Why we charge a subscription instead of taking a cut

Taking a percentage is the obvious way to charge for payments software. Everyone does it, customers are used to it, and it has a property every software company loves: revenue that grows without anyone having to sell anything.

We charge a flat monthly fee instead. Here is the reasoning, including the parts that are bad for us.

A percentage is a tax on growth

The software costs us the same to run whether a business turns over fifty thousand or five hundred thousand. The database does not work harder because your Saturday was good.

So a percentage is not a price for anything. It is a claim on your growth, dressed as a price. The business doing well pays more for the same product, and the better it does, the more it pays — which is a strange thing to sign up for when you think about it plainly, and almost nobody does, because it arrives pre-deducted.

Two per cent of a good year is a bill for having had one.

It makes our interests quietly wrong

Percentage pricing is usually described as alignment: we only do well when you do well. It sounds right and it is half true.

The half that is not true is what it makes us want. If our revenue is a slice of your transactions, then the most valuable thing we can do is increase the number and size of transactions flowing through us. Not the number of businesses that are better off — the volume.

That pulls a product in a particular direction. Towards encouraging more payments rather than better records. Towards features that increase throughput rather than features that save a Sunday afternoon. Towards not mentioning that a customer could do something more cheaply another way.

A subscription makes our interest much duller and much more honest: we want you to keep finding it worth paying for, which means it has to keep being useful. That is the whole of it.

It also had to be this way

Being straight rather than only high-minded: there is a regulatory reason as well.

A fee charged by reference to a transaction in cryptoassets starts to look like arranging deals in them, which is a regulated activity. Charging a percentage would have changed what Ceodore is in the eyes of a regulator, and would have required authorisation we do not have and do not want.

So the commercial instinct and the legal position pointed the same way. That does not make the reasoning less true, but you should know both existed rather than being told only the flattering one.

What it costs us

• A harder sale"Two per cent" needs no explanation and comes out of money you never see. "Seventy-nine pounds a month" is a decision somebody has to make, on purpose, every month.
• No automatic growthOur revenue only rises if more businesses choose us or existing ones move up a tier. There is no quiet increase that arrives because customers had a good quarter.
• The wrong shape for investorsPercentage revenue that scales with customer volume is a much prettier chart. We are not raising money, so that matters less — but it is a real cost of the choice.
• Small businesses pay proportionally moreA sole trader pays the same as a busy shop. On low volume, a subscription can cost more than a percentage would. That is an honest disadvantage and it is why the first tier is twenty-nine pounds rather than seventy-nine.

What it means in practice

No percentage of your sales. No transaction fee. No spread hidden in a conversion. No fee that appears above a certain volume, no premium rate for a payment type, and no line on a statement you have to work out.

There is no fee parameter in the payment code to be switched on later, which is the only version of this promise worth anything. A pricing policy can be revised by a future board. A capability that was never built has to be built.