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Tuesday, 18 August 2009

Payment Processors- FastSpring and PayPal

Choosing a payment processor for your company is one of the most important decisions you will make. You rely on them keeping the trust of your potential customer who has decided to buy your product. You rely on them to always be available, to deal with any billing problems, to manage chargebacks, refunds and notifications.

And most of all- you rely on them to collect your customers' money.

I can say- without reservation, that I made the right choice in going with FastSpring (http://www.fastspring.com):
  • Great customer Service- respond to emails very quickly
  • Good presence in ISV community- e.g. on Joel on Software Business of Software forum
  • No upfront/ongoing charges
  • Higher transaction charges than other payment processors
  • Easy to customise payment process- e.g. I send a HTTP notification to my webserver to generate a license key
A couple of weeks in however I noticed I was getting hit with VAT on all my transactions. There's nothing FastSpring can do about this- they resell your software, and as a large company are obliged to charge VAT at 15% to their European customers. This is especially painful as all my customers are in the UK- so it applies to every single transaction.

In the hope of increasing my profits by 15% I decided to investigate PayPal:
  • More difficult to set up- documentation spread all over the place, and forum answers sometimes misleading
  • Low transaction charges
  • No support for discount codes/vouchers (this really surprised me)
  • No experience with customer service yet- but I've heard bad things
I now run both side by side- though I try to steer users onto the PayPal payment option rather than FastSpring (Buy Page) as I make over 15% more per PayPal order.

Despite this- I still find that roughly half of my users prefer to use the FastSpring payment option- and I'm not really sure why- I'd be interested if people have any ideas about this.


Posted by at 12:58
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2 comments:

  1. Hello

    It's been over a year since you posted this article on FastSpring vs. PayPal, and was wondering if you were still satisfied with PayPal?

    Saving 15% on each transaction by relying on a non-EU processor that doesn't remit VAT to European fiscal authorities, while illegal, sounds interesting :-)

    Thank you.
    ReplyDelete
  2. Hi there,

    Yes- I am still very satisfied with PayPal- especially now I qualify for their merchant rates.

    Just to make it clear- there's nothing illegal about using PayPal- and whether its EU based or not is irrelevant- they are just acting as a Payment processor. It is down to me to charge or not charge VAT to customers (as I am not yet over the VAT threshold I don't need to).

    The reason Fastspring charge VAT is that they have a different status (acting as a reseller rather than a processor) and thus have to charge VAT.

    Once I am VAT registered (not too far away) then the difference between the two will be much smaller.
    ReplyDelete

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