Paddle vs Polar

Paddle

Payments and merchant of record for software companies

Paddle is a merchant of record for software companies, which means it becomes the legal seller of your product and takes over sales tax registration, filing, and remittance worldwide, in exchange for a flat 5% + 50 cents per checkout transaction. The distinction between a merchant of record and a payment processor is the whole point and is worth being precise about. A payment processor such as Stripe moves money and leaves you legally responsible for collecting and remitting VAT, GST, and US sales tax in every jurisdiction where you have customers. A merchant of record sells the product to the customer on its own account, so the tax liability, the registrations, the filings, and the compliance risk are Paddle's rather than yours. For a two-person SaaS selling to 40 countries, that is the difference between one invoice and a tax advisory relationship. Pricing is 5% + 50 cents per checkout transaction, with no migration fees, no monthly fees, and no hidden extras. That single fee covers tax compliance, fraud protection, customer support, churn recovery, and the billing infrastructure itself, with no add-on charges listed for standard features. Products priced under $10, and those requiring invoicing, fall outside the standard rate and need custom pricing arranged through sales. The tradeoff is straightforward. Paddle's 5% + 50 cents is meaningfully more than Stripe's headline card rate. What you are buying with the difference is the removal of an entire compliance function, plus failed-payment recovery and buyer support that you would otherwise staff. Whether that is good value depends almost entirely on how many jurisdictions you sell into and how much your time is worth. Who it is for: SaaS companies, desktop software vendors, and digital product businesses selling internationally, particularly small teams without a finance department. It is especially common among bootstrapped founders in countries where opening a Stripe account is difficult or impossible, because Paddle's own entity handles the merchant relationship. How it compares: Stripe is cheaper per transaction and far more flexible as a developer platform, but leaves global tax entirely to you unless you add Stripe Tax and do the registrations yourself. Lemon Squeezy is the closest merchant-of-record competitor and is now Stripe-owned, with a similar fee structure and a lighter, more indie-friendly product. Polar is a newer merchant of record aimed at developers, starting at 5% + 50 cents on its free tier and falling to 3.4% + 30 cents on higher paid plans. FastSpring is the established enterprise-leaning option. Against these, Paddle's strengths are maturity, subscription billing depth, and a genuinely complete tax posture; its weakness is price at volume and a heavier onboarding review than a self-serve processor. Evaluate it the moment international VAT becomes something you have to think about rather than something you can defer.

Polar

Open-source merchant of record for developers

Polar is a merchant of record billing platform built for developers and, in particular, for usage-based AI products: it meters raw usage events such as tokens, API calls, compute, and storage, and automatically converts them into invoiceable charges through a single integration. Like Paddle and Lemon Squeezy, Polar acts as the reseller of your product in over 100 markets, taking on payments, sales tax, fraud, refunds, and chargebacks. The compliance argument is the same as any merchant of record: you stop being the legal seller, so you stop owning global tax registration and filing. What differentiates Polar is the metering layer sitting on top of that. It describes itself as the billing stack for the intelligence era, and it is designed around the problem that AI products bill on consumption that is expensive to measure and awkward to reconcile. Pricing has a genuinely free entry point and falls as you scale. Starter costs nothing monthly and charges 5.00% + 50 cents per transaction. Pro is $20/month and charges 3.80% + 40 cents. Growth is $100/month and charges 3.60% + 35 cents. Scale is $400/month and charges 3.40% + 30 cents. Because the monthly fee buys a lower rate, the correct tier is a straightforward arithmetic question rather than a feature question: work out the volume at which the monthly fee is recovered by the reduced percentage and move up at that point. That descending structure is the clearest practical difference from Paddle, which charges a flat 5% + 50 cents at every volume with no monthly fee. Below roughly a few thousand dollars of monthly revenue, Polar's free Starter tier and Paddle are effectively the same price. Above that, Polar's paid tiers get cheaper and Paddle does not. Who it is for: developers shipping API products, AI tools, and SaaS with consumption-based pricing, especially solo founders and small teams who want metering, subscriptions, invoicing, and payouts from one integration rather than assembled from a processor plus a metering service plus a tax engine. How it compares: Stripe is the most flexible and cheapest per transaction but is not a merchant of record, so global tax stays your problem. Paddle is more mature, with deeper subscription billing and a longer compliance track record, at a flat and eventually higher rate. Lemon Squeezy, now Stripe-owned, is the lightest option for straightforward digital product sales but is less oriented toward metered usage. Polar's advantage is being the merchant-of-record option that treats usage metering as a first-class primitive and prices down with scale; its disadvantage is being the youngest of the group, with the shortest operating history behind it. Evaluate it if you are billing for consumption and do not want to build the meter yourself.