Platforms and Payment Integration: Why Stripe may not be your best option
Stripe has been hugely successful and for good reasons. Elegant API’s and simple onboarding have been the primary drivers behind their success.
But for platforms looking to monetize payments Stripe may not be the best option. Let’s look at why.
First, an overview of what makes Stripe a great choice for many developers and apps.
1-The API: First and foremost the Stripe API and ability to quickly iterate are second to none. Get a sandbox account, test and go to market very quickly
2-Simple pricing: The ubiquitous 2.9% and 30 cents pricing scheme has become so commonplace that merchants almost expect it
3-EZ onboarding. A merchant can go to Stripe.com and in very little time have their Stripe account. Multi-currency/country support make it easy for a platform to expand to other countries
4-Built-in compliance: This is hugely important for platforms that essentially act as a middleman eg a rent collection solution. Developers tend to think that a debit to a tenant can directly settle to a landlord. What actually happens is that the tenant debit settles into a bank account controlled by the payment solution provider and is then pushed out to the landlords bank account via an ACH credit. If the rent collection platform “owns” the settlement account they are then subject to Money Transfer or Money Service Business purview. What Stripe is able to do is offer an escrow-like bank account that Stripe owns but allows the rent collection SaaS to programmatically move money. This is a BIG deal. Most 3rd party payment providers do not offer this capability
5-Split payments: Often a platform has the need for sale proceeds to be split between 2 or more parties
Stripe makes it easy to add payments to your platform. There is no debate around that. But is Stripe the best option for platforms looking to add and monetize payments?
Here are a few areas of concern where Stripe is potentially not the best fit:
1-Monetizing payments: Stripe owns the merchant account and will be collecting their fees from the payment payout. So if a $100 sale is made the merchant will be funded $96.80 (2.9% and 30 cents is held back). Stripe does not share any of this with the platform. So if you are looking to generate revenue you are forced to bill and collect on top of those fees
2-Your platform offers some accounting functionality: Because Stripe net funds proceeds when a $100 sale is booked you are actually realizing $96.80 of revenue. This can make bookkeepers and accountants very unhappy
3-Stripe owns your customer's merchant account. Your clients leave your site to go get their merchant account. If there are support issues they may be looking for you to solve them
4-Stripe charges a % on payouts. So you are not just paying a % to collect payments but to disburse as well
The biggest drawback is revenue generation
Is your client going to be happy with Stripe taking 3% and you taking something on top of that? Are you comfortable taking billing risk?
Is the best of both worlds possible?
We think so. Using our Payments as a Service solution your platform can enjoy the following benefits:
- Powerful, easy to use Credit Card and ACH API’s that support split funding
- The ability to leverage compliance from your platform partner
- The ability to gross fund your merchant base rather than net settle
- Your client applies on your site and gets payment credentials instantly
- Revenue share that offers you payment processing fee sharing
- No % charged on payouts
Revenue sharing works as follows
Your platform decides on what rate you will offer payments. 2.9% and 30 cents is the easiest model. Depending on multiple factors the actual cost of payments will be calculated. These factors include average $ sale amount, mix of business cards, debit cards. As an example costs might be 2.1%. That leaves .8% of margin.
Again depending on variables like # of potential merchant and processing $ volume you will receive a % of the margin. That % could vary again depending on multiple factors from .25% up to 60% or more.
So you get powerful API’s, instant onboarding, no financial risk eg chargebacks, fraud, compliance, personal support and simple revenue generation.
If your platform needs simple revenue generation and especially if recurring payments are important you should look at Stripe alternatives — Like ours :)