A story recently broke out about National Fitness Financial non-payment to gym owners. National Fitness is a gym management software, not unlike our own, but one big difference is that they handle billing and collections directly, as it would appear from the article.
I cannot comment on the exact situation at National Fitness as they haven’t released a formal response yet, however it brings up a point that we often discuss with our customers – how we handle billing on behalf of gyms using our system.
Why You Should Always Use A Dedicated Payment Processor
Processing card payments – offline or online – is serious business. There is a ton of legal and technical obstacles to overcome to do it correctly and according to regulations.
A company that builds gym management software, should not be building its own payment processing as a side feature. There is a big difference between using a merchant account for your own business, and becoming a payment aggregator for other businesses.
This is why a dedicated payment processor is almost always the best option. A company that is built around the single focus of processing payments, and proves it can do it at scale.
This is why most businesses either open their own merchant account with their bank, or if they need online payments, they use a company such as PayPal, Authorize.net, Braintree (now a part of PayPal), Square and Stripe.
Nowadays, almost all online services will be using one of those companies (or a lesser known one) to handle their payment processing.
Since I don’t know the situation at National Fitness, I cannot say for certain they did not use one. It is clear, however, that they acted as intermediary and could stop the money from being transferred to their clients. That would not be possible if those clients were using a payment processor themselves.
Why We Chose Stripe
Out of the companies mentioned above, we chose Stripe for processing member payments on behalf of our customers. As part of the gym billing set up, a manager will create a Stripe account or connect an existing one, if they have it. The process literally takes only a couple of minutes, as you can see here.
This is a common topic that we are asked about by potential customers – why don’t you use [insert payment processor name here]. We already wrote about it in our documentation, and I will repeat some of it here and expand on it.
1. Stripe does not require a merchant account
Most payment processors require you to open a merchant account with your bank in order to process payment cards. As a payment aggregator, Stripe uses their own merchant account on your behalf, removing the need for you to open and maintain one (which involves some additional paper work, a waiting period and additional fees). PayPal is another service that offers this feature, which is one of the reasons that it has become so popular.
2. Stripe handles PCI compliance for you
PCI stands for Payment Card Industry, and in this case specifically refers to the Security Standards Council, the body that organizes security standards for digital card processing.
Everyone who processes payment cards needs to be PCI compliant to meet legal requirements for doing so. If you ever processed credit-cards directly with a merchant account, you are probably familiar with the procedure – you need to fill out a security questionnaire, and have a periodic security audit.
Stripe has a clever solution that transfers that requirement onto to them – by making sure credit-card information goes directly from the web browser to their servers. What we get back is a token, a unique string of characters that allows us to bill the card without storing the card information.
By doing this, Stripe saves you the hassle and cost of maintaining PCI compliance. At the same time, security is increased as you (or us) do not actually posses any credit-card information. Note that if you want to charge credit-cards directly using PayPal (without the client going through their website and using a PayPal account to pay) – you need to handle PCI compliance and the associated security measures yourself.
3. It’s the most user and business friendly option
Having worked with almost all the payment processors listed above during the last 12 years or so I’ve been building online systems that manage payments, Stripe is by far the most friendly and easy-to-use solution of the bunch.
First of all, as a developer – there is no comparison. Their API and documentation are second to none. Stripe was originally known mainly as a product aimed for developers, before they added more consumer products such as shopping carts and payment forms.
As a developer, knowing that whatever I possibly need from a payment processor is clearly documented and easy to implement is huge. It means there is much less chance of something going wrong due to undocumented behavior (PayPal, I’m looking at you), and that the implementation will be much simpler and easy to maintain. Complexity is the source of most issues in software engineering, and Stripe has done a great job of minimizing it.
On the customer side, they have a simple and quick account creation process, and user-friendly account management tools. Gone are the days of using billing software that looks like it was built in the 90s over a spreadsheet application. Stripe dashboards and online tools allows you to easily find relevant payment information and make it work with your accounting software.
4. Simple, transparent pricing
Stripe’s pricing is clearly marked on their website, and are very competitive. For reference, take a look at Authorize.net’s pricing. It appears identical on the surface, until you realize they also charge a $49 “setup fee” and $25 per month. A small asterisk at the bottom also indicates that there is additional %1.5 cost for international cards (relevant if you have gym visitors who are tourists). Chargebacks are also higher at $25 vs. $15 at Stripe.
The actual details aren’t that important – what’s most important is that almost any other service you look at has tiers and hidden fees in small letters and hard to reach pages, which Stripe does not. The good folk over at Memberful did a nice comparison of PayPal and Stripe fees, which is an interesting read. It seems that around $5000 of monthly payments, PayPal starts beating Stripe by a hair, if you don’t count their monthly fees and international card fees. (You should be looking at the PayPal Pro comparison, as PayPal Standard is a different service that is not directly comparable to Stripe).
On the flip side, using PayPal Pro for credit-card processing requires you to take care of PCI compliance yourself. PayPal is also infamous for freezing accounts for many months at a time, while holding on to the funds, with very little due process. (Just Google “PayPal account freeze” to see what I mean). In 2013, they promised they were rolling out a solution to those account freezes, but nothing has changed which makes it hard to recommend PayPal for any business critical billing.
5. Hundreds of product integrations
When you create a Stripe account through our billing set up, you can use it for much more than just our system. There’s literally hundreds of products and services that can use a Stripe account – from accounting, to invoicing, to eCommerce and mobile payments. Your Stripe account can centralize all your financial activity related to your business, which makes accounting and administration much easier.
A common question we get, is how does Stripe work with Quick books (apparently everybody’s favorite accounting software). Using Stripe with most accounting software, and specifically Quick books is simple – they give you a file export of all your transactions which Quick books uses (an .iif file).
My Own History With Stripe
Having used most of the payment services mentioned above, over the course of 12+ years of handling online payments, I’ve been burned by each multiple times. Account freezes, service stoppage, documentation problems, customer support, and so on.
I started using Stripe at my previous company about 4 years ago, and so far it has been smooth sailing. In that time frame, I’ve processed millions of dollars and tens of thousands of transactions using Stripe – directly or on behalf of customers – and had zero issues with it. That is quite the achievement.
Stripe is not perfect. For example, their recurring payments feature is not very robust and we’ve had to build around it to allow for flexible payment plans for members through our system. They have also been slow in adding much requested features, such as ACH transactions (finally released Jan. 2016 – and coming soon to our system!).
However, we had no actual issues with the system – which I cannot say for all of their competitors which I’ve used – and whenever we needed additional support, they delivered it promptly and professionally.
This might read as somewhat biased – and it is, for good reason. We chose Stripe as the payment processor for our customers since we honestly believe it is the best tool for the job, based on our experience.
It is likely we will be adding other payment processors in the future, for when a gym is already heavily invested in their existing solution. But for now, you can’t really go wrong with Stripe.