Stripe Transaction Fees: Why Xflowpay Is a Better Alternative for International Payments

Stripe deducts 2.9% + $0.30 from businesses every time a transaction occurs. Initially, this fee doesn’t seem like much, however, it can add up eventually.  

According to FXC Intelligence, in 2024, around $196.35 billion were transferred internationally. By 2030, the amount will probably shoot up to $303.34 billion. This highlights the importance of online money transfer platforms in today’s world. 

In order to keep up with the times, understanding the ins and outs of a fintech platform such as Stripe is extremely important. In this article, we will delve into what Stripe charges, explore some business use cases, provide some best practices, and discuss some more reliable and cost-efficient alternatives to Stripe. 

• Stripe transaction fees are charged by Stripe, which is a global fintech platform. Key components of Stripe fees include processing charges, FX markups, cross-border payment charges, refund costs, and chargeback penalties.

• While Stripe is a popular payment platform, businesses face some challenges. Hidden conversion costs, slow settlements, and regional availability issues increase operational complexity.

• To save money when using Stripe, businesses can form multi-currency accounts, accept money locally, and practice strategic FX conversions to help lower costs and improve efficiency.

Stripe is a fintech company that helps businesses with online payments. It provides an export payment solution, which means that businesses can receive payments for goods sold internationally.

Stripe transaction fees include the various costs that Stripe charges businesses for processing payments. The fees differ based on whether it is a domestic or an international transfer. These fees mainly include a percentage of the amount and a fixed fee. Stripe has a pay-as-you-go scheme, which means that businesses only pay when a transaction is conducted.  

Stripe has both domestic and global transaction costs. However, their fee structure can differ as shown:

1. Domestic transactions

For domestic transfers, Stripe demands a fee of 2.9% of the transferred amount plus a fixed fee of $0.30 per transaction. There is an additional amount for instant payouts or handling disputes. The cost of domestic transactions depends on the card type and the business’s needs. 

2. International transactions

Global transactions costs include a 1-1.3% markup on the transferred amount. It depends on the card being used. Some additional costs can also be present, such as foreign exchange fees, regional pricing, and faster payment options. 

Stripe can also charge you different payment gateway fees, such as processing fees, currency conversion markup, cross-border payment charges, and refund or chargeback fees:

1. Processing fee

Most debit and credit card companies have to pay 2.9% + $0.30 for every transaction. ACH transfers cost 0.8% but they cannot exceed $5, and wire transfers require a $8 flat fee. The extra fees are added to ensure that the payment is secure and authentic. 

2. Currency conversion markup

If, during a transaction, currency needs to be converted, then the fee paid for the conversion is called the currency conversion markup. Stripe charges an extra 1% of the amount being converted.

3. Global transaction costs

Whenever a business accepts payment from a customer who lives in another country, they apply a global transaction cost to their amount. Stripe charges an extra 1% in addition to the standard processing fee, which makes up for the added challenges of international payments and regulations.

4. Refund and chargeback fees

Stripe charges no additional fees for any refunds. That said, it charges $15 per chargeback or payment dispute, regardless of the outcome. To avoid this fee, refunds should be initiated before a dispute even arises. 

Depending on their business model, businesses are faced with different fee structures. Here’s a breakdown of Stripe fees for common business use cases:

Xflow, Wise, PayPal, and Payoneer are fintech alternatives to Stripe. Each international payment platform has its own benefits. The differences are highlighted below:

Stripe fees differ based on whether you’re on the receiving end or the sending end of the transfer amount. The differences are highlighted below:

1. Inbound Stripe fees

Every time your business receives a payment from a customer through Stripe, you’re charged an inbound fee. This is usually just the standard processing fee. Since this comes out of the business’s profit, it directly affects the profit margin. 

2. Outbound Stripe fees

Whenever you send money to your bank account through Stripe, a small fee is charged. Over time, these small fees charged per transaction can add up and cut into your profits. 

Hidden FX fees, slow payments, and local challenges are some of the common struggles with Stripe. We discuss them in detail here: 

1. Hidden FX fees

Stripe charges a foreign exchange rate that is 1-2% over the mid-market rate, which can reduce your profit margins significantly. Additionally, since Stripe does not return the FX fees on chargebacks and refunds, the effect on your finances is even higher.

2. Slow payments

Stripe can take around 3-5 business days to complete transfers. There is a 7-14 day verification period for new account holders that can cause more banking delays. This can slow down the cash flow and make financial planning difficult, especially for freelancers and online resellers.

3. Local challenges

Not every Stripe feature is available in every region. This could affect the local businesses negatively, as they might struggle with VPN issues, legal issues, or channel conflicts. Different taxes and currencies, along with limited payment methods, might also complicate global transactions and sales.

Consider multi-currency set up, local entities, and FX optimization to save money on cross-border payment charges and protect your margins.

1. Multi-currency setup

Stripe’s multi-currency accounts allow businesses to accept and hold payments in multiple currencies. This can help you in avoiding extra conversion fees and lowering exchange rate risks. Charging customers in their local currency also allows them to build trust with your business. 

Alternatively, fintech platforms such as Xflow offer multi-currency solutions with low flat fees and minimal forex charges, which is great for businesses going global.

2. Local entities

Opening local entities allows businesses to accept money locally and comply with local tax regulations. Not only does this encourage sales, but it also reduces the number of items abandoned in the cart. While Stripe does help businesses operate locally in many different countries, legislative barriers and pricing issues can still cause some difficulties. 

3. FX optimization 

Stripe’s 1-2% markup on international payments can hurt business profits. To avoid this, you should convert your currencies at the right time. Since Stripe does not return FX fees during chargebacks and refunds, the use of multi-currency accounts and local entities is important to keep costs low and predictable. 

Stripe comes with its own set of disadvantages such as hidden currency conversion markups, delayed settlements, and region-specific issues that can reduce profit margins significantly. 

However, cost-effective alternatives like Xflow, Wise, Payoneer, and PayPal solve these issues by offering lower forex fees, reduced transaction fees, and faster payments. For example, Xflow uses mid-market foreign exchange rates, has a 1% fee or $8 flat fee on transactions, and has fast settlements, allowing businesses to retain most of their profits.

The following factors should be considered before you integrate a payment platform into your already existing tech stack:

• Requirements: Evaluate your business’s needs.
• Technical capabilities: Evaluate how the technical capabilities offered by the platform match your needs.
• Integrability: Ensure that the payment platform is easily integrable into your existing systems.
• Compliance: The platform must also provide built-in regulatory compliance.

Keep AML and KYC requirements, data security compliance, and financial reporting needs in mind to make your transactions more compliant and efficient. 

1. Anti-Money Laundering (AML) and Know Your Customer (KYC) 

It is important for businesses to meet the AML and KYC standards for international payments as these help in verifying the customer’s identity, tracking the transactions, and reporting any suspicious activity. Businesses should also make use of automated monitoring and identity checks. They should assign compliance roles and regularly update the documents. 

2. Data security and privacy compliance 

International companies need to protect their customer information. They need to follow standards such as PCI DSS and ISO 20022 to help protect sensitive information and reduce the likelihood of security breaches. Businesses can reduce errors significantly by using automated tools to collect, store, and report data.

3. Financial reporting and tax compliance

To conduct international operations, businesses should align financial reporting to standards like IFRS. Further, statutory accounts and tax reporting should also be managed, keeping in mind the local laws. To meet this standard, businesses should centralize data collection, have standardized reporting processes, and assign roles for report preparation and review. 

The future trends set to disrupt international payments include transparent pricing models and region-specific payment optimizations. Let’s discuss them in detail:

1. Transparent pricing models

Transparent pricing models are an approach that companies can use to be more open about their fee structures. Customers expect clarity and transparency from businesses. The latter can offer this by giving the former detailed information about the pricing structure and disclosing additional fees and discounts.

2. Region-specific payment optimizations

Region-specific payment optimization refers to businesses that modify their payment processes according to a specific region's customer preferences and regulations. This includes offering payment methods in local formats, supporting multiple currencies, and ensuring that all local regulations and compliance requirements are met. 

The way to implement region-specific payment optimization is by understanding target markets, using different payment methods and continuously testing and updating security. 

While Stripe is popular for online payments, Indian businesses still face challenges due to Stripe’s transaction fees, such as hidden currency conversion markup, late payments, additional foreign charges, and compliance issues. These can negatively impact their profit margins. 

Xflow addresses these issues by using mid-market currency exchange rates with no additional fees, next-day settlements, and transparent flat-fee pricing. Through this, Xflow enables faster and more cost-effective cross-border payment charges than Stripe. 

Some of Xflow’s advantages over Stripe are mentioned below in detail: 

1. Real FX rates

While Xflow uses the mid-market exchange rate and has no markup, Stripe uses a 2% foreign exchange charge. This means making foreign payments is more cost-effective with Xflow. 

2. Local rails

Xflow uses local networks, such as ACH and Fedwire, and has the money in your account in one day. It is much faster than Stripe, which takes 2 to 7 business days for the settlement to reach.

3. Transparent fees

Xflow uses a flat fee of either $8 or 1% of your amount, depending on the amount. There are no added fees. This contrasts with Stripe’s transaction fees, which include 2.9% + $0.30 for a transfer, significantly affecting the final amount received.

4. Compliance 

By partnering with the Reserve Bank of India (RBI) and automating important documents such as e-FIRA, Xflow can help Indian businesses stay more compliant when compared to Stripe. This would result in audit-ready, compliant, and faster international payments.

Xflow is a payment platform designed especially for Indian businesses and freelancers. It offers a fast, simple, and cost-effective alternative to Stripe. Xflow strives to be transparent, has minimal fees, and processes payments fast in INR. It also simplifies compliance and integration.

Xflow provides transparent mid-market FX rates with no hidden fees. Businesses only have to pay a 1% commission or a flat rate of $8 per trade. Remittances are quick since local INR transfers are faster, which can improve a business's cash flow. Additionally, Xflow has simple compliance with regulations. It provides one-click e-FIRA/FIRC for all international transactions within 24 hours. 

Xflow is built to integrate with your existing tools and supports numerous foreign payment methods. This simplifies making payments across countries, reduces the cost, and ensures compliance with all relevant regulations.