Stripe Alternatives: Payment Processing for Startups

Understanding Your Payment Options

Before diving into specific tools, it is essential to understand the two fundamentally different approaches to accepting payments online: acting as your own merchant versus using a Merchant of Record service.

Payment Processors (You Are the Merchant)

Traditional payment processors like Stripe and PayPal let you accept payments, but you remain the legal seller of your product. This means:

• You are responsible for collecting and remitting sales tax, VAT, and GST in every jurisdiction where you sell
• You handle refunds, chargebacks, and customer disputes directly
• You need to maintain compliance with payment card industry standards
• You may need to register for tax collection in multiple states or countries
• Lower transaction fees, but higher operational complexity

Merchant of Record (MoR) Services

Merchant of Record services like Paddle and LemonSqueezy act as the legal seller of your product. They collect payment from your customer, handle all tax obligations, and then pay you your share. This means:

• The MoR handles all sales tax, VAT, and GST calculations and remittance
• They handle chargebacks and fraud protection on your behalf
• Simpler global expansion since you do not need to register in each country
• Higher transaction fees in exchange for reduced complexity
• Less control over the checkout experience and customer relationship

The right choice depends on your business model, geographic reach, and how much operational complexity you want to manage. A SaaS startup selling to customers in 50 countries might save significant time and money with an MoR, while a US-only e-commerce store might prefer lower Stripe fees and handle their own tax compliance.

Merchant of Record (MoR) Explained

The Merchant of Record model deserves a deeper explanation because it represents a fundamentally different approach to selling digital products globally.

What an MoR Actually Does

When you use an MoR service, you are technically selling your product to the MoR company (like Paddle), who then resells it to your end customers. On invoices and receipts, the MoR company appears as the seller, not your company. This legal structure means:

Tax Compliance

The MoR registers for sales tax, VAT, and GST in countries worldwide. When your customer in Germany buys your SaaS product, Paddle charges the appropriate German VAT, files the returns, and remits the tax to German authorities. You never have to worry about EU VAT registration, economic nexus rules in US states, or tax compliance in Australia.

Chargeback Protection

When a customer files a chargeback, the MoR handles the dispute process. They absorb the chargeback fee and work to recover funds. While you might see a deduction from your earnings for successful chargebacks, you do not deal with the payment network directly or risk having your merchant account terminated due to high chargeback rates.

Payment Method Coverage

MoR services typically offer more payment methods out of the box because they have already done the work of integrating local payment methods worldwide. This can include iDEAL in the Netherlands, Boleto in Brazil, or Alipay for Chinese customers.

When MoR Makes Sense

• Digital products and SaaS: Where sales tax complexity is highest and physical fulfillment is not a factor
• Global customer base: Selling to customers in many countries without wanting to register for tax in each
• Small teams: When you do not have bandwidth for finance and tax compliance
• Bootstrapped startups: When minimizing operational overhead matters more than optimizing fees

When to Stick with Traditional Processors

• Single-country focus: If 90% of revenue comes from one country, the MoR premium may not be worth it
• Physical products: You already need infrastructure for shipping and fulfillment
• High volume: At scale, the fee difference becomes significant enough to justify in-house tax management
• Custom checkout needs: If you need specific checkout flows or deep payment integration

Stripe: The Standard

Stripe has become the default choice for tech startups, and for good reason. Its developer experience is exceptional, documentation is comprehensive, and the product suite has expanded to cover nearly every payment-adjacent need.

Key Features

• Stripe Payments: Accept cards, wallets, and bank transfers with a unified API
• Stripe Billing: Subscription management with usage-based pricing support
• Stripe Tax: Automatic tax calculation (additional fee)
• Stripe Connect: Build marketplaces and platforms with multi-party payments
• Stripe Atlas: Incorporate a US company and set up a bank account
• Radar: Machine learning fraud detection
• Financial Connections: Verify bank accounts and access financial data

Pricing Breakdown

• Standard processing: 2.9% + $0.30 per successful card charge (US)
• International cards: Additional 1.5% for non-US cards
• Currency conversion: Additional 1% if converting currencies
• ACH Direct Debit: 0.8%, capped at $5
• Stripe Tax: 0.5% per transaction where tax is calculated
• Disputes: $15 fee per dispute (refunded if you win)
• No monthly fees: Pay only for what you use

Best For: Technical teams building custom payment experiences, US-focused businesses, startups that want maximum control over their checkout and can handle tax compliance.

Paddle: MoR for SaaS

Paddle has positioned itself as the payment solution specifically for SaaS and software companies. As an MoR, they handle global tax compliance, which is particularly valuable for software businesses selling subscriptions worldwide.

Key Features

• Global tax compliance: Paddle handles VAT, sales tax, and GST in 200+ countries
• Subscription billing: Built-in recurring billing with dunning management
• Checkout: Optimized checkout overlay or embedded options
• License key delivery: For desktop software distribution
• Paddle Retain: Automated failed payment recovery
• Analytics and reporting: Revenue metrics and subscription analytics
• Multi-currency pricing: Set prices in local currencies

Pricing Breakdown

• Standard rate: 5% + $0.50 per transaction
• Includes: All payment processing, tax handling, and fraud protection
• Chargebacks: Paddle absorbs the fee and handles disputes
• Payouts: Monthly by default, with options for more frequent payouts
• Volume discounts: Available for businesses processing over $1M annually

Best For: SaaS companies selling globally, businesses that want to avoid dealing with international tax compliance, software companies selling to the EU where VAT handling is critical.

LemonSqueezy: Modern MoR

LemonSqueezy emerged as a modern alternative to both Gumroad and Paddle, combining the simplicity of creator-focused platforms with robust MoR capabilities. It is particularly popular among indie hackers and small SaaS founders.

Key Features

• Merchant of Record: Handles global sales tax, VAT, and GST
• Digital product delivery: File hosting and license key generation
• Subscription billing: Recurring payments with customer portal
• Email marketing: Built-in email tools for customer communication
• Affiliate system: Create and manage affiliate programs
• Store builder: Create a simple storefront without coding
• API access: Build custom integrations

Pricing Breakdown

• Standard rate: 5% + $0.50 per transaction
• Includes: Payment processing, MoR services, file hosting
• No monthly fees: Pay only when you make sales
• Payouts: Weekly or monthly options available

Best For: Indie hackers selling digital products, small SaaS founders who want simplicity, creators who need an all-in-one platform with MoR benefits.

Gumroad: Creator Economy

Gumroad pioneered the creator economy payment space and remains popular for its extreme simplicity. If you want to start selling digital products in minutes with minimal setup, Gumroad delivers.

Key Features

• Instant setup: Start selling in minutes with no technical knowledge
• Digital delivery: Automatic file delivery after purchase
• Memberships: Subscription-based content or products
• Workflows: Automated email sequences for customers
• Discover: Built-in marketplace for product discovery
• Affiliates: Simple affiliate program management
• Analytics: Basic sales and traffic analytics

Pricing Breakdown

• Flat rate: 10% of each sale
• No monthly fees: Only pay when you sell
• Payment processing: Included in the 10%
• Payouts: Weekly via direct deposit or PayPal

Best For: Creators testing digital product ideas, authors selling ebooks, artists selling digital assets, anyone who prioritizes simplicity over fees.

PayPal: The Legacy Option

PayPal often gets dismissed in startup circles, but it remains relevant for specific use cases. Its massive user base (400M+ accounts) means many customers prefer paying with their PayPal balance, and it offers buyer protection that builds trust.

Key Features

• PayPal Checkout: Accept PayPal, cards, and Pay Later options
• PayPal Business: Invoicing and business tools
• Venmo for Business: Accept Venmo payments (US)
• Pay Later: Built-in BNPL options
• Seller Protection: Protection against certain chargebacks
• International: Available in 200+ markets

Pricing Breakdown

• Standard commercial: 2.99% + $0.49 per transaction
• PayPal Checkout: 3.49% + $0.49 (advanced checkout)
• International: Additional 1.5% for cross-border transactions
• Currency conversion: 3-4% spread on conversion
• Chargebacks: $20 fee per dispute
• Micropayments: 4.99% + $0.09 for transactions under $10

Best For: Businesses where customers expect PayPal as an option, marketplaces, international sellers in markets where PayPal is dominant, adding as a secondary payment method alongside Stripe.

Square: In-Person and Online

Square started with the iconic card reader for in-person payments but has expanded into a full commerce platform. If your startup has any physical presence or plans to sell in person, Square offers a unified system that competitors cannot match.

Key Features

• Square POS: Free point-of-sale system with hardware options
• Square Online: E-commerce website builder
• Square Invoices: Professional invoicing with online payment
• Square Banking: Business checking and savings accounts
• Square Loans: Access to business financing
• Square Appointments: Booking system for service businesses
• Inventory management: Unified inventory across channels

Pricing Breakdown

• Online transactions: 2.9% + $0.30
• In-person (tap/chip): 2.6% + $0.10
• Manually entered: 3.5% + $0.15
• Invoices: 3.3% + $0.30
• No monthly fees: For basic features
• Square Plus: $29/month for advanced features

Best For: Retail businesses with physical and online sales, service businesses needing appointments and payments, restaurants and food businesses, any startup with in-person payment needs.

Shopify Payments: E-commerce Focus

Shopify Payments is only available if you are using Shopify for your online store, but for Shopify merchants it is often the best choice due to seamless integration and avoiding extra transaction fees.

Key Features

• Zero extra fees: No additional transaction fee on top of card processing
• Seamless integration: Built into Shopify admin
• Shop Pay: Accelerated checkout for returning customers
• Multiple currencies: Accept payments in customer currencies
• Fraud analysis: Built-in fraud detection
• Unified reporting: All payments in one dashboard

Pricing Breakdown

• Basic Shopify: 2.9% + $0.30 online, 2.7% in-person
• Shopify: 2.6% + $0.30 online, 2.5% in-person
• Advanced: 2.4% + $0.30 online, 2.4% in-person
• Non-Shopify Payments fee: 2% / 1% / 0.5% depending on plan
• International: Additional 1.5% for international cards

Best For: Shopify merchants who want the simplest setup and best rates, e-commerce businesses already committed to the Shopify ecosystem.

Wise: International Payments

Wise is not a direct Stripe alternative for accepting customer payments, but it is an essential tool for international startups managing money across currencies. It excels at holding multiple currencies and making international transfers cheaply.

Key Features

• Multi-currency accounts: Hold 40+ currencies in one account
• Local account details: Get local bank details in USD, EUR, GBP, and more
• Real exchange rate: Mid-market rate with transparent fees
• Batch payments: Pay contractors and suppliers in multiple currencies
• Wise Business debit card: Spend in any currency at the real rate
• API access: Automate international payments

Pricing Breakdown

• Account: Free to open and maintain
• Receiving: Free for most currencies
• Conversion: 0.4-1.5% depending on currency pair
• Transfers: Small flat fee plus conversion fee
• Card: Free to order, real exchange rate for spending

Best For: Complementing your payment processor when you have international customers or contractors, managing revenue in multiple currencies, paying international team members or suppliers.

Cost at Different Revenue Levels

To help you understand the real impact of payment processing fees, here is what you would pay annually at different revenue levels, assuming 80% domestic / 20% international sales and average transaction size of $50.

At $10,000 MRR ($120K Annual Revenue)

At $50,000 MRR ($600K Annual Revenue)

The Tax Compliance Factor: These calculations do not account for the cost of tax compliance. If you use Stripe and sell globally, you need to either use Stripe Tax (+0.5% per transaction) or handle tax registration, calculation, filing, and remittance yourself. For a SaaS selling in the EU, US, and other markets, professional tax compliance services can cost $5,000-20,000+ annually. When you factor this in, the MoR premium often disappears or even becomes a savings.

How to Choose Your Payment Processor

Choose Stripe If:

• You have technical resources and want maximum flexibility
• Most of your customers are in one country (especially the US)
• You need custom checkout experiences or complex payment flows
• You are building a marketplace or platform requiring Stripe Connect
• You can handle tax compliance yourself or with Stripe Tax

Choose Paddle If:

• You are a SaaS company selling subscriptions globally
• You sell to EU customers and want to avoid VAT registration complexity
• You want to focus on product, not payments and tax infrastructure
• You need B2B features like VAT ID validation and proper invoicing

Choose LemonSqueezy If:

• You are an indie hacker or small team selling digital products
• You want MoR benefits with a simpler, modern platform
• You need built-in affiliate management
• You value simplicity and do not need enterprise features

Choose Gumroad If:

• You are testing a product idea and want zero upfront commitment
• You prioritize simplicity over cost optimization
• You are a creator selling to an existing audience
• You want access to Gumroad's built-in discovery marketplace

Choose Square If:

• You have any in-person sales component
• You run a retail, restaurant, or service business
• You want unified POS and online payment systems
• You need integrated appointment booking and payments

For most SaaS startups selling globally, the decision often comes down to Stripe vs Paddle/LemonSqueezy. The question is whether the MoR premium is worth the tax compliance simplification. For many bootstrapped founders, the answer is yes - the time saved on tax paperwork is better spent building product. For well-funded startups with finance teams, Stripe plus professional tax services often provides more control at a similar total cost.

Whatever you choose, make sure you understand the full picture including tax implications, not just the headline transaction fee. A processor that looks cheaper on paper can become more expensive once you factor in the operational costs of managing global tax compliance.

For more guidance on evaluating software tools systematically, see our SaaS Evaluation Framework. If you are building your complete startup tech stack, check out our Ultimate Startup Tool Stack Guide. And if you are building with no-code tools, many payment processors integrate seamlessly with platforms covered in our No-Code MVP Tools Guide.