Choosing a payment provider for your Europe-based SaaS startup
blog.gogemba.com(I work at Stripe, here in London)
Great write-up - I hadn't seen that graphic before but it's great - full credit to the original source http://startingandsustaining.com/.
As a Stripe-r, I can't complain about the OP's conclusion in any way :) As stated they are based in Denmark, and Stripe is not currently available for Danish businesses - that's on us to fix, and we're certainly working on it.
However, re: the title "How to choose a payment provider for your Europe-based SaaS startup" - the situation in Denmark is not representative of Europe as a whole.
Stripe has now launched here in the UK[1], and we now have betas available in Ireland, France, the Netherlands and Belgium - with the latest released in the past few weeks. So if you're based on one of those countries, please do give us a look. And if you're based elsewhere, well - I guess we need to keep up the pace and hurry to your country ;)
[1] https://stripe.com/blog/introducing-stripe-uk
As other commenters have mentioned, it's really easy to make mistakes comparing complex pricing across different providers. With Stripe and PAYMILL, the fees quoted are all you pay. With Braintree's interchange+ pricing, they actually state themselves that "Total costs are typically 1.8% to 2.6% of the transaction. There is a minimum cost of €100 per month"[2]
With Braintree's interchange+ pricing, they actually state themselves that "Total costs are typically 1.8% to 2.6% of the transaction. There is a minimum cost of €100 per month"
And that means it can't be as low as 1.8% of your transaction unless you're consistently taking in the region of €5,500+ per month -- low revenues for an established business, but not a trivial amount for a bootstrapped start-up looking for a payment service to launch with.
I've wondered whether this is a deliberate business decision by Braintree to discourage applications from brand new (and I assume on average more risky) start-ups. Then again, established businesses with serious revenues would presumably be considering a more traditional set-up where they can negotiate much lower rates with heavyweight payment services, and would perhaps care less about the hassle of setting those things up compared to the ease-of-use for developers of modern payment services. I'm not sure which part of the market Braintree are really trying to own at the moment: they do seem to have a USP among the "developer-friendly services" in the number of different payment methods they support through a common API, but this doesn't even seem to merit a mention on the front page of their site.
If you're charging customers and aren't making enough in a few months to cover the minimum fee then your business is going to be in trouble in any case. Sure the percentage is going to be crappy, but if you're a SaaS business and your margins are so small that the percentage is worth stressing about in the early days then you're probably doing something wrong.
(I bootstrapped my last startup and 100 euros is roughly what I was paying SEOMoz, my accountant, etc. on a monthly basis)
It's way more important to just get something working and out-the-door and grow the number of customers then to spend a lot of time over what comes down to a relative small amount of money, you can always re-negotiate the fees when you grow and the absolute amount becomes meaningful.
If you're charging customers and aren't making enough in a few months to cover the minimum fee then your business is going to be in trouble in any case. Sure the percentage is going to be crappy, but if you're a SaaS business and your margins are so small that the percentage is worth stressing about in the early days then you're probably doing something wrong.
Right, so if you're in that position, why would you put up with the onerous application process for a service like Braintree if you have a simpler alternative like Stripe available and it provides the functionality you need? You want a payment service that takes as little time as possible to set up and then just works, because you have a million more important things to be doing. Any advantages Braintree might have had if their pricing did work out more favourable than Stripe's flat rates is instantly lost because they can't give straight answers to too many basic questions (like "What does it cost me to collect a payment?") and their API and documentation are significantly more complicated.
I've not implemented either Braintree or Stripe before, but I'd agree with the principle of just doing whatever gets you out the door the fastest (for a subscription business I might including the proviso of using a service that will give you card portability so you can transition off in the future).
Hello, as a developer based in Lagos, Nigeria (don't believe the stereotype about Nigerians and fraud), PayPal has refused to include Nigeria in her list of supported countries hence there is a gaping need for an international payment gateway in Nigeria which is the fastest growing mobile market in the world and the fastest growing economy on the continent. When does stripe intend on coming towards this neck of the woods?
Well I've worked with pretty much every provider available in the UK, so here are some brief opinions on the bigger ones:
PayPal: Awful, API changes regularly without warning (including changing parameter names for no apparent reason)
SagePay: Truly awful, datacentre seems to catch fire regularly
WorldPay: Awful, but not as bad as SagePay
Barclays ePDQ: You have to fill out an Excel spreadsheet to get a developer account
GoCardless: Great API, more or less limited to UK customers
Paymill: Good
Stripe: Very good
Braintree: Very complicated but not bad
And if you're downvoting me for this, feel free to ask for reasons why for specific providers. I have genuinely used all of them for at least one project.
I've been using various online credit card processors since 1995, and my experiences are slightly different. Worldpay is absolutely excellent - their service is amazing, and their support is absolutely top-notch. Definitely the best solution if you're in the UK.
I'm not sure what you're doing with paypal, but there haven't been any API changes that have affected us in the 7 years we've been using them. In fact I just looked at our paypal code, and it hasn't really changed at all since 2007.
I've had so many issues with PayPal that it's just unreal. First up, they have something like 10 separate API interfaces for taking payments. Second, the documentation is -terrible-.
We implemented one of the APIs (can't remember the name, it was something stupid at least) recently, and half way through our implementation the parameters we received back changed name for no apparent reason, and the PayPal sandbox was entirely changed; this resulted in our account becoming broken, constant errors where code was previously working, and it was never resolved.
WorldPay is incredibly outdated, underfeatured, and rarely improved. Their support is pretty decent, however.
With Stripe and Paymill now available, I don't see any reason why people should continue to use what we've been struggling by on for the past few years. They're so much better that I can't even really draw a comparison.
I just had a look at Stripe, and it does seem like a good service. If I was building a new site I'd probably consider it. The annoying thing about paypal is that it doesn't allow you to change subscriptions.
I looked very closely at Braintree but ended up not implementing them because of their €100 minimum per month. I don't understand how you say their API is complicated. It is well documented. The Ruby Gem also seems quite good and easy to implement. As you host the form and data is sent to Braintree there is also very little to get it up and running.
It is well documented but they use a lot of terminology which makes it annoyingly obscure, and the control panel is very confusing if you don't know any accountancy vocab. There are far simpler alternatives which cost less and do the same things.
I'm not going to get any "OMG new stuff" love for this, but we are currently in the process of integrating with Worldpay. We are using their "hosted payment page", which works pretty much the same as Paypal in that you redirect the user to them to enter their card details. However unlike Paypal (who we currently use) you can fully customise the pages, so it can match your site and appear pretty seamless. They also provide a full merchant integration, but we didn't want to have to deal with the full PCI compliance thing.
The main reasons why we chose them are:
a) None of the shiny new providers (we tried Braintree and Paymill) would accept us as we are a travel booking service.
b) Their rates were better than anyone else we looked at.
If you are taking a large volume of payments you may want to consider switching to them. However for a small startup probably not, as we have to pay a fairly large monthly fee on top of transaction fees (but overall it works out cheaper).
EDIT: Also regarding currency conversion costs we accept payments in USD, EUR and GBP and have bank accounts in all three.
Well it seems their "World" doesn't include Latin America, same as all the other shiny new solutions, so PayPal and BitCoin are still the only game in town down here in Brazil.
What are the main payment methods there?
Credit cards for sure, I suppose many are international too so americans can easily get our money. It's the other way around that's tricky, setting up a SaaS from here and getting a payout. PayPal is here so they work with Brazilian banks. As for all the other payment processors, no luck. Though someone here linked to Intel's solution[1], which proxies through PayPal and seems like the way I'll go.
[1] http://software.intel.com/cloudservicesplatform/service/comm...
"We are using their "hosted payment page", which works pretty much the same as Paypal"
But this is a huge deal breaker. Conversions for external payments forms are lower, particularly with PayPal which has poor UX and is PayPal-branded.
Of all the things, Intel also has a payment processor as part of their cloud service platform - http://software.intel.com/cloudservicesplatform/service/comm... - I don't know why it's still labeled "beta" and how and if it actually works but it seems to work in about 50 countries now.
Have Braintree really standardised their transaction fees at the 0.9% + €0.10 rate shown in the table near the end of the article? I thought that was in addition to the interchange rates, which vary widely. The difficulty in figuring out what a transaction would actually cost us with Braintree was one of the major reasons we never got going with them.
Edit: The Braintree FAQ[1] appears to agree with this. It also says they have €15 as their chargeback fee, not €11 as shown in the table in the article.
Yes, it is plus interchange fees. And €100 minimum per month in fees.
We are Belgian and happily use http://adyen.com for 3 years now. Receiving payments from about 60 different countries without any problem.
The implementation was easy. And on the rare occasions we needed support, they were very quick to respond.
I didn't do a price review recently, but at that time they were the most interesting for us to start.
Interesting summary. I'm located in Germany and I'm thinking about switching from PayPal to some other payment provider.
Does anyone have experience with chargeback fees? PayPal doesn't have chargeback fees and I'm a bit worried that chargeback fees might have unexpected consequences. Many of my transactions are 6€ or 12€. When does a chargeback fee trigger exactly and how likely is it if you have a customer base of a few thousand?
Having tested and used most of these solutions in the UK, Stripe wins hands in almost all scenarios for bootstrapped companies. Its just so easy to get up and running, and their support is top-notch.
There is one big downside though - you can only charge in USD, GBP and EUR. We sell to other countries who like their pricing in local currency, and this is a major issue for us.
Does anyone know of a service provider which also allows you to SEND money (via wire transfer) to customers? I've been looking for that since a long time and contacted airbnbs provider, but no reply at all. This function is used if you are acting as the middle man between 2 parties.
I evaluated payment provider for my Germany-based SaaS and came to a similar conclusion. Paymill is great to get started, but Braintree wins in the long run (just do the math).
Obviously when your product is growing you don't have time to just rewrite the payment processing and migrate all data to a different provider.
I guess this is where something like "Spreedly" comes in. It is an additional abstraction that allows you to switch payment providers easily. At least so I read. Does anyone have experiences with that?
We chose Spreedly for our startup and it was really easy to integrate. I like the idea of having the customer's credit cards details saved independently from the Payment Gateway and Merchant account, so that you're free to switch any time you want if you find a better deal in just 5 minutes via the control panel.
Beside this though we found 2 main problems along the path:
1) Setting up a merchant account for multi currency (we charge in USD and get paid in EUR) is a nightmare and it takes a lot of time (in the end it took more than 3 months!). Things get much more complicated and costs can rise quickly. Also, you have to register with American Express separately and you have to do it for 2 separate accounts (one for euros and one for dollars). So you end up with lots of different accounts (one for Spreedly, one for the payment gateway, one for the Visa+Mastercard merchant account, one for American Express) and this makes things much more complicated to manage.
2) Spreedly decided in the last months to focus just on the Spreedly Core (vaulting the credit card data in a secure place) and sold the subscription part to Pin Payments http://blog.spreedly.com/2013/07/15/pin-payments-purchases-s... So this means that the developing of new features was dropped and their minimal control panel stayed the same over the last couple of years. Not sure if this is going to change in the future with Pin Payments, but it's always a big question mark for the future. Support and maintenance is still covered, but I wouldn't expect any new stuff for the future...
So I guess that in the end if I were in your place I would stick with Braintree or Paymill, and we would probably have chosen Braintree if at that time they would have offered the payment gateway and merchant account as well (they started only since last year I think).
I'm looking forward to see Stripe coming in Europe and hopefully cover all the states very soon.
I think it is a prudent move for a bootstrapped startup. You just don't blow out 1,200 EUR / year, when you don't have any revenue incoming. Solve the problem at hand (i.e. accept payments) in a way that is best RIGHT NOW.
There are so many ways to mitigate this decision later on. I know at least two companies who changed their payment processor in the course of their lifetime.
I just did the math real quick as well, and i really don't understand their choice for Paymill. Braintree's rates are so much better, they are loosing so much money in the long run!
Posted a chart in the comments at the blog.
In the long run yes, when they have revenue. But they mention:
But then, one day when I came back to their website, I saw that they had added a minimum fee of €100 to their plan, and that unfortunately tipped the scale for us, as we pay everything on our own, and we have zero revenue coming in.
So the problem is for the first few months during which you pay everything out of your own pocket. It probably all depends on how confident you are that you'll get revenue.
How simple/hard is it to migrate from system to another?
Great article! FYI, I'm an engineer at Braintree. We'll be eliminating our monthly minimum very soon - stay tuned.
As someone who's not familiar with payments, how often do chargebacks generally occur, and why are they so expensive?
Thanks for the blog post and going into how difficult it is to accept payments in Europe.
I would like to add one - IMHO important - point to PayMill: They do not support credit cards from the USA.
source: https://www.paymill.com/en-gb/pricing/ (click on "fees for card types and countries" - the US is not mentioned in that list)
hi all, we support cards from the US (although processing and payouts in USD), but we can not onboard merchants based in the US at the moment.
best
Kilian (MD PAYMILL)
Hi Kilian, Thanks for clarifying this! Good to hear
Hipay comes in handy for the card + digpass combo