31
39 Comments

Stripe vs Paddle

This January/February I've been looking at which payment method is best for my SideProject.
I've decided to share what I've discovered, as I haven't found much information on the advantages/disadvantages of Stripe vs Paddle.

My problem

I have a SideProject (SPAM: WebiCaster.com) which I want to charge recurrently on a monthly basis. I have free and paid users. The paying users can do things that the free ones can not.
The problem is that the price is very low (5$), it is recurring and the user can be from any country (it would be nice to have multiple currencies and multiple prices).
By law, you have to charge the tax of the country where the user is resident (not my company). That means a headache every month to manage invoices and taxes from multiple countries.
If you have a manager that charges you by invoice volume ... this can be a ruin. You run out of profit margin. It is not the same to charge 100 invoices of 5$, than 1 invoice of 500$.

Stripe.com

It is one of the most used payment gateways. It is very easy to integrate using its API. It has relatively low commissions.

Advantages

  • You register instantly. All very easy and fast.
  • Multiple projects linked to a single Stripe account (ideal for having multiple sideprojects on a single Stripe account).
  • It is designed for development and testing. They have a very well done and very flexible API.
  • It allows you to enable "test" mode and all tests are saved separately. You don't mess up the real stats.
  • Lots of documentation and community (much more people use it than Paddle).
  • Multi-language dashboard panel
  • Quite low fees
  • Suitable for any kind of project where you want people to pay with their card.
  • You can use any form to integrate with their API, or you can use their checkout https://stripe.com/en-es/payments/checkout (tax or coupon calculation doesn't work in that checkout, it only works with forms that use the API)
  • It has a portal for your customers to download their auto-generated invoices, change their monthly subscription plan, or change their payment card details. https://stripe.com/docs/billing/subscriptions/customer-portal
  • It has a very configurable dashboard where you can see many graphs about your SideProject's revenue (too much data for my taste).

Disadvantages

  • It does not manage the tax issue. It has to be calculated by the web and then you have to have a manager for the invoices and the MOSS (europe).
  • There are tools like quaderno.io that facilitate the tax calculation ... but they have a monthly cost.
  • activating "trials" for customers is better implemented in paddle.

Paddle.com

It's not just a payment gateway. They are a reseller of your services. This means that they calculate the correct VAT for each client, and Paddle does the billing. Then they bundle all the revenue and pay you on a single invoice.
For example: 500 users -> 500 invoices from Paddle, but your company only receives 1 invoice with the total of all revenues. This simplifies the invoicing a lot!!!

Advantages

  • They take care of tax calculation and payment.
  • Paddle allows payment with Paypal, Stripe does not accept Paypal.
  • It allows you to specify different prices per currency and has many currencies (Stripe is more complex).
  • You can display a multicurrency price on your website very easily. https://developer.paddle.com/guides/how-tos/pricing/display-localized-prices
  • Activating Trial periods so that your users are charged after a while is very easy.
  • They allow you to "recover" users who have abandoned the checkout. They charge you a 10% commission. (I'm not going to use it, but it's good to know that this feature exists).
  • It has a very simple checkout in popup modal format. It is not very flexible, basically you can only change colors or pre-fill fields (email, CP, ...) https://developer.paddle.com/guides/how-tos/checkout/paddle-checkout
  • Relatively recently they have released another new checkout that you can embed in your website. You can adjust a lot more things to make it look like it is really part of your website. https://developer.paddle.com/guides/how-tos/checkout/inline-checkout

Disadvantages

  • More expensive fees than Stripe
  • is half-translated into Spanish. I have seen a couple of errors in the translations.
  • only available for a few business types. Basically Saas. You can see a list of banned ones here: https://paddle.com/support/aup/
  • cumbersome to sign up (several mails and recording a video explaining how my SideProject works)
  • I have seen complaints from people who say that they have had their account closed without notice supposedly for selling an incompatible product (when to sign up they have to accept you). This is a bit scary to be honest, but I guess it's because they started selling an unsupported product after pivoting the project.
  • the invoices use Paddle's brand and not yours (users can get confused).
  • the bank charge comes out with Paddle's name (users can get confused)
  • withdrawals require a minimum in the account, otherwise they are not made. You must have 100$ or 100€ to be able to receive the money the following month.
  • does not allow to modify the email for an existing user (neither from the api nor from the control panel).
  • I can't filter by email from the API. It forces me to save data in my database if I want to interact via API from my web (Stripe does allow me to use the API to filter by email and modify it if I want).
  • doesn't allow users to make a plan/rate change by themselves. They are forced to unsubscribe and then sign up for the other new rate. (It can only be done using the API or from the control panel. You do not have a modal to give easy access to your users.)
  • the control panel does NOT have a test mode. And you can't delete the tests you have done. They mess up your stats. (They have improved this literally a week ago, on Monday 15th they published a note saying that from now on they do allow it, but it is not as easy as Stripe has it. Basically it is to open another account just to test).

Summary

If your product is not digital and automated, Paddle will not serve you.
If you prefer that the invoices only show your brand and do not confuse your users ... do not use Paddle.
If your project requires to do very customized things and you need a good API and well documented .... no way use Paddle.
If you don't want/can't wait several months until you have $100 to get your money ... don't use Paddle.

If you don't want to worry about taxes, or how to display multiple currencies on your website then don't use Stripe.

My conclusion

Selling in multiple countries is complex. I have not found any solution that I am 100% satisfied with.
If Stripe would take care of taxes 100%, and allow Paypal ... then I wouldn't be using Paddle right now.

I hope this little review is helpful to someone, it would have saved my time to know all this 1 month ago.

Tell me in the comments if you have any experience with either of these two platforms, or if you know of a better one.
Which one do you use in your projects?

Edit:

I forgot to comment on something as basic as pricing.

On Stripe you can easily find them at https://stripe.com/pricing.

On Paddle they are a bit hidden on their Terms of Use page (section 4):
https://paddle.com/legal/

Stripe: 1.4% + €0.25 for European customers and 2.9% + €0.25 for NON-European customers. They say you can negotiate if you have a lot of volume.
Paddle: 5% + $0.50

Note: Stripe fees vary from country to country. If your company is from the U.S.: 2.9% + 30¢.

As you can see Paddle is more expensive than Stripe, but they take care of the accounting.

  1. 6

    I'm long-time Paddle user and it's worth every cent for me. Especially if you're located in EU. Dealing with VAT is a nightmare. I want to just sleep well. Yes, it's a bit more expensive but for me it doesn't matter because it gives me real value for the money.

  2. 5

    Hey Robert,

    Great post. I actually wrote up a comparison of a few different services based around the hassle of VAT just after you posted this: https://www.ianwootten.co.uk/2021/02/23/comparing-vat-solutions-for-bootstrapped-uk-businesses/

    Included in that post is a spreadsheet where you can adjust your prices and see how your revenue is affected with one of the payment providers: https://docs.google.com/spreadsheets/d/1gwPkVYfPAxfCSPyjamtdKemSJZ3T5V3hzH4GeYNti9A/edit?usp=sharing

    1. 1

      Nice comparison. Thanx

    2. 1

      Wow, thanks for your work.
      I totally agree with what you say in the article.
      Very useful spreadsheet, thanks

  3. 2

    Two things: Stripe has VAT handling in beta; and pick your long term relationship wisely!

    My major concern with Paddle is being locked in. They'll own the customer relationship for recurring payments. Given the choice, I'd rather be locked in with Stripe.

    And Stripe has VAT handling in beta to basically do what Quaderno does (charge VAT when appropriate, handle invoicing, generate a sales report for you to file to the EU bodies).

    But Stripe don't have immediate plans to actually do the EU filing for you (see my other comment about costs there, but it's ballpark £600/year to totally hand over to accountants). This is where Paddle still has an advantage - their pitch is basically "don't ever have to think about payments ever again" - which is crazy powerful, except for some reason I don't trust them (for all the reasons you mentioned - mystery pricing, quality, random account lockdowns).

    1. 1

      You'll be locked in with both Stripe and Paddle.
      If in a year's time I want to switch from one to the other ... it's going to be a pain.

      But currently for me, it's a bigger pain to not have fixed expenses so I can pay taxes, not waste time on accounting tasks and validate that the project can generate recurring income.

      I really think Stripe is more powerful, but right now it gives me more headaches than Paddle. I want something simple and that I don't have to spend a lot of time on.

      When Stripe comes out of Beta, I'd love to try it, the problem is having to pay an account manager.
      And you have to keep in mind that not all projects have products that can be sold with Paddle.

      And you made me think that something as basic as pricing I haven't mentioned. Damn it. Thanks. I'm going to edit the post.

  4. 2

    Thanks for sharing this Robert. The only thing I would add is that I think most countries have thresholds before VAT registration and collection is required. For example, I think if you're in Spain and selling into the UK, the threshold is £85,000. I think for most EU countries VAT threshold is €35,000.

    So you have to get reasonably big (at least for an indie hacker) before it becomes a problem.

    Caveat that I am not a tax attourney or accountant, so please don't take this as tax advice.

    I'm personally torn between the two choices... I haven't made up my mind yet.

    Are you happy with Paddle so far?

    1. 1

      I am not an expert, but I think that in Spain the threshold is 0€ for digital products.
      And in the UK the threshold is only for companies in that country. If my customers are from Uk, but my company is not from UK, then I have to declare taxes from the first sale.

      And I am not an accountant either. It is always better to hire an expert.

      At the moment I've been with Paddle for 4 days, I haven't had much time to be happy or unhappy xD.

      1. 2

        I just wanted to concur with this @RobertMenetray .

        I'm in the UK, and my accountant said even a single consumer sale to the EU needs to be reported (0 euro threshold).

        Extra data points:

        • To register to file EU consumer sales, you need to pick one EU country to report all of them (we did Ireland)
        • The accountants took care of everything for that for £600
        • The accountants charge £150 / quarter for filing

        So in evaluating Paddle for convenience, and factoring in their higher price, a ballpark alternative is £600 a year for EU filing and a one-time fee of £600.

        1. 1

          For EU businesses there is a threshold of €10,000 in B2C sales before VATMOSS (the EU Digital Sales Tax) applies.

          Edit: Whoops. Just saw you're in the UK, post-Brexit the threshold doesn't apply. Sorry :(

          Source: https://www.rossmartin.co.uk/vat/vat-cases/5252-post-brexit-vat-moss-february-deadline

          1. 1

            Thanks for the info, Thomas. Yay Brexit.

            Honestly, this is totally crazy. It's unbelievable to me that a U.S. business has to worry about collecting international taxes. Equally crazy are the U.S. state sales tax laws which require EU businesses to collect sales tax in Arizona or Texas or one of the 20 or so states that tax saas sales. I don't understand how this sort of jurisdiction works.

  5. 1

    Little late in the discussion. Is this same for both B2B and B2C. If I'm selling SaaS for Business customers, do i need to file the tax at origin country of customer?

    1. 1

      Yes, if they do not use a valid VAT number for intra-EU transactions

      1. 1

        okay, paddle is the only way tp go then. Comparing the complexities to file taxes with local tax consultants and their fees.

  6. 1

    If you start, Paddle is great. The worse thing about Paddle is that it took me a couple of purchases before I realised that they didn't create those services.

    VAT is not that difficult. You need to add a dropdown to pick a country, and add relevant multiplier to the price. That's it.

    In general, it's an amazing problem to have. It means that you have sales.

  7. 1

    One thing I would like to add is that Paddle has referral system built-in with the payment system. Currently we are using Chargebee + Stripe setup. Chargebee handles all the recurring plans and makes one-time payment calls to Stripe. Which means we can switch to any payment gateway like paypal anytime we want. But I am missing the referral system payments in chargebee that paddle already offers.

  8. 1

    Thanks for sharing this.

    On the face of it Paddle looks a no-brainer to me in terms of outsourcing tax management for what is a small cost so it is useful to understand practical sticking points.

    Do you have any view on these possibles:

    1. Countries/states have tax thresholds so until your sales become significant you are not liable for tax. When using Paddle your sales are "bundled up" with other Paddle sales in that country, so your product is liable from first sale. So without Paddle => no tax to pay until significant volume. With Paddle => tax to pay from first sale.

    2. Paddle are (understandably) selective with their clients and are increasingly targeting ever-bigger / ever-less-risky customers in-part to fight fraud that will leave a gap regarding support for smaller operators.

    Selling in multiple countries is complex. I have not found any solution that I am 100% satisfied with.

    This keeps bugging me from time to time. I'm sure there could be a better approach.

    But clearly providers are evolving and it will be interesting to see how support for global tax evolves.

    1. 1

      As I said in another comment, the threshold depends on each country. I am not an expert, but I think that in Spain the threshold is 0€ for digital products. And there are countries where the threshold only applies if your company is from the same country as your customers.

      Basically, I think the whole tax issue is hell.

      Point n2 is a good point. I've been let in. But I understand that it's possible that they are becoming more and more selective.

  9. 1

    I recently contacted Paddle about changing customer emails and they confirmed there is no API now in the near-term. There is however a button in the online portal that they can activate for you on request, depending on that user's history with Paddle the button may just put a request in for someone at Paddle to amend the email.

    FastSpring (older & more expensive incumbent) does have an API to change customer email and largely works quite similarly to Paddle with a little more flexibility here and there. One thing they don't have is something akin to Paddle's new "inline" checkout, it's either a full-blown checkout page or a (somewhat ugly) popup overlay.

    I would love to know more about other options that don't involve a Merchant-of-Record like Paddle. I understand that Taxamo can remit taxes for you and works with Stripe, but how expensive is it? Are there other options that will do that too? What works best for early-stage startups with no cashflow who want to keep monthly costs down (so % fee works well)?

    1. 1

      Taxamo was not known to me. But I don't see any price on their website, and it's not clear to me if it's only for tax calculation or if they also declare it in each country.

      And in my case I prefer a % of sales to having to pay a fixed fee.
      As you say, an indiehacker should keep monthly costs to a minimum.

    2. 1

      Gumroad subscriptions! :)

      1. 1

        Absolutely, Gumroad is another alternative to Paddle. I haven't used it myself, but from what I researched, it only allows money to be taken out to a paypal account if my company is European. For that reason I have ruled it out.

  10. 1

    Hi Robert, thank you for sharing. This is really helpful. I had to make the decision between Stripe and Paddle last week for my time tracker sideproject https://getbillable.com/

    I decided to go with Paddle for now. The extra service they provide (with the taxes) save me time. At the current stage of my project that time allows me to add more valuable features to the app. I might switch to Stripe in the future. The connection with Indiehackers is nice ;)

    1. 1

      Not only the integration with indiehackers, I dare say that Stripe has a much better API than Paddle.
      I'm sure Stripe has many more integrations with other services.
      Luckily, at the moment I don't need these integrations to monetize my project.

  11. 1

    This is really helpful! Thanks for posting!

  12. 1

    Been down this road too!

    As an EU person I'm gonna use either Paddle or Gumroad for my SaaS. :)

    1. 2

      I used to use Gumroad and then I switched to Paddle. Gumroad is good for one-time products, doesn't have a lot of must-have SaaS features.

    2. 1

      Unfortunately Gumroads checkout is ugly and the API poor 😞

      1. 1

        Paddle does not have the best API either.
        But the checkout has been improved with their embedded version.
        The old version of the checkout is similar to Gumroad, I find them both ugly.

      2. 1

        I don’t have any issues with the Gumroad checkout look.

        What are you missing in the API? I think it looks fine. It doesn’t have tons of bells and whistles... but isn’t that the point with Gumroad?

        1. 2

          With Gumroad you can't have VAT-inclusive pricing, localized pricing, you can't change subscription plans, can't have free trials, etc. They are good very selling one-time products like ebooks, but not for SaaS.

          1. 1

            Oh really? I've bought stuff on Gumroad where they charge VAT. Is that not included with the subscriptions?

              1. 2

                Sure :) I've spent a lot of time in this trench ;)

                Gumroad is great if you're selling courses or simple software that you can activate with a license key. It doesn't have a way to properly integrate into your software. So if you're looking to have integrated payment then Paddle is your other option as it has a JS library to add a payment popup with web hooks and all that.

                On the flip side, Paddle allows you in have inclusive or exclusive VAT. This means that the VAT can be included in the price, or added on top of the price. This is useful if you require a specific amount from each sale. Gumroad on the other had is only exclusive in that the VAT is added to the price at checkout.

                Paddle does have price localisation, which is useful, but ends up showing the conversion amount to dollars anyway for smaller currencies. It also gives users the ability to use a VPN to find cheaper pricing (tested this myself).

                Paddle's fees are quite a bit higher than Gumroad, especially if you're doing small transactions (less than, say, $15). Gumroad (3.5% + 30c) - Paddle (5% + 50c). That 50c is actually the big kicker if you're doing small transactions as with a $9 purchase you'll end up paying over 10% in fees (95c per transaction).

                I tried moving over to Paddle, and while they're an objectively more useful system, Gumroad is cheaper and my audience are familiar with it (artists).

                I hope this wall of text helps!

                1. 1

                  Great summary!

                  Some other issues for me with Gumroad vs Paddle: No international wire transfer for withdrawals, no invoice generated for your income, they add Facebook pixel inside your checkout JS widget, more chargebacks.

  13. 1

    A couple of extra things about Paddle:

    • You can sell digital products as an individual without a company (I asked this a couple years back from their customer service)
    • Not just for SaaS but also for one-off digital products like books, games etc

    Edit: Great comparison, thank you a lot Robert!

    1. 1

      Thanks to you for the information.
      I didn't know that you don't have to be a company to use Paddle.

  14. 1

    This comment was deleted 8 months ago.

Trending on Indie Hackers
I will promote your startup to 50K+ people 62 comments I made Session, a productivity timer that makes $5K/month in net profit, AMA! 21 comments I built an NFT Guide site. Feedback welcome! 15 comments I've teased this project for a while. Initial thoughts on this landing page? 12 comments Only 30 days! We finished a great Etsy products research tool 10 comments #1 on Product Hunt with an open-source project 8 comments