Is Stripe subscription management worth the cost?

Stripe is a popular choice for businesses seeking to implement subscription management and recurring billing. But is it truly worth the cost?

Stripe's subscription management lets you handle various aspects of recurring billing, from creating subscription plans to automating invoices. However, Stripe's pricing structure and limitations raise questions about its suitability for businesses with complex billing needs.

In this article, we'll dive into the costs associated with Stripe subscription management.

Read on to learn:

• How Stripe subscription management works and its key features
• The limitations of Stripe and its potential impact on your business
• A detailed comparison of Stripe and Orb, highlighting their core differences
• Which businesses are best suited for Stripe
• Which companies might need a more specialized solution

Let’s get started by explaining how Stripe subscription management works.

How Stripe subscription management works

Stripe subscription management provides a foundation for businesses that operate on a recurring billing model. It allows you to manage customer subscriptions, automate invoicing, and handle recurring payments.

For SaaS businesses and e-commerce platforms, Stripe offers tools to set up subscription tiers, apply coupons, and manage upgrades and downgrades.

What does Stripe subscription management offer?

Essentially, Stripe allows the creation of subscription plans with different pricing structures. You can set up recurring payments on a daily, weekly, monthly, or yearly basis.

Automated invoicing is another key function, as it generates and sends invoices to customers based on their billing cycle. Basic usage tracking is also available, providing some insight into customer activity.

However, Stripe's pricing structure and certain feature limitations might make it less suitable for businesses with highly complex billing needs. Companies that need intricate pricing models or advanced revenue recognition may find Stripe's built-in features insufficient.

Key features of Stripe subscription management

Stripe subscription management provides a range of tools for businesses operating on a recurring revenue model. To understand its value, we need to examine its strengths and weaknesses.

What Stripe does well

Stripe offers a solid foundation for many subscription-based businesses. It supports flat-rate, tiered, and seat-based pricing models, allowing for a degree of pricing structure variation.

A self-service customer portal is available, enabling customers to manage their subscriptions, update payment information, and handle basic account changes. Basic revenue analytics and MRR tracking are also provided, giving businesses a snapshot of their recurring revenue.

Limitations

While Stripe offers valuable features, it also has limitations:

• Usage-based billing: With Stripe Billing, you can set up and integrate different types of usage-based pricing models with your SaaS product.
  
  However, while they provide the tools, implementing complex usage-based billing with Stripe still requires a deeper understanding of the platform and more development effort compared to simpler subscription models.
• Fees: In addition to standard payment processing fees, Stripe charges for its billing features. This can increase costs, especially as a business scales. It is important to note that the cost of payment processing is separate from the subscription management tools.
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• Dunning and revenue recovery: Dunning management capabilities are relatively basic. Businesses needing refined dunning and revenue recovery tools may find Stripe's built-in features lacking.
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• Customization: Extensive customization can be demanding. While Stripe provides APIs and tools, extensive customization can require substantial development resources. The structure of the platform can limit the ability to create unique billing flows.
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• Ecosystem lock-in: Relying on Stripe locks businesses into its ecosystem. Migrating to another platform can be a complex undertaking.

Is Stripe subscription management worth the cost?

To answer this question, it's important to understand the associated costs to determine if it's the right fit for your business. Let’s zoom in on those associated costs.

Transaction fees

Stripe's standard fee for processing domestic cards is 2.9% plus $0.30 per successful charge. For businesses using Stripe Billing, there's an extra fee of 0.7% on recurring charges.

That means for a $100 subscription payment, the total fee would be $3.60 ($2.90 standard processing fee + $0.70 Stripe Billing fee). For companies with notable recurring revenue, these fees can accumulate.

International and currency conversion fees

If your business accepts payments from international customers, additional fees apply. Stripe charges a 1% fee for international cards and an extra 1% for currency conversion. Therefore, processing a $100 payment from an international customer could incur an extra $2 in fees, totaling $5.60 in this scenario.

Chargebacks and fraud prevention

In the event of a dispute, Stripe imposes a $15 chargeback fee, regardless of the outcome. While Stripe includes basic fraud prevention tools, businesses seeking advanced protection might consider Stripe Radar for Fraud Teams, which comes at an additional cost.

Stripe vs. Orb: Which one fits your business?

Both Stripe and Orb offer valuable features but cater to different needs. Let's break down their core offerings to help you decide.

You can read more about the differences between Stripe vs. Orb in this guide.

Who should (and shouldn't) use Stripe subscription management

Let's explore which businesses can truly benefit from Stripe and which ones might need to consider alternatives.

Who can benefit from Stripe?

• Startups and small businesses: Stripe's ease of use and quick setup make it a good starting point for businesses launching subscription services. It handles basic features like recurring billing, invoicing, and simple subscription management without requiring extensive technical expertise.
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• Businesses with standard pricing models: If your business primarily uses flat-rate, tiered, or seat-based pricing, Stripe can effectively manage your subscriptions. It supports these common models with built-in features and straightforward configuration.
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• Businesses seeking an integrated solution: Stripe's platform offers a wide range of integrated features beyond subscription management, including payment processing, fraud prevention, and business analytics. This can be beneficial for businesses looking to consolidate their tools and streamline operations.

Who might struggle with Stripe?

While Stripe provides a solid foundation for subscription management, businesses with more complex needs may find it limiting.

• Businesses with complex usage-based billing: If your pricing model involves intricate usage calculations, tiered usage thresholds, or real-time billing adjustments, Stripe wouldn’t be the ideal solution. While it supports usage-based billing, Stripe’s limitations with implementing complex scenarios can require workarounds and custom integrations.
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• Businesses seeking extensive customization: While Stripe offers APIs and webhooks, achieving a high degree of customization can require notable development effort. If your business requires unique billing workflows, highly tailored customer experiences, or deep integration with other systems, you might face challenges with Stripe's platform.

TL;DR: If you need more than basic subscription management, Stripe alone might not be the ideal fit. You should consider alternative platforms like Orb, which specialize in usage-based billing and offer greater flexibility for complex pricing models and rapidly scaling businesses.

FAQs

Can Stripe handle metered/usage-based billing?

Yes, Stripe supports metered or usage-based billing, allowing businesses to charge customers based on their usage. Stripe Billing has integrated features for this purpose.

Does Stripe charge extra for billing features?

Stripe charges an additional fee for its billing features, which is a percentage on top of the standard transaction fees. The exact rates can be found on Stripe's official pricing page.

Can I use Stripe for billing but avoid their high fees?

While Stripe's fees are competitive, avoiding them entirely isn't feasible if you're using their billing services. However, you can optimize costs by selecting the most suitable pricing plan and minimizing unnecessary transactions.

Does Stripe allow flexible hybrid pricing models?

Yes, Stripe allows for flexible hybrid pricing models, letting businesses combine recurring subscriptions with metered billing or one-time charges.

Why Orb is the billing partner you need

Stripe provides a robust foundation for many businesses, but SaaS companies often require more specialized billing capabilities to support their growth.

Orb is a done-for-you billing solution designed specifically to meet these needs, offering a complete platform that goes beyond the limitations of Stripe subscription management. Here's how Orb helps SaaS businesses thrive:

• Refined usage-based billing: Orb's core strength lies in its ability to easily handle complex usage-based pricing models. Whether you track API calls, monthly active users, storage, or custom events, Orb provides the tools to accurately bill for any metric.
  
  
• Data-driven insights: Orb's robust reporting and analytics engine provides real-time visibility into your revenue streams and customer usage patterns. These insights help you make informed decisions about your pricing strategies, improve your offerings, and spot opportunities for growth.
  
  
• Simplified billing operations: Orb automates key billing tasks, such as invoicing, pricing plan management, and payment processing, freeing your team to focus on core business objectives. Integrations with your existing technology stack further boost efficiency and reduce manual effort.
  
  
• Adaptable pricing strategies: Orb's flexible platform enables you to implement a wide range of pricing models, including tiered plans, volume discounts, and per-user pricing. This adaptability helps make sure you can cater to diverse customer segments and tailor your pricing as customer needs and the market change.
  
  
• Better customer relationships: With Orb, you can provide customers with clear, accurate invoices and a self-service portal to manage their invoices and payments. Orb’s transparency fosters trust and strengthens customer relationships.

Ready to manage subscriptions and billing with less hassle? Check out Orb’s pricing options to find a plan that fits your business needs.