Postmates saves more than $3 million in card network fees with Stripe’s payment consultation services

Postmates is an on-demand delivery company, revolutionizing delivery logistics for consumers across 4,200 US cities. Postmates offers a leading marketplace for customers to find and purchase from local restaurants and stores.

Products used

    Billing
    Issuing
    Payments
    Radar
North America
Enterprise

Challenge

Postmates is transforming the way goods move around cities with more than 600,000 couriers and the largest network of merchants in the United States. However, with such tremendous customer growth came a major obstacle: ever-growing card network fees. Postmates was paying tens of millions in card network fees each year. As a result, it was critical to the company’s bottom line to reduce transaction fees.

Postmates knew moving from flat-rate pricing to a “cost plus,” or interchange plus, model would provide Postmates with complete transparency into the various fees associated with each transaction and, in turn, the opportunity to dramatically reduce card network fees.

Solution

Stripe’s Payment Performance team consulted with Postmates to evaluate its specific cost trends, identify opportunities to optimize its payment flow, and develop a strategy to implement the highest impact cost savings initiatives.

Samantha Phillips, Payments Product Lead at Postmates, said, “Stripe provided an impact summary including the breakdown of interchange, scheme, and Stripe fees that was specific to our pricing structure. Stripe also analyzed our transaction data, providing custom recommendations for cost savings that immediately worked.” Stripe’s Payment Performance team recommended five strategies to reduce network fees:

1. Card types: Postmates’ users make purchases with all available card types. This is convenient for Postmates’ users, but is difficult to track. Stripe broke down the costs by individual card types, sniffing out opportunities to optimize the payment flow by checking historical processing volume and processing volume vs. network to find savings.

2. International Setup: Since Postmates’ services are popular in top international tourist destinations and international transactions tend to be more expensive than domestic, Stripe reviewed the percentage of cards issued outside the US. The goal: assess whether the payment structure was minimizing cross-border costs. Stripe examined the domestic vs. international effective rate and NPV by cardholder country to uncover optimization opportunities.

3. Refunds and returns: Any on-demand delivery business has to face customer concerns about quality or late deliveries, which results in refund requests. The problem: not all network fees are returned when a cardholder wants a refund. Stripe reviewed payment flows for on-demand delivery, paying close attention to the reduction of fees lost during refund requests. Stripe recommended crediting customers’ Postmates accounts instead of issuing refunds to increase stickiness and reduce transaction costs driven by refunds.

4. Penalties: The complexity of delivering physical goods in a fast-paced, on-demand environment means adhering to best practices to encourage payment acceptance across multiple integrations. Stripe reviewed every one of Postmates’ payment entry points to ensure they weren't subject to unnecessary scheme fee penalties. Stripe examined downgrades (transactions that didn’t meet network bestpractices, thereby settling at more expensive IC rates) and integrity fees (Visa-assessed penalty scheme fees for similar reasons) to find opportunities for savings.

5. Average Order Value: In delivery, gratuities are common, even weeks after an interaction. Comparing net present value (NPV) vs. effective rate, transaction size vs. effective rate, and average order value (AOV) vs. effective rate over time, Stripe reviewed Postmates’ payment flow looking to reduce the transaction fees by consolidating the food transaction and tipping transaction into a single purchase. As a result, Stripe recommended that Postmates’ offers its customers top up wallets with funds for their purchases, increasing AOV and decreasing their overall effective rate.

Results

By evaluating card types, international setup, refunds and returns, penalties, and AOV, Stripe’s payments consultations services identified $3.3 million in savings for Postmates.

Through the partnership, the two companies built an environment of ongoing cost optimization education—there is no finish line to cost optimization—via personalized workshops and custom recommendations.

“Stripe’s team has set the bar for a strategic partnership,” said Phillips. “We have a dedicated Account Manager and Technical Account Manager and do weekly syncs to discuss any and every topic. We’ve also spoken with members of the performance, compliance, and engineering teams in order to ensure Postmates is performing where we should be and to stay aware of any upcoming regulatory changes."

Always know what you pay

Integrated per-transaction pricing with no hidden fees

Start your integration

Get up and running with Stripe in as little as 10 minutes