Stripe Connect Express/Custom fees too high?
I'm working on a platform similar to buymeacoffee.com, ko-fi.com, patreon.com, where you can sponsor another user with single or monthly payment $1-10,000. I'd like to use Stripe Connect, as I'm most familiar with it and they have the most examples/best docs.
I'd like to avoid using Standard Connect accounts. The dashboard is just way to complex for the average user in my opinion. Picturing someone with the business skills (or lack thereof) of my mother trying to navigate their subscriber and revenue, or offer a refund on the full Stripe dashboard I can see them pulling their hair out. As they say in the docs it's recommended for platforms "With experienced online businesses as users" which would not be my case.
So I'd like to use Stripe Express or Custom. The fees for these account types are:
- $2 per active user (any user that gets a payout)
- 2.9% + 30¢ credit card processing
- $.25 per payout
- 0.25% of payout volume
- varying currency conversion fees
Using Patreon as an example, they charge their users various fees to make money, these fees are:
- Platform fee: 5-12%
- Payment processing: $3 or less = 5% + $0.10, over $3 = 2.9% + $0.30
- Payout fees: $0.25 USD per payout (US users)
- Currency conversion fee: 2.5% currency conversion fee
So to keep it simple let's pretend it's all US and ignore currency conversion. If a creator set up a tier for only $1/mo, and they ended up only getting 1 subscriber (i.e. worst case scenario). Stripe would be charging Patreon ($2 + $0.329 + $0.25 + $0.0025) = $2.5815 a month to handle all the fees through payout. Meanwhile Patreon would be taking ($0.12 + $0.15 + $0.25) = $0.52 a month. So Patreon would be losing $2.0615 a month per user with a setup like this. In fact if I'm doing my math correctly, each active creator would need to earn ~$17 a month in the BEST case scenario (12% fee, over $3 payments) just to break even.
I'm thinking this model simply wouldn't working for an indie startup like mine. I'd either have to set high minimum donations which isn't ideal for end users, minimum balance payouts which isn't ideal for users (and Stripe makes it difficult to handle), or very high fees to where my users could actually lose money.
I think in the end I'll have to resort back to Standard accounts even though the user experience is, in my opinion, subpar.
Why would you NOT buy my product?
You could consider a policy where a user on your platform can only receive a payout once they have a minimum balance. The Stripe active user fee is only incurred if the user had a payout in that month (I believe).
Justin- Thanks for the analysis! We’re integrating payments into our global social food & drink app, Chowdown, and trying to figure out how Stripe or other payment system would work there. What is your business model? As I understand, on Connect the users and their customers interact directly. We were thinking of taking % of transitions. Let me know. Thanks!
That's the plan, just taking a % as transaction fee and considering having a monthly subscription users could opt-in to avoid the fee and instead pay a fixed rate. This would be plenty if I were using Standard Connect accounts but if I use Express or Custom Connect accounts it's the $2/user fee that's really killer so I'm chatting with support to see if theres anything that can be done there.
Thank you! This is helpful!