At Paddle, we speak with 30-40 SaaS businesses each month who are looking for Braintree alternatives. In these conversations, we take a deep-dive into all aspects of revenue delivery to understand what challenges businesses are facing and why they are looking for something different.
Here are the five main reasons SaaS businesses look for an alternative.
1. Complex integrations with other tools
Braintree only provides a solution for how you take and process payments. While clearly this is a core to running a business, it’s only part of how your revenue is ultimately delivered.
Braintree’s PayPal set-up does save you one integration but what about the other processing required to manage your business, including:
- Subscriptions and recurring billing: Braintree has limited functionality for recurring billing. Businesses usually either build a work around or integrate with a subscription management tool to handle subscription logic.
- Tax compliance: To manage sales tax compliance with Braintree, you’ll need to integrate with another tool, like Avalara. Braintree does offer these partnerships but there’s limited documentation to help you get the integration up and running.
- Invoicing: Braintree doesn’t have an invoicing function. Any company looking to send out invoices will need to use a separate solution – and then take the time to reconcile these payments against your accounts (either via more tooling, your accountant, or both).
Braintree does integrate with a number of third-party tools that will help you plug these gaps but these still require the resources in-house to set up and maintain. For businesses where this is an issue, an all-in-one solution might be a better option - but more on that later.
2. Lower revenue performance in some regions
We’ve already discussed how Braintree payment performance is likely to be stronger in markets where PayPal is the payment method of choice. But what about where it isn’t?
As a single payment gateway, businesses using Braintree are limited to its banking relationships (unless they go through the hassle of integrating additional processors, and likely setting up local entities in different regions).
This means that payments running through it have a limited number of routes they can take in order to be successful. The potential impact of this is lower conversions and more failed payments outside of Western markets or where your Braintree account is set up.
Learn more about local banking and payment routing here.
3. Limited support for SaaS growth strategies
At Paddle, we see that SaaS companies typically grow by:
- Moving into new markets
- Selling to high-end customers, larger teams and enterprises
- Adding support and processes suitable for consumers, prosumers, or small teams
- Introducing new products
- Optimizing pricing strategy and billing models
With the most successful eventually utilizing all five growth strategies.
Braintree is a payment gateway used by a number of different types of businesses. This isn’t a bad thing but it means that it isn’t designed for SaaS, so naturally most of the revenue delivery functionality required to execute these strategies effectively sits outside of its remit.
SaaS businesses using Braintree need to integrate a number of tools to handle checkout localization, taxes and subscriptions - it’s doable but leads to silos in data and makes it difficult to gather the insights SaaS businesses need to respond quickly to new growth opportunities.
4. Sales tax compliance is complex and lacks documentation
We talk a lot about SaaS sales tax here at Paddle, mainly because it’s incredibly easy to land yourself in hot water if you don’t manage it correctly (trust us, we found out the hard way).
For SaaS businesses selling through a payment facilitator like Braintree need to at the very least integrate it with a tax calculator (unless you have a finance team or tax accountant with hours of time on their hands, who can’t wait to review your sales line by line).
We mentioned above that there are a set of tax calculators available through Braintree but the integrations are complex and aren’t well documented. It’s also important to note that these tools will incur an additional cost and are unlikely to absolve you of the liability - meaning that unfortunately, your finance team will still need to be on hand to register, file and remit tax payments.
5. Total cost of Braintree quickly adds up
On the surface, Braintree fees are a charge per transaction (2.9% +30¢ for US businesses).
Not too bad, right?
Maybe not, but remember, this is just for payments – successful, domestic payments. When you factor in additional charges passed on by card networks (currency conversion and American Express payments can catch you out here) - those transaction fees start to climb.
SaaS businesses are also starting to think about the cost of their revenue delivery infrastructure more holistically. To put that into perspective, it means factoring in:
- Roughly 0.8-1.2% of revenue (or a fixed fee) for your subscription billing software
- Additional costs for a tax compliance calculator
- Plus internal headcount. Engineering, Finance, and Support to manage and maintain these processes.