Paddle

Overview

Paddle isn't just a payment gateway like Stripe or PayPal. It is a Merchant of Record (MoR). This distinction is the single most important thing to understand before you sign up.

When you use a standard gateway, the legal transaction is between you and the customer. You are responsible for calculating sales tax, collecting it, and remitting it to the government of every country where you have a buyer. For a SaaS company selling globally, this quickly becomes a compliance nightmare involving VAT in Europe, GST in India, and sales tax in various US states.

Paddle takes a different approach. They technically buy the product from you and resell it to the customer. Legally, Paddle is the one selling the software. This means they are liable for the taxes, the fraud, and the compliance. You don't have to register for tax in 50 different countries because Paddle is already registered. It effectively outsources your entire finance and legal billing operations so you can focus on shipping code.

Key Features

Automated Tax Compliance & Liability Shield

This is the primary reason developers choose Paddle. The platform automatically calculates and collects the correct sales tax or VAT based on the customer's location. More importantly, they remit those taxes for you. You don't file returns in the UK or Germany; Paddle does. They also handle the regulatory heavy lifting, including GDPR compliance and handling chargeback disputes, acting as a shield between you and administrative chaos.

Unified Billing & Subscription Engine

If you use Stripe, you might need a separate layer like Chargebee or Recurly to handle complex subscription logic (prorating upgrades, managing trials, handling coupons). Paddle has this billing engine built-in. It supports recurring revenue models, pausing subscriptions, and B2B invoicing out of the box. It simplifies your tech stack by removing the need for third-party subscription management tools.

ProfitWell Metrics Integration

Following their acquisition of ProfitWell, Paddle now includes industry-leading analytics directly in the dashboard for free. This gives you deep visibility into your Monthly Recurring Revenue (MRR), churn rates, and Lifetime Value (LTV). It provides a "single source of truth" for your financial health without needing to wire up a separate analytics tool.

Localized Checkout & Smart Routing

The checkout process is designed to maximize conversion rates globally. It automatically detects the buyer's location and presents the checkout in their local language and currency (supporting 25+ currencies). Behind the scenes, Paddle uses smart payment routing to send transactions through the processor most likely to approve the charge, which helps reduce failed payments.

Pricing

Paddle uses a flat-rate, transaction-based pricing model. There are no monthly fixed fees.

• The Rate: 5% + $0.50 per transaction.

At first glance, this looks expensive compared to Stripe (usually 2.9% + $0.30). However, you have to look at the total cost of ownership. The Paddle fee includes:

1. Payment processing fees.
2. Subscription management software (saving you the cost of tools like Chargebee).
3. Fraud protection.
4. Sales tax/VAT calculation and remittance (saving you the cost of tools like TaxJar or Avalara).
5. Cross-border fees (Stripe often adds 1% or more for international cards; Paddle includes this).

There is no free tier, but they offer a sandbox account so developers can fully test the API and integration logic before processing real money. For massive volume (usually over $10M ARR), custom enterprise rates are available.

Pros & Cons

Pros

• Zero Tax Headaches: This cannot be overstated. Not handling VAT returns for the EU or UK is a massive time and money saver.
• Developer Experience: The documentation is solid, and the "Paddle.js" library makes it relatively fast to drop a checkout overlay into your app.
• Reduced Tooling Costs: You don't need a separate subscription manager or tax calculator. It consolidates three bills into one transaction fee.
• Performance: High authorization rates for international transactions thanks to their smart routing and local entity relationships.

Cons

• The 5% Fee: For high-margin, low-complexity businesses selling mostly domestically, 5% is a steep cut. If you don't sell internationally, you are paying for features you don't use.
• Strict Onboarding: Because Paddle takes the legal liability for your sales, they are very picky about who they work with. The approval process is rigorous, and they may reject business models they deem "high risk."
• Checkout Constraints: You don't have total control over the checkout UI. While you can brand it, you cannot build a completely custom, pixel-perfect payment form like you can with Stripe Elements.
• Support Latency: General support response times can sometimes lag (24–48 hours) compared to the instant chat support available on some other enterprise platforms.

Verdict

Paddle is the default recommendation for bootstrapped SaaS founders, indie hackers, and small-to-mid-sized software teams who plan to sell globally.

The math is simple. If you value your time (or your finance team's time) at more than the 2% difference between Stripe and Paddle, then Paddle is the correct choice. It is effectively a "sanity tax." You pay a premium on the transaction fee to avoid hiring an accountant or dealing with international tax authorities.

However, if you are strictly selling to customers in your own country, or if you are a massive enterprise with an in-house tax team already, the 5% fee might be overkill. But for the vast majority of digital product sellers, the peace of mind is well worth the price of admission.