Paddle was founded in London in 2012 by entrepreneurs Christian Owens and Harrison Rose. It was created based on the founders’ experience setting up VAT and ensuring compliance across countries. This platform is a Merchant of Record that manages payments and infrastructure for online businesses. In 2020, Paddle raised $68 million at a valuation of over $1 billion.
What is Paddle?
Paddle is a Merchant of Record. They take the legal and financial liability of global online payments, subscriptions, tax compliance, and billing. They calculate, collect, and remit global taxes on behalf of the seller. They also manage the checkout flow, chargebacks, and other business operations. On Paddle, sellers can sell digital products, mobile apps, digital games, and more. However, you can’t sell physical goods, financial or payment services, or other products.
How does Paddle work?
Paddle works a bit differently than most platforms as it functions as a Merchant of Record. When you sell on Paddle, they act as the legal and financial seller of your product. That means their company name appears on the invoice or bank statement when a customer places an order, not your brand name.
The platform is responsible for transactions, taxes and compliance, fraud and risk, and payouts. The entire checkout process is managed by Paddle. Plus, they are legally liable for the transaction, so they must calculate, collect, and remit all taxes across jurisdictions. They also manage fraud and chargebacks. Finally, once a buyer has completed their purchase, Paddle will take its cut and provide you with the remaining revenue on a set schedule.
What you need to know about selling on Paddle?
One challenge of selling on Paddle is that you’re limited in many ways due to its Merchant of Record status. For example, you won’t be able to customize the checkout experience. Some sellers want to customize their checkout experience to boost their conversion rate. However, when you use Paddle, you give up the ability to make changes to this, as they manage all financial and legal aspects of the business.
Selling on Paddle can be frustrating for some sellers, as customers may see a different brand name appear on their bank statements. As a result, some may issue chargebacks because they don’t recognize the brand name on the statement. While Paddle is responsible for the financial aspect of the business, they will manage chargebacks themselves. However, frequent chargebacks could result in a shutdown of your store.
Paddle has delayed payouts compared to some platforms that offer instant payouts. For instance, Paddle will send payments your way by the 15th of every month. You’ll need at least $100 in your account to receive a payout. Overall, this can negatively impact your business’s cash flow.
Paddle doesn’t offer a variety of pricing plans. Currently, they take a 5% + $0.50 per transaction fee. This is great for low-volume sellers; however, for high-volume sellers, having a paid monthly subscription tends to work better. Paddle only offers custom pricing for enterprise users who’ve generated over $50,000. Most platforms offer flexibility, letting you choose a paid plan without signing up for an enterprise deal.
Is Paddle the best platform to sell products?
No, Paddle isn’t the best platform to sell products. Payhip is a better Paddle alternative because it provides automated global tax compliance, lets you be the seller of record, offers instant payouts via Stripe and PayPal, and offers a variety of pricing options. As a result, you have more control over your business without the headaches. To start selling on Payhip, sign up for free.