Using Stripe is the default choice for many small businesses — it's hard to come across anyone who doesn't have a Stripe account. And so by extension, it’s often a no-brainer for many to also use Stripe for their Billing and Invoicing products, too. But if you were keeping an eye on your inbox the last couple of weeks, you might’ve seen an email about the Stripe Billing price increase and wondered how it's going to affect your bottom line as a SaaS business
We’re here to help you make sense of the new Stripe pricing and what it might mean for your business.
ICYMI: Here’s what happened
In late June, the Stripe team sent out an email to notify users of an upcoming change to their plans and pricing. These changes would take effect starting July 10, 2024 for new users, with a later effective date for customers who already use Stripe Billing.
Refresher: Stripe and its many products (and fees)
Stripe pricing can get confusing quickly. Remember that Stripe is best known for being a payments mogul, but it has numerous other features it offers
each with their own prices associated with them.
Most of us are well aware (painfully so) that Stripe charges 2.9%+30 cents as the transaction fee for payments, but if you also want to use features like Billing or Invoicing, you’ll be tacking on these additional percentage fees as well. To our knowledge, there is no changes to Stripe's longstanding card processing fee or using the payment gateway.
Here, we’re just focused on their Billing product, which has been at 0.5% for a long time.
Stripe’s billing and invoicing pricing as of July 2, 2024. Billing is set to increase price from 0.5% to 0.7% on July 10.
What are the pricing changes & when will they happen?
Per the announcement, starting July 10, 2024, Stripe will consolidate its existing Billing Starter (0.5%) and Billing Scale (0.8%) plans into a single comprehensive plan priced at 0.7%. These fee changes aim to simplify the pricing structure, but it is also a significant price hike that's likely to be painful for early-stage startups an SMBs especially.
Yet another wrinkle: New Subscription-Based Pricing
Stripe is introducing subscription-based pricing plans for its Billing and Tax services, offering an alternative to the traditional pay-as-you-go model. These new plans require users to commit annually, with payments made monthly. At the beginning of each month, users are charged a fixed subscription fee that corresponds to a pre-determined level of product usage they select when signing up. This model is designed to help users manage their finances by providing more predictable monthly expenses.
If a user's actual usage during the month exceeds the level they have pre-selected, Stripe will charge an additional overage fee at the end of the month. This ensures that users only pay extra when they exceed their anticipated usage. All these fees—both the regular subscription and any potential overage charges—are automatically deducted from the user's Stripe balance, simplifying the payment process.
Which customers does the price increase apply to?
Grandfathering for Existing CustomersStripe knows what they are doing and are no strangers to
grandfathering. So, in order to ease the transition to the new pricing model, they're delaying the price hike for Stripe users already using Stripe Billing. Those existing customers will continue to enjoy the lower rate of 0.5% until June 30, 2025, but then those fee changes kick in.
This grace period should ease some of the concerns of existing customers, but will mean that many businesses may want to start planning ahead and considering how this will impact their bottom line as they’re giving away another 0.2% by default, and processing fees can really add up quickly.
What if you don’t already have Stripe Billing?
If you are not already a Stripe Billing customer by July 10, the announcement suggests that you’ll be subject to the new price increase of 0.7%.
Heads Up: You (likely) will still have to pay additional fees
As a general note, it’s not clear if or how the Billing fee changes might impact other transaction fees – Stripe didn’t say anything about this in their announcement. As of today, Stripe charges and additional cost for each product you use. So if this continues to be the case and the new Stripe Billing pricing update doesn’t change that equation, you can expect to be paying the 0.7% plus whatever other transaction fees you’ve been paying – the credit card payment fee, the Invoicing fees, etc.
Billing Scale Customer? Look out for these 2 new Stripe fees
One thing we do know for sure from their announcement is that Stripe Billing Scale customers will have to pay 2 additional fees to access Invoicing and Revenue Recognition:
“Starting July 10, 2024, Billing Scale customers will retain all of their existing Billing features, but Stripe Invoicing and Stripe Revenue Recognition (which were previously included) will now be charged separately.” Here’s how those new fees break down:
- 0.25% for Revenue Recognition: Revenue Recognition will be available for free on Billing and Invoicing volume until June 30, 2025, after which it will be priced at 0.25% of total volume.
- 0.5% for One-time invoices :The rate for one-time invoices will be 0.5% per paid invoice for Invoicing Plus.
Beyond this, it’s not clear whether other brackets of customers will be paying fees, but we assume.
Are Stripe Billing’s product updates worth the price hike?
In its email announcement, Stripe suggests that the pricing change is to account for some feature changes, however most of these are industry-standard.
Stripe Billing's Product Updates
Stripe Sessions recently provided insights into the updates for Stripe Billing, and we've summed up the main points below.
Entitlements: A Step Forward, But Only Just
Stripe introduced updates to its entitlement features, which now allow entitlements to be created through the Stripe API. However, this functionality remains quite basic:
- Limited Dashboard Interaction: Entitlements can only be managed through the API and are not integrated into the Stripe dashboard UX, which could limit accessibility for users who prefer a more visual management system.
- Binary Feature Access: The approach to entitlements is overly simplistic, offering a binary model where customers either have access to a feature or they don't. This lacks the nuance many SaaS businesses require, such as offering limited entitlements with overage pricing or usage caps.
- Lack of Integration in Key Areas: Despite being able to store and retrieve feature-plan mappings via the API, these entitlements are not visible in critical customer-facing interfaces like Stripe's subscription pricing page or the Billing Customer Portal.
Usage-Based Billing: Catching Up but Not Leading
Stripe has made some enhancements to its usage-based billing capabilities, including:
- Real-Time Metering: The ability to handle real-time streaming of metering data, aligning Stripe's offerings with existing capabilities in the market.
- Basic Meter Aggregation: New mechanisms for meter aggregation have been introduced, though they remain quite basic and do not yet support advanced pricing logic based on usage dimensions.
Hybrid Pricing Plans: Still Missing
A significant gap in Stripe's offerings remains the support for hybrid pricing models. Many modern SaaS businesses, especially those in emerging tech sectors like AI, require the flexibility to combine multiple priced features within a single plan—such as fixed monthly fees, per-seat pricing, and usage-based charges for high consumption. Stripe's current structure still does not support this complexity, forcing many startups to devise custom workarounds or seek alternative solutions.
Are there any good alternatives to Stripe Billing?
For SaaS founders who are reconsidering their billing solutions due to Stripe's pricing changes, or the limitations in features offered by Stripe Billing,
there are several alternatives in the market that might better align with their needs.
WingbackWingback stands out as a premier alternative, especially for modern SaaS startups looking for a robust yet flexible billing solution. Designed specifically with the needs of SaaS businesses in mind, Wingback offers:
- Comprehensive Billing Features: Wingback provides a full suite of billing and subscription management tools that go beyond basic functionalities to support complex billing scenarios, including hybrid pricing models.
- Frontend Components for Any Complex Pricing Plan: Unlike many other platforms, Wingback offers superior frontend components that can be customized to match the specific user experience and branding requirements of your SaaS product.
- Cost-Effectiveness: With a pricing structure designed to support startups at various stages, Wingback presents a financially viable alternative to Stripe Billing, especially for those looking to maximize features while keeping costs in check
ChargebeeChargebee is another alternative that provides a range of billing and subscription management services. It is particularly known for its:
- Support for Various Pricing Models: Chargebee offers support for different pricing strategies, including usage-based and tiered pricing. However, it has limited support for complex hybrid pricing models, which can be a drawback for SaaS businesses looking for greater flexibility.
- Integration Capabilities: Chargebee integrates with a variety of other business tools, which can simplify the management of customer subscriptions and billing.
While Chargebee is a robust platform, SaaS founders should consider its relatively poor frontend components and limited hybrid pricing support when evaluating it as an alternative to Stripe Billing.
PaddlePaddle provides an all-in-one billing, payment, and subscription management solution but with certain restrictions that might affect its suitability for some SaaS companies:
- Built-in Compliance and Tax Handling: One of Paddle’s strengths is its handling of VAT and sales tax compliance, which can reduce the administrative burden on SaaS companies.
- Checkout and Payment Processing: Paddle offers a streamlined approach to checkout and payment processing, which can enhance the buying experience for end-users.
However, similar to Chargebee, Paddle offers limited support for hybrid pricing models and its frontend components may not meet the needs of all SaaS businesses, especially those looking for highly customizable user interfaces.Stripe's pricing update is a significant development for SaaS startups that rely on its billing solutions. While it introduces some advanced features, the increased costs and existing limitations may prompt businesses to explore alternative solutions. By considering platforms built specifically for SaaS billing, like Wingback, startups can find options that better suit their evolving needs and help them maintain a competitive edge in a dynamic market.
Conclusion
If you’re an active Stripe Billing customer, you’ll likely be experiencing a price increase to 0.7%, and if you’re a Stripe Billing Scale customer, you should account for 2 new price hikes for Invoicing and Revenue Recognition as well. This will all be added to whatever other Stripe fees you are subject to (including Stripe Processing Fees for credit card transactions) and the details here are still fuzzy.
The supposed reason for these changes is features upgrades, but those are also somewhat table-stakes in today’s world, so it’s not clear if these really justify these price hikes.
It may be worth it for some Stripe users to still keep everything under the Stripe roof, but be forewarned that you may be losing more of your margins if you continue to use their Billing product moving forward.
