Diversity in payment preferences across the globe expands far beyond credit cards. From digital wallets to bank transfers, the variety of payment methods available today speaks to consumer needs and habits.
Stripe operates as an all-in-one payment platform designed to bridge the gap between businesses and their increasingly diverse customer base. While we steer people away from using Stripe as their main payment processor and gateway, we admit the service has some great features.
Understanding how Stripe works and when a traditional merchant account makes more sense can save you significant heartache as you scale your business.
CONNECT WITH A BETTER PROCESSOR
Stripe as a Payment Service Provider
Business owners often use the terms “payment processor” and “merchant account” interchangeably, but these solutions work very differently. Stripe is a payment service provider (PSP). They obtain merchant accounts from various acquirers or banks, then allow companies like yours to sign up and process payments through their infrastructure.
This setup makes onboarding incredibly simple. You essentially lease a piece of Stripe’s existing merchant account that banks have already approved. You can sign up and start processing transactions within a few hours, with no underwriting process examining your business or personal background.
You simply check a box accepting their terms and conditions, and you’re ready to accept credit card payments.
However, convenience comes with a catch. Stripe expects you to have read and understood their terms and conditions. If you violate these terms, they can suspend your account or hold your funds.
Many merchants process happily with Stripe for years without issues, but once problems arise, they discover the limitations of this one-size-fits-all approach.
AVOID SUSPENSIONS, SHUTDOWNS & WITHHELD FUNDS
Real Merchant Accounts
A merchant account provides a better path for processing transactions. When you work with a merchant account provider (like DirectPayNet), you go through an underwriting process that typically takes about a week. You submit an application with processing statements, bank statements, IDs, and other pertinent business information.
Your merchant account provider reviews this information, asks clarifying questions about your business, and underwrites the account to determine if they can support you. This process might seem like a hassle compared to Stripe’s instant signup, but it offers many advantages for growing businesses.
First and foremost, it’s predictable. When a merchant account provider approves your business, they know:
- what you’re selling,
- how you’re selling it,
- and who you are as an individual.
They conduct credit checks and review your complete business model before onboarding you. This means fewer surprises down the road, like no sudden risk reserves because you’re offering free trials and no holds because your business scaled faster than expected.
A PROCESSOR THAT SCALES WITH YOUR BUSINESS
Global Payment Methods
Stripe supports an array of payment methods to ensure no customer gets left behind. Whether your customers are in Belgium using iDeal, Sofort, or Giropay, in China using Alipay and direct debits, Bangkok with PromptPay, or in Brazil with Boleto, Stripe covers these options.
Not to mention, the platform supports the world’s leading card networks: Visa, Mastercard, American Express, and Discover for both credit and debit cards.
However, you should carefully select which payment methods to enable. While Stripe allows integration of global payment options, activating them all may complicate your reporting and incur unnecessary processing fees.
Aim to enable the payment methods most popular in regions you want to operate or ones requested most by customers.
OFFER MORE PAYMENT MODES AT CHECKOUT
Processing Fees
Stripe charges a flat fee of 2.9% plus $0.30 per transaction for domestic card transactions.
If you process non-domestic sales (for example, if you’re a U.S. business selling outside the U.S.) Stripe typically adds 0.6% to 1% on top. With foreign exchange fees included, most merchants pay between 3.5% and 4% in total transaction fees.
With a merchant account, processing fees vary based on your business profile. If you demonstrate high volume or substantial processing history with good performance metrics, you can negotiate rates below Stripe’s standard pricing.
Stripe only negotiates rates when you reach $8 to $10 million in annual sales, and they rarely offer better rates unless you process seven figures monthly.
Beyond the per-transaction fees, merchant accounts may include monthly fees and a batch fee for settling transactions each day. However, depending on the type of business you run and your processing volume, these costs often work out more favorably than Stripe’s flat-rate model.
Multi-Currency Support
Multi-currency support allows businesses to reach customers worldwide through a seamless, localized shopping experience. If you’re looking to expand sales beyond your current market, multi-currency is the way to go.
Local Currency Pricing
When shopping online, customers prefer seeing prices in their local currency. Customers want to know exactly how much you’ll charge them without performing mental currency conversions.
Pricing in a customer’s local currency reduces cart abandonment and increases conversion rates.
For you, as a business owner, dynamic currency conversion also means implementing a pricing strategy that reflects the needs and capabilities of that market.
Currency Conversion and Pricing
Exchange rate fluctuations are a hurdle for international sales. Stripe simplifies this by automatically handling currency conversions. However, businesses need to be mindful of the impact of currency conversion on pricing and profits. Stripe offers two key features to address this:
Dynamic Currency Conversion (DCC) automatically shows prices in the customer’s local currency based on current exchange rates. Customers know exactly what you’ll charge them.
Static Currency Conversion gives businesses control to set fixed prices in different currencies. This feature is useful for pricing strategies that test whether a product should be cheaper or more expensive depending on the market.
The Checkout Experience
Your checkout payment page is the final step in the (simplified) customer journey. The ease of completing a purchase at this moment makes or breaks sales.
Stripe Checkout is a familiar, easy solution that makes the final click effortless and efficient. It also takes care of compliance in every region Stripe supports (like requiring 3DS in Europe).
The downside to Stripe Checkout is its complete lack of customizability. It’s a rigid solution that’s great for getting up and running quickly, but not necessarily for the long term.
You can offer everything Stripe Checkout offers and more with a page that’s just as easy (or even easier) and branded to your liking. DirectPayNet can help you get started.
CUSTOMIZE YOUR CHECKOUT EXPERIENCE
When Stripe Makes Sense for Your Business
You should consider Stripe when you’re a brand-new business with no processing history. You want to prove you can make sales without wasting time on underwriting processes. You can sign up with Stripe or similar services like Shopify Payments, Braintree, or Square and focus on making sales first.
Stripe also works well for very low-risk businesses. Low-risk means stores with:
- no subscriptions,
- one product for sale,
- and no upsells.
Additionally, you might keep Stripe in your payment arsenal for accepting specific currencies from smaller countries. For currencies outside the major ones (euros, British pounds, U.S. dollars), merchant accounts can be more expensive.
You can also configure your payment backend to allow certain products or transaction amounts to go through Stripe and the rest through a merchant account. Similarly, you can use Stripe until you reach the typical $25,000 per month threshold and then another solution to avoid shutdowns.
LEARN MORE ABOUT STRIPE AS A BACKUP PROCESSOR
When You Need a Merchant Account
First, if anyone tags your business as high risk or if you currently have a risk reserve with Stripe, you need a merchant account. High-risk categories include businesses offering:
- free trials
- not-safe-for-work content
- gambling or gaming
- supplements
- digital content
- coaching programs
Your business model makes you high risk even if your chargebacks, disputes, and refunds remain low. Multiple factors contribute to high-risk classification beyond poor performance metrics.
You also need a merchant account if you process high-ticket transactions (anything over $3,000 per ticket). Stripe places holds very quickly on high-ticket merchants, especially if you get even one chargeback exceeding $3,000. Within ten days, you’ll likely see a hold on your account.
High volumes demand merchant accounts too. If you process over $250,000 monthly, or if your sales fluctuate seasonally (varying more than 25% month to month) Stripe struggles to support you. Stripe dislikes unpredictable businesses. When your volume moves up and down each month, you need a merchant account provider who understands seasonal businesses and builds this into their risk profile.
APPLY FOR A DEDICATED MERCHANT ACCOUNT
Making the Transition
If you’ve been working with Stripe and recognize that a merchant account better serves your needs, making the transition is straightforward. First, find a merchant services provider that works with your specific types of businesses. If you operate a high-risk business, work with specialists like DirectPayNet rather than traditional banks.
Once you identify potential solutions, reach out with your website and three months of processing history or bank statements. Providers conduct a quick review, then send you a quote and application with a short document list for onboarding.
On the technical side, merchant account providers plug into virtually any payment gateway. Whether you use a shopping cart platform or built something in-house requiring API integration, providers find solutions that work with your existing setup. Don’t avoid merchant accounts because you worry about the tech. Integration works just as simply as with Stripe.
When you start processing with your new merchant account, transition slowly if you want to keep Stripe as a backup. Move 10-20% of your volume to your merchant account initially, then gradually reduce Stripe volume over 3-4 months. This prevents shocking Stripe’s systems and triggering risk reserves.
If you use Stripe for subscription billing, you can transfer your Stripe tokens to your merchant account before shutting down Stripe. The process takes about two weeks to complete but allows you to continue processing subscriptions without interruption or approval issues.
Building a Hybrid Strategy
Many businesses use both Stripe and merchant accounts strategically. For example, if you’re a U.S. company with 80% domestic sales, you might process U.S. sales through your merchant account while using Stripe for international transactions.
A hybrid approach provides flexibility and redundancy. You never want something as mission-critical as accepting payments to rely on a single provider. Having at least two solutions (one primary and one backup) protects your business from disruptions.