If your business is like Gun.io, you do a lot of charging clients for services. Waiting for checks in the mail is so 2005, so you probably accept credit cards, and maybe even ACH. There are tons of blog posts comparing different payment services, like Paypal vs. Stripe, etc. We’ll leave that topic alone and say we chose Stripe. Assuming you did, too, our VP of Operations, Tyler Newkirk picked up the trail to determine...
How can I reduce my Stripe processing fees?
I was recently re-introduced to the idea of leveraging Stripe’s volume discount for our business by a savvy client of ours (check out AdvicePay, a FinTech company founded by Alan Moore and Michael Kitces). This wasn’t the first time I’d heard about Stripe’s willingness to work with larger clients, but I had yet to take the time to dive in and explore the potential benefits for which we might be eligible. Due to recent growth and a commitment to a lean operating structure, I deemed it time to give Stripe a ring.
Only I couldn't, because Stripe doesn’t list a public phone number for their sales or support teams. Bummer - be prepared for a semi-lengthy email discourse.
Before contacting Stripe’s sales team however, I spent a few hours digging online to see if I could solve any of these inquiries. Unfortunately I was unable to discover much more than a few vague pointers here and there. As a result, I wanted to record my findings and provide a resource for anyone else looking to understand Stripe’s volume discount.
I wanted Stripe to answer the following questions:
1. What criteria does Stripe use to determine volume discount eligibility?
2. Within that criteria, what level of volume is required for Stripe's discount?
3. How is Stripe's volume discount applied in practice?
In this three-part series I will explore these questions and the answers I was able to uncover.
What criteria does Stripe use to determine volume discount eligibility?
Searching for the appropriate contact information, I found a sales contact form at https://stripe.com/contact/sales. Encouraged by the fact that this form seemed specifically geared toward volume discount requests, I entered the required details and sent the form on its way, hoping for the best.
Within 24 hours I had an initial response, courtesy of a helpful Sam from Sales. Right off the bat he disclosed that Stripe typically only considers volume discounts for accounts “consistently” doing over $80,000 USD in transactions per month - with the caveat that account eligibility may still vary due to different characteristics unique to each business. He clarified:
“Our pricing is largely driven by our underlying costs for processing your transactions which, as you can imagine, varies quite a bit from user to user. These costs are highly contingent on the business itself and the customer profile. Having lots of American Express, international and corporate customers will cause the rate to skew higher; having mainly domestic debit cards will keep the rate low.”
Of note: Stripe actually publishes a figure much lower than Sam’s stated $80K on their own pricing page, as section that seems to appear sporadically based on some kind of split-testing:
I captured this image from their site on 9/22/16, so the exchange rate at the time of writing this article puts €30,000 at roughly $33,500. At no time even in the past 5 years has the exchange rate been anywhere close to convert €30K to $80K. Misleading, to say the least.
With respect to Sam’s reply, although still somewhat opaque, I considered his admission a valuable one. In reading the remainder of his email though, I became increasingly confused as I realized Sam’s implication that our monthly transaction volume fell short of the $80,000 threshold. Confident that our business “consistently" exceeded this threshold (by a lot), I went to back into our Stripe account to investigate and gather concise numbers before responding.
Looking at our Stripe dashboard, I double-checked our figures. I played with the dates, creating a list of monthly transaction volume totals for the entire YTD.
I wrote back Sam from Sales, detailing our monthly figures for the past few quarters as well as some growth statistics to bolster the argument for our volume discount approval (and to learn how flexible Stripe might be with respect to other compelling statistics outside of the $80K/mo requirement). Feeling confident in my rebuttal, I anxiously awaited Sam’s response.
Arriving only 3 hours later, Sam courteously replied with his own (albeit significantly lower) monthly transaction figures, stating that based on his findings, we weren’t yet achieving the $80,000 monthly transaction volume floor to be considered for the volume discount. Frustrated, I read on - until I caught a phrase that Sam had used to describe his monthly totals (my emphasis added):
“Please note that according to your recent net processing, it doesn't appear that Gun.io is exceeding the $80k / month minimum threshold for a potential pricing review of your account.”
How does Stripe calculate “Net Processing”?
You saw it coming, and there it was - the crux of the issue. It now seemed obvious that we were referencing different equations to arrive at our monthly totals, yet I wasn’t sure where this ‘Net Processing’ total resided. A bit embarrassed by my ignorance and apparent unpreparedness for this discussion with Sam, I went back online to search for the source of his ‘Net Processing’ numbers before responding once more.
After minimal hunting, I learned that Stripe prepares a downloadable financial report for each user, housed at https://dashboard.stripe.com/account/data. The ‘Download Report…’ button will create and download a .csv file of your account’s history for your eternal viewing pleasure.
Looking at the report in Excel, I began to play with the different categories of numbers to work backwards into the monthly ‘Net Processing’ totals that Sam provided in his last email (annoyingly, there is no ’Net Processing’ label anywhere in the report). It took a bit of guess-and-check, but I eventually realized that his numbers were the result of taking strictly 'Gross Amount' of 'Sales' (which I believe to be purely sales via CC's) and adding the negative 'Gross Amount' from 'Refunds' (if applicable). Eureka! See some example figures below:
The undimmed area provides the general reference of where to view the relevant information; the red boxes delineate the exact rows to sum for each month in order to find the ‘Net Processing’ amount. Per the sample image, the Net Processing Total equation for August ('8/1/16’ in cell D1) goes like this: $170,000 (Gross Amount, Sales) plus -$8,000 (Gross Amount, Refunds) equals $162,000 ('Net Processing Total').
To explain further - if Stripe were to consider this report for the volume discount, it would determine that August realized $162,000 in transaction volume; $21,500 in July; $86,500 in June. Despite the two months above their stated $80K threshold, I’d suspect that the variability in this example would be too great to approve a volume discount. Armed with new comprehension, I now understood how Sam (and thus, Stripe) calculated the monthly transaction volume (i.e. ’Net Processing’) numbers for our business.
Additional side note: the transaction amount detailed within your dashboard is the sum of both card and ACH transactions, gross of any refunds. For the sake of reducing your fee exposure you need to net out ACH like we did above.
Question 1: What criteria does Stripe use to determine volume discount eligibility?
Answer: Monthly ‘Net Processing’ totals, calculated by the sum of 'Gross Amount of Sales’ and ‘Gross Amount of Refunds’.
In Part 2 I’ll share what I learned about the actual volume of sales necessary to get Stripe to bite on a volume discount for credit card processing fees.