Freemius vs payment processors – which one to choose?
If you’re selling software, you need a way to collect payments. One option is to use a traditional payment processor (like Stripe or PayPal) and stitch together the rest of the billing stack yourself.
The other is to use a merchant of record (MoR), which takes on a broader operational role, including legal, compliance, and tax responsibilities.
This overview lays out what each option covers and what falls on your plate. Use it to weigh the real trade-offs and pick the setup that fits your goals.
Merchant of record  | Payment processor  | ||
|---|---|---|---|
| Accept payments | |||
| Cross-border transactions | +1.5% extra cost | ||
| Subscription management | +0.7% extra cost | ||
| Invoicing | +0.4% extra cost | ||
| Legal seller of record | |||
| Tax registration and filing | |||
| Tax calculation | +0.5% extra cost | ||
| Fraud prevention | Extra cost | ||
| Disputes handling | On you + $15–$30 per dispute | ||
| Chargeback defense | |||
| Software licensing | |||
| Localization out-of-the-box | |||
| Built-in security & privacy compliance PCI, GDPR, CCPA, PECR | |||
Why DIY payment processing costs more than you think
Most founders assume:
On paper, sure. But once you start selling subscriptions globally, the math flips.
The global pricing reality
Let’s run the numbers on a typical micro-SaaS doing $10,000 in sales at $19.99 per subscription (≈500 transactions).
Sales tax exposure
~25% of transactions taxed, avg. 10% rate
Disputes
0.7% dispute rate ≈ 3–4 disputes
Sales distribution
| Description | Amount (USD) |
|---|---|
| Product sales volume | $10,000 500 transactions |
| VAT/GST/Sales Tax | $250 25% avg taxed transactions 10% avg tax rate (ranging from 4%–27%) |
| Total volume | $10,250 |
| Base transaction fee (2.9% + 30¢) | $447.25 $10,250 x 2.9% + 500 x $0.3 |
| International card (+1.15%) | $107.62 to $146.06 US sellers: 70%+ cross-border Non-US seller: 95%+ cross-border |
| Subscription payment – Stripe Billing (+0.7%) | $71.75 |
| Invoicing (+0.4%) | $41 |
| Tax calc & monitoring – Stripe Tax (+0.5%) | $51.25 |
| Fraud protection – Stripe Radar (20¢) | $100 $0.20 × 500 transactions |
| Dispute fees ($30) $15 fee + $15 countering fee | $105 3.5 disputes (0.7% avg dispute rate) |
| Total fees before payout | $923.87 to $962.31 |
| Your net before payout fees | $8,967.69 to $9,006.13 $10,000 – total_fees_before_payout – $70 (3.5 chargebacks) |
| Payout currency conversion FX (1%–4%) E.g., if you sell in USD but get paid in EUR Fees vary by country | $89.68 to $360.25 |
| Total fees | $923.87 to $1,322.56 |
| Stripe’s effective rate | 9.24% to 13.23% |
| Your net | $8,609 to $9,006.13 |
It’s 9%+ once you sell globally.
That’s 3× higher than most founders think — and that’s before the weeks of dev time to wire up subscriptions, taxes, invoices, and retries.
Even if you cut corners (no invoices, no taxes early on), you’re still at 8.32%+.
Merchant of record
With an MoR like Freemius, you’re looking at a flat 8%–10% cut — but that already includes:
| Global tax compliance | |
| Dispute handling | |
| Fraud protection | |
| Subscriptions, invoicing, licensing, etc. | |
| Faster setup: first sale in minutes, not weeks |
On $10K in sales, you’d net $9,000–$9,200.
4.7%
+ gateway fees
- Immediate account approval
- Avg 24-hour support ticket turnaround
- Free¹ wire payouts² wherever you are
- Automated sales tax compliance
- Focused exclusively on selling software
- Hands-on migration assistance
¹ Wire payouts may incur intermediate bank fees.
² Supported payouts through Wire, Wise, Payoneer, and PayPal.
- 0% fee on the tax component
- No extra % for cart recovery
- No extra % for failed renewals recovery
- No setup fees, monthly fees, or hidden fees
Processing large payment volumes?
What’s included?
Merchant of record
- Global payment processing
- Credit cards & PayPal
- Automated sales tax and VAT
- Fraud protection & risk management
- Localized checkout & multi-currency
- Simplified reporting & reconciliation
- Chargeback & dispute management
- PCI compliance out of the box
Selling software
- Webhooks
- REST API
- Software licensing
Self-served customer portal
- Plan changes and upgrades
- Payment method updates
- Retention flow
Subscriptions & recurring billing
- Automated renewal reminders
- Multi-seat and multi-license support
- Smart card updates
- Failed renewals recovery
- Trials
Marketing
- Affiliate Platform
- Cart abandonment recovery
- Coupons and discounts
- Subscription recovery campaigns
- Verified reviews collection
Solution
SaaS & software
SaaS, desktop apps, Chrome extensions, Electron apps
WordPressi+2.3%
Plugins, add-ons, themes, templates, widgets, kits
- Software licensing
- Multi-site licenses
- Automatic updates
- Release management
- Beta versions
- Staged rollouts
- Single sign-on with WordPress
- Sell from WP Admin Dashboard
- Sell add-ons & bundles
- Opt-in & usage tracking
- Audience analytics
- Deactivation feedback
- WP.org compliant GPL SDK
- WP.org review automation
Hidden drains with DIY setups
Using Stripe, PayPal, or similar payment providers gives you full control over the implementation, but it also means assembling the entire commercial infrastructure yourself. That approach can work if you have the time and resources to manage it. But it’s worth being aware of some common trade-offs.
Slower time to launch: Building and testing your own billing stack usually adds weeks before you can sell.
Conversion impact: A generic checkout often underperforms; even a small drop in conversion or renewal rates can wipe out any fee savings.
Global complexity: Expanding to new regions means registering for tax in each one (dozens of US states, VAT in Europe, GST elsewhere).
Ongoing maintenance: Refund flows, dispute handling, tax law changes, and subscription edge cases require continuous engineering attention.
So, which one is better?
Here’s a quick rule of thumb:
Stick with a payment processor if:
- You’re selling locally only
- You want full control of the billing logic
- You’re okay trading product velocity for infrastructure maintenance
Go with a merchant of record if:
- You want to sell globally without registering everywhere
- You don’t want to babysit tax, invoicing, and compliance
- You prefer not to manage multiple third-party tools for subscriptions, licensing, and customer management
- You’d rather spend dev cycles on your product, not payment plumbing
Why software businesses go with Freemius over other MoR platforms
Most merchant of record (MoR) platforms were built to serve the broad world of digital products—ebooks, online courses, design assets, you name it. They focus primarily on billing and treat creators only as customers, offering a transactional tool to process payments.
Freemius is built differently. We’re purposefully focused on software — nothing else. We look at the full customer lifecycle, not just the checkout. Our mission is to maximize your revenue, reduce your churn, and guide you from launch to scale to exit.
We’re not just your payments platform. We’re your growth team.
01
Platform: Built for software growth
Freemius is a modern, developer-friendly commercial infrastructure that goes way beyond billing.
We optimize every critical touchpoint in your customer journey:
- Pre-purchase exit-intent coupons
- Cart abandonment recovery
- Failed renewal win-backs
- Pre-cancellation retention flows
- Cancellation surveys with targeted discounting
All designed to boost conversion, reduce churn, and increase LTV—out of the box.
02
Team: We win together
Where other platforms offer generic support, we offer deep partnership.
- You get developer-to-developer support from people who understand what it means to run a software business.
- You get strategic advice on pricing, packaging, business models, product decisions, marketing, and more.
- We’re in it with you. When you grow, we grow.
“We’ve worked with Freemius since 2018 and it’s been a great, positive experience. Their support is amazing, and they’re always improving things.”
DeoThemes
“The team at Freemius helped us get our unique code sorted and live. We now have both the Free and Premium versions available.”
ProFeedWP
03
Community:
You’re not alone
When you join Freemius, you tap into an ecosystem that multiplies your success.
We optimize every critical touchpoint in your customer journey:
- Makers community: 1,800+ makers in our Slack group and real-world Makers’ Meetups where founders help each other grow.
- Affiliates: A built-in affiliate network of creators, YouTubers, and content marketers — plus warm intros when it makes sense.
- Business connections: From investors to acquirers, we know the people you’ll want to meet when it’s time to exit. And we’ll help you get there.
What Freemius provides,
and how it fits into your stack
Security & compliance
| Fraud protection & risk management | |
| PCI | |
| SCA & 3DS 2.0 | |
| GDPR | |
| US sales tax | |
| UK & EU VAT |
Marketing and
revenue optimization
| Special coupons & discounts | |
| Subscription recovery | |
| Cancellation survey | |
| Verified reviews collection |
5 minutes from signup to your first sale!
Getting started with Freemius is dead simple:
Add your product
Grab your no-code checkout link → start accepting real payments
That’s it. No lengthy approval process. No waiting around. You can start selling in minutes.
Laura Elizabeth
Founder of Client Portal
Laura Elizabeth
Founder of Client Portal
“Freemius makes my life easier and earns me more money. They handle all sales tax which is yet another headache that I don’t need to deal with. I’m finally able to focus on improving the product and helping customers which is exactly what I wanted.”
Thinking about migrating to Freemius?
You’re not on your own
Faster than you think
Zero disruption
Independent from your old processor
You’re not on your own
Our team walks you through every step
Faster than you think
Zero disruption
Independent from your old processor
Our simple two-step process
Data import
Ongoing renewals sync
Our simple two-step process
Getting started with Freemius is dead simple:
Data import
Ongoing renewals sync
Schedule a call with a migration specialist. We’ll build you a free, custom step-by-step migration plan tailored to your setup. No risk, no strings attached — you decide if and when to move forward.
Florian Vizethum
Founder & CEO at AAWP
Florian Daugalies
Founder & CEO at AAWP
