though I guess that's to your benefit as a merchant), and can have pretty variable costs.
Edit: at the end of the day, checkout completion rate is often more impactful than the fees. Other advice: 1) Try to negotiate with providers. You may not have sufficient leverage until you reach some scale, but it doesn't hurt to ask respectfully. 2) If you plan to grow your business for a long time: create local payments abstractions that make it easier to switch providers or support multiple providers later. Everybody has outages and this increases your negotiating leverage.
[0] https://en.wikipedia.org/wiki/Interchange_fee [1] Depending on the card distribution of your users, "interchange plus" can be more costly than a fixed plan.
But it does have a 60k inr daily limit.
