How To Reduce Stripe Payment Processing Fees

Last updated: January 2nd, 2019.

Stripe fees are a fact of life for most online sellers. But they can be negotiated down at various times, we've done it on our own businesses and will show you how.

For starters, Stripe was recently valued at $20 billion dollars.

I'm going to show you how to put some of that money back in your pocket with real-life examples of reduced Stripe fees that were negotiated by real customers.

As well as getting into real life examples, it's essential to get a bit of background on how the payment processing world works.

This information could prove valuable in your negotiations, and possibly even change a few things about how you do business.

Why Should You Trust Us?

This was written by George Sylvain, co-founder of Social Print Studio, a successful e-commerce store & app with over half a million customers.

Additional help was provided by Hank Kronick, founder of Order Metrics and data analysis specialist.

We've got a combined 16 years of e-commerce experience and have personally used every technique described in this guide and seen the results in practice.

Let's get into it.

About Stripe & Fees

Stripe is a pure payment processor that integrates with Shopify and any other online store you can build. They work with all the major financial institutions

Stripe offers two official pricing plans:

  • Pay As You Go: 2.9% of each transaction plus a $.30 surcharge
  • Enterprise: Negotiable rates, volume discounts, account management, and dedicated support

There’s room for negotiation with both options, but the Enterprise model is designed to accommodate businesses with large volume.

Your business needs to generate at least $80,000 per month consistently to get a seat at the negotiating table

Actual Numbers From Real Businesses

Okay, here's the thing.

Even if you do hit $80k per month, you are probably not going to get a discount without asking for it. And even then, it can be tricky.

In a 2017 case study Gun.io VP of Operations Tyler Newkirk attempted to negotiate his processing fees with Stripe. He was denied lower fees because his revenue did not exceed $80,000 for three consecutive months. It did match or exceed $80,000 for the first and third months, but a significant drop in the second month took him out of the running.

In my experience, at Social Print Studio, we were able to get a few different levels of discount negotiated once we hit various milestones over the years. We had to exchange emails with several people at Stripe to achieve these, and sometimes we were denied. But here's a quick overview of what we were able to get:

  • At around $1m per year - 2.5% + $0.30
  • At around $2m per year - 1.9% + $0.30
  • At around $3m per year - 1.8% + $0.30

There's no saying you'll be able to get these rates though, because there are many other factors at play that Stripe will be considering when reviewing your account.

Consider the case of Buffer who publish all their financials. It seems they are making over $10m per year and they are still getting the rate of 2.2% + $0.30.

So even if you are getting higher revenues you might not be eligible for the lower rates. Let's explore why.

Potential Issues & Reasons You Might Not Get A Lower Rate

First, you need to know about Interchange Rates & Fees.

Stripe doesn't take all that 2.9% - they still have costs themselves - they pay a cut of each transaction to the card issuers & banks. These are called Interchange Rates.

You'll never be able to get lower Stripe rates than their Interchange Rates + some markup.

These fees are charged by the card issuer, and then split between the banks, card marketing partners like airlines and the networks themselves (Visa, MC, Amex). To figure out the rates, there are complicated tables you can try to understand, but here's a simplistic overview:

Visa & Mastercard cards usually cost somewhere between 0.7% to 2.25% and $0.10 of every transaction.

This can vary a lot based on factors like debit cards vs credit cards, or was the card number typed in (higher fee), or was it swiped (lower fee), and other variables. Here's a short extract from the Mastercard fee tables:

Mastercard Interchange Rates
Interchange Rate tables from Mastercard.

But American Express fees are much higher - Amex Cards typically cost over 3% + 0.15c per transaction.

Given these high costs for Stripe, the number of American Express transactions you process in a given month can hurt their profitability.

The AmEx processing fee is already significantly higher than the fee Stripe charges you. Essentially, they lose money on every one of these transactions.

If your business relies heavily on AmEx transactions, this is unattractive to Stripeand makes you an unlikely candidate for lower fees.

However, if this percentage is low, or you go as far as banning AmEx as a form of tender, you could win their favor.

Of course, for Buffer for example, they are selling to businesses - corporate credit cards are often Amex - and so more B2B type services may not be able to avoid this situation.

Another factor against you could be your chargeback rate. Chargebacks are when a customer believes their card was charged in error, and call their bank to reverse the charge, usually in instances of fraud. You can see how many you have in your Stripe Dashboard under Disputes

Stripe Disputes Screen

Subscription billing companies often have this issue. Because people forget about the ongoing charges on their cards, they then claim they never agreed to them, and file a chargeback with the bank.

This happens especially if you make it difficult to cancel a subscription plan.

Higher chargeback rates lead to higher payment processor costs, leading them to refuse to lower your rates.

Chargebacks also are more common if your items are low quality, your customer support is not prompt with refunds when things go wrong, or even simply the name you've chosen for the bank statement charge seems dodgy. Make sure the name on the statement reflects the name of your website!

One more big reason to try to prevent chargebacks is, if you lose, you incur another $15 fee from Stripe. Stripe Disputes Fee
These can add up over time and really hurt your business in both fees & inability to secure lower rates.

Summary

Even if you think you’re eligible for a volume discount, the power is still in Stripe’s hands. You can go to them and ask for a reduction and the scenario would play out as follows:

They’ll calculate your actual rate based on your current volume and hopefully offer you something lower. Shopping around won’t help here.

The negotiation with Stripe isn’t about whittling down the price to something you want; it’s about meeting a threshold to ask for a pricing break. And any break they give you is usually cheaper than you could get as a small merchant trying to do this on your own.

It will most certainly be cheaper than dealing with merchant services divisions directly.

Overall from my experience, and the "anecdata" I have seen, Stripe will do fair by you as long as you're making money for them!

Good luck with your negotiations and I hope the data and information here will help you out.

Feel free to contact us at Order Metrics if you need advice on any of this, I'd be happy to take a look.

About This Guide

The Order Metrics Profit & Growth guide is designed to help you unlock the most profit for your e-commerce business.

This is not intended to be nonsense content marketing like you find on other company blogs.

These are real, tested techniques could help you grow your business and put some cash back in your pocket so you can invest in things that matter to you.

Check out the other articles we have written back at our profit guide index.

Want to find even more ways to improve your bottom line?

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