Billing is one of the most important things to consider when building a SaaS. After all, if you’re not getting any paying users, you’re not going to last long in the business.
In the past decade, this went from being a difficult aspect to handle to becoming as easy as implementing some lines of code or plugging into an online service.
Unfortunately, with the rising popularity of SaaS products, many people have built all sorts of things, ranging from simple tools to questionable ones. This has led to restrictions imposed by some of the most-used billing providers. Also, some of these providers have changed their fees structure to capture higher revenue margins at the expense of their users.
Now, it’s not that easy to build something and then hook it up to a platform like Gumroad or Stripe. Indie hacking is not as easy as it used to be.
But it doesn’t have to be all “doom and gloom”. In this article, we’ll explore some important SaaS billing concepts and see what other alternatives exist out there.
Let’s get started.
Current Problems with SaaS Billing Providers
There was a time where the indie community was small. Only a few builders were doing their thing and proving there was an alternative to the 9-5 or full freelancing.
This community started growing and expanding thanks to some brave ones who went the indie route and service providers who made the billing part an easy thing.
The 2 main ones here are Gumroad and Stripe.
I know many indies who either used one or the other. In some cases, they used both. One for their SaaS projects and the other for more, creator style, info products.
One particular example was a tool called “TweetAP”. This tool helped with autoDM’ing Twitter followers along with showing you useful statistics about your account. I used it for several months and all payments were part of a subscription through Gumroad.
Unfortunately, this was one of the indie products that got killed with the Twitter API changes.
Soon enough, that stability came to an end and the indie world got shaken with changes that affected everyone. Both of these platforms stopped being as reliable as they once were.
For Gumroad, the issue was a substantial increase in their fees. Before, they had a pricing model that scaled with the amount of money processed. Meaning, smaller creators and indie builders would only pay a small fee and could figure out which products work and which ones don't.
But with the change, it was a standard flat rate of 10% for everyone. Regardless if you’re a big established builder or just starting out, you’ll have to pay the same fee.
This change was introduced at the end of January of this year. And of course, there was a lot of discussion about the implications and the decision to migrate elsewhere. Prompting many of them to migrate and look for other existing alternatives.
Here is a screenshot of an email talking about that price increase.
And on Stripe’s side, the issues have been going on for much longer.
In the past 2 years you can find all sorts of discussions, complaints, and plain frustration-venting about their shortcomings.
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See also…
Granted, many of those posts that ended up making it to the first page of Hacker News, had either bogus claims or got addressed by the co founders themselves (you know, to avoid bad PR).
And with such a scenario, many people have asked about alternatives for their own projects. The problem here is that there’s a ton of payment processors and many are not suitable for SaaS products.
So, let’s see what are the main elements we need for a SaaS product and then we’ll review what alternatives are out there.
Key Elements of SaaS Billing
On the surface, billing isn’t that complicated. You only need 2 things:
where to store the money (aka a merchant account or a business bank account) and then how to get that money (aka a payment processor).
But remember that this is not your typical brick & mortar store or an e-commerce. This is a SaaS.
And because it is online, anyone can access it and start using it.
Because of that, a simple merchant account and payment processor won’t cut it.
You also have to take into account aspects like:
- Charging a recurrent subscription (either monthly, quarterly, or yearly).
- Handling different payment methods (credit/debit cards, Google/Apple Pay, ACH Payments, Paypal, etc.)
- Managing payment processor fees (some processors have higher or lower fees).
- Dealing with refunds and chargebacks.
- Being tax compliant globally (remember anyone can access it).
- Having proper data & reporting for statistics, audits, and legal stuff.
- And many others
Soon enough you’ll realize this can get very complicated very fast.
And fun fact, Stripe doesn’t cover all of that. It’s very convenient for the billing part. But beyond that, you’re responsible for the rest.
Before you throw your hands up and be like “well, this is over. I’ll have to be at the mercy of Stripe or not have a SaaS at all”.
There’s something you need to know first that can alleviate your SaaS billing woes.
And that it’s a Merchant of Record.
What is a Merchant of Record?
A MoR (Merchant of Record) is an entity that takes on the financial responsibility and liabilities on your behalf when processing payments of customers around the world.
It is authorized to take payments and deal with banks or other financial institutions. But it not only helps you take payments, it takes care of the entire SaaS billing process for you.
So, all those elements we discussed before? Yeah, a Merchant of Record deals with all of that for you. You only pay one fee and are free to run your SaaS business however you want. Instead of having to maintain a payment provider, a service for recurring subscriptions, another for taxes and legal compliance, and so on.
Now that you know what it is. Let’s look at the best options out there.
Current Billing Alternatives
From all the MoR’s, there are 3 names you’ll come across the most. These are the services that come up over and over when you interact with digital products or SaaS solutions in the indie space.
Paddle
Paddle is both a MoR and payments infrastructure that prides itself in being built specifically for SaaS businesses. It manages all the aspects of the payment process (not only the billing part) and helps the business to grow and expand internationally.
If you're on “Indie Twitter” or visit subreddits like r/Saas, there’s no doubt you’ve heard about Paddle before. The “billing alternatives” discussion is a recurring one (
It takes a little bit of setup to get everything right, but after that you can start accepting payments and focusing on the business instead of maintaining a payment service stack.
The pricing is an all inclusive fee that covers all the services beyond billing. And it works as a “pay-as-you-go” model which is 5% + 50 cents per transaction. They also offer a custom price for larger businesses and higher volume transactions.
Checkout Examples:
Lemon Squeezy
Lemon Squeezy is the “new kid on the block” (of MoR’s). It allows you to build your SaaS without worrying about maintaining all the parts of the payment stack.
It takes care of all the regulations and compliance matters for you. It supports many more payment methods than others. People in other countries can pay with their local currency if they don’t have credit/debit cards. It has an AI fraud-prevention tool that detects suspicious behavior or malicious actions against your business.
The pricing works the same way as Paddle. An all inclusive fee that provides access to all services for 5% + 50 cents per transaction and no additional fees. The checkout is not customizable, it’s like Gumroad where your users will land on the same page.
Checkout Example:
Fastspring
FastSpring is the other MoR that handles payments for online businesses like SaaS and sells digital products. It also allows you to work with multiple payment processors to cover users internationally.
It handles the whole tax collection and legal compliance process in all the countries you have paying users. FastSpring acts as a reseller, selling the products & services while handling the payments on behalf of its customers. It allows you to customize the checkout process with either a storefront or a popup.
Checkout Examples:
The pricing is tailored to each individual business and the products/services it provides. It also charges per transaction but works on a revenue-sharing model, meaning that if you sell little you get charged little and if you have a greater volume of transactions, you get a proportional higher fee.
Conclusion
With this overview of the current SaaS billing landscape, I hope you now have a much better idea of what it’s involved in this dynamic of getting paying users all over the world.
It’s great to know that we aren’t stuck dealing with Stripe’s whims for our billing needs. We can go with one of these MoR’s to make the whole process much easier and convenient.
Now, with all these options at your disposal, you can go ahead and keep building and growing your SaaS to serve more people all around the world.
Thanks for reading!. I hope it was useful and informative.
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