Choosing a payment processor for digital products can be an overwhelming and confusing process, even for the most experienced online seller.
Today, I’m sharing the top tips from my online clients to help you find a payment processor, how to save on processing fees, and what key features to look for to help you streamline how you sell your Digital Products.
Quick note: All rates reflect base standard fees at time of publishing. However, service fees will vary (i.e. by region, type of card, speciality services, etc) so please check directly with the processor for their current fee schedule.
Let’s go!
So, now that we’ve started our checklist for selecting the best payment processor for our digital products, let’s look at some of the top recommendations for online sellers:
Stripe
Stripe is renowned globally as a payment processor, and is my fave tool I use with my clients who sell digital products. Since it first leapt on the online scene in 2011, it continues to grow and evolve with the explosion in online services & products. In addition to payment processing, Stripe now offers invoice solutions, subscription management, Bitcoin support, financing, and in-person terminal options.
The only drawback I’ve experienced is that it can take 5-7 days for funds to be deposited to a bank account. With an established customer history, there is an option for next-day deposits, but that comes with additional fees.
Standard transaction rate: 2.9% + $0.30 per transaction
PayPal
Most of us have used (or at least heard of) PayPal at some point in our lives, as either a customer or a merchant (or both!). It is an internationally recognized payment processor, with established operations in more than 200 countries around the world, making it an easy option to sell digital products online.
In addition to e-commerce transactions (both as a software integration and standalone “checkout” option), the PayPal suite offers invoicing, multi-currency support, credit solutions, in-person terminals and more.
The biggest con can also be seen as a pro: it is (relatively) easy to report fraud or request a chargeback and refunds are processed quickly. This is awesome as a customer, but can lead to a risk of fraudulent refund requests against merchants. Having gone through this with clients, the onus is then on the seller to provide supporting documentation to validate the charge. With that in mind, make sure your refund/return policies are crystal clear on your site AND during the checkout process to help support these claims.
Standard transaction rate: 2.9% + $0.30 per transaction
*PayPal has numerous processing options & rates vary by program
See also: 10 Questions to ask BEFORE selecting a payment processor
Paddle
Paddle is technically a “reseller” for products/services, but is a great payment tool for international sellers because it handles all aspects of international sales taxes- determining the rate by location and then collecting it & remitting it to the respective government on your behalf.
However, this does come at a higher processing rate (6-8% per transaction) and is limited to specific types of businesses (for example, Paddle is not available for dropshipping).
FastSpring
Similar to Paddle, FastSpring has great features if you’re specifically looking for a payment processor to handle the sales of your digital products & software. It functions as the “merchant of record” which means it also will handle international sales taxes on your behalf.
FastSpring is a full e-commerce hosting site for digital products and software, so expect higher processing rates; currently these are 8.9% -or- 5.9% + 0.95 per transaction.
Square
Square is one of my favourite tools because of its robust options for both online AND in-person transactions. It has its own e-commerce store platform, or you can use it to collect payments on common platforms like WooCommerce & Wix (and with Kajabi, SamCart, Kartra using a connection tool like Zapier). In recent years, it has introduced invoicing + payments, as well as in-person devices to accept both credit & debit cards.
Standard transaction rate: 2.9% + $0.30 per transaction
In-person credit card processing: 2.65%
In-person Interac Debit processing: $0.10 per transaction
Want to try Square for FREE? Use this link to get your first $1000 in transactions for free.
Honorable Mentions
Helcim (Square alternative)
Why I like it: Competitive Pricing (Starts at 1.92% + 0.08 per transaction)
Needs some love: more options specific to Digital Products & Memberships
2Checkout
Why I like it: Syncs with Shopify, Opencart, Woocommerce
Needs some love: higher processing fees (3.5-6%)
Authorize.net
Why I like it: Accept multiple types of payments, including e-checks, credit cards, and PayPal
Needs some love: batch fees, monthly fees, pricing only upon request/quote
Platform payments
Many digital product hosting platforms offer their own payment processing, which can be helpful to simplify the customer experience. However, it’s important to review the key features outlined above (what is the payment time? Does it sync with accounting software (like Quickbooks Online) to see if it’s truly the best fit for your business.
Some of these “payment tools” also come at higher rates (i.e. Teachable Payments range from 2.9% up to 4.99% and have a 10% “reserve” held for each transaction in case of refunds) but, for the sake of ease and preventing processing errors, it’s worth it to consider these Platform payment processors for your digital products.
The trend I’m loving as an accounting pro is seeing how these tools to continue to evolve as our e-commerce world expands.
If you’d like to dive deeper into the finance side of your e-commerce business, the waitlist for “Accounting 101 for Online Sellers” is now open. 100% Free & designed for Canadian sellers in mind. Join the waitlist HERE.
SUMMARY
Choosing the best payment processor for digital products depends on a variety of factors: size of your business, volume of transactions, selling platform, and integration with existing tools. Taking the time to clarify EXACTLY what you need (use this checklist to get started) is an important first step.
Affiliate Disclaimer: I sometimes use affiliate links for my trusted fave products. If you click and purchase, I may receive a small commission at no extra cost to you.
