Other payment processors that do not use a 'freemium' model charge less for their processing fees (and varying rates across cards). The reason it seems freemium for Stripe and other competitors is that they charge higher processing fees for the convenience than other traditional processors do.
How nice that spread is does depend dramatically on the size of the transaction, though.
I'm guessing a service like Stripe has plenty of customers in B2C markets, where selling something for $10 is hardly unusual. At that price, they are only making a few cents on the transaction in revenues (not profits).
Obviously on a $100 transaction the figures work out much better for them.
I think Stripe also still charge the same rate for all card types, but behind the scenes they are probably paying significantly higher rates to some card networks than others.
I'm paying 0.15% + $0.26 for those transactions through another MSP. I think many people are paying the 2.9% for the convenience Stripe and PayPal offer over applying for and integrating a merchant account and gateway, not because they're a huge risk and nobody else would take their business at lower rates.
No, it does include that fee. That 0.05% + $0.21 I referenced is the interchange fee charged by Visa. That fee was capped at that low level by the Durbin Amendment of the Dodd-Frank financial reform legislation in 2010. Stripe's pricing has been 95%+ markup when it comes to debit/check cards since then. Other card types don't have such an enormous fee spread, but unless all your customers are paying with corporate cards and AmEx, 2.9% flat rate is a real nice margin.
At the risk of being dense, are you sure you're not talking about debit cards? I've never seen interchange fees lower than about 1% for credit cards. In what I read from the Durbin Amendment, I've only found the specific numbers you mentioned in reference to debit cards.
If I'm wrong, I want the name of your merchant processor!
I am most definitely talking about debit cards. I said "fee for charging a debit/check card". They make up 25% of my online processing volume despite being a mostly B2B business. They're probably more than 25% of Stripe's volume.
Whoops, you did say that, way back in the first post in our thread. Sorry, I've been focused on credit cards — all is clear now. I hadn't thought at all about that wrinkle of Stripe.
I suppose it's (only partially) balanced by the higher AMEX, etc fees.
