The seller named on your card statement can be Paddle instead of the software company you thought you were paying. That quirk sits at the heart of the Paddle business model.
Paddle, a London company founded in 2012, sells software on behalf of other firms and keeps a slice of each sale.
This guide explains how Paddle makes money, what that slice covers and what founders give up in return. We flag every figure that is a company claim.
What Is Paddle? The Company Behind Other People’s Checkouts
Paddle is a London-based merchant of record that sells software on behalf of its customers, handling payments, tax, fraud and subscriptions in return for a fee on each sale.
Paddle says it serves more than 6,000 digital product companies, a figure from its July 2025 funding announcement. Paddle merchant of record services replace what the company calls a fragmented stack of payment tools.
Seeing how Paddle makes money starts with that bundle.
From a Teenage Start-Up to a $1.4 Billion Valuation
Paddle began in 2012 with co-founders Christian Owens and Harrison Rose, who came up with the idea as teenagers trying to build their own software company, according to Owens.
Owens was 18 when he founded the company.
Funding followed. A $68 million Series C in November 2020, led by FTV Capital, took total funding to $93 million. The $200 million Series D, announced on 10 May 2022 and led by KKR, valued Paddle at $1.4 billion and combined equity with debt from Silicon Valley Bank. Total funding then stood at $293 million.
In April 2023 Owens became executive chairman and Jimmy Fitzgerald, previously chief operating officer, became chief executive.
The handover came three months after Paddle cut 8% of its workforce.
Merchant of Record: Why Paddle Is the Seller
A merchant of record is the legal entity that sells a product to the customer and takes on the liabilities attached, including sales tax, refunds and chargebacks.
Paddle’s own explanation describes two transactions in every sale: one between the customer and the merchant of record, and one between the merchant of record and you. The merchant of record’s name appears on the customer’s card statement, and the cardholder turns to it in a dispute.
A payment service provider such as Stripe handles only the transaction itself, while a merchant of record manages the whole order and its liabilities.
You still control how you present the product, support customers and market it.
That arrangement underpins the Paddle business model.
How Paddle Makes Money: 5% Plus 50¢ on Every Sale
Paddle charges sellers 5% plus 50¢ on every checkout transaction, with no monthly fee, and that single price sits at the heart of the Paddle revenue model.
That is how Paddle makes money at its simplest.
High-volume sellers can qualify for custom pricing, while transactions under $10 and invoicing may have separate pricing arrangements. Because the 50¢ is fixed, the effective rate falls as the sale price rises. On a $100 sale Paddle takes $5.50, or 5.5% (our calculation from the published rate).
The Paddle revenue model shows up in the accounts. UKTN reported in March 2025 that Paddle’s 2023 accounts showed revenue up 17% to £57.3m and a loss of £44.4m, up 20% on the previous year.
Paddle said in July 2025 that it had 40% year-over-year growth.
Paddle Fees: What Founders Actually Pay
Paddle fees are a flat 5% plus 50¢ per checkout transaction, which Paddle says covers payments, tax compliance, fraud protection, chargebacks and buyer support.
Paddle lists no monthly, migration or hidden fees on its pay-as-you-go plan. The fixed 50¢ takes a bigger bite out of small sales:
Chargebacks cost extra: Paddle’s seller handbook lists a fee of 20 USD, GBP or EUR each. Paddle publishes its headline rate in dollars, so check the current pricing page for your currency before you budget.
Beyond Payments: ProfitWell, Billing and Retention Tools
Paddle owns ProfitWell, the subscription metrics and retention business it bought in May 2022 in a deal valued at more than $200 million in cash and equity.
Paddle now presents ProfitWell Metrics as free and Retain, its tool for recovering failed payments and reducing cancellations, as built into Paddle Billing at no extra cost.
That keeps how Paddle makes money easy to summarise, because the one published price is the transaction fee. Invoicing, advisory and implementation services are priced through a demo.
The Paddle business model has also moved towards app developers. In July 2025 Paddle credited its growth to new AI products and Apple’s opening of its app ecosystem to web payments, and announced $25 million from CIBC Innovation Banking.
Paddle’s Business Model vs Stripe: Who Carries the Tax?
Stripe’s standard UK card fees start at 1.5% plus 20p for domestic cards, lower than Paddle’s headline rate.
With standard Stripe Payments, your business generally remains the seller and retains responsibility for its tax obligations, although Stripe offers tools to help calculate and manage tax.
Stripe also sells its own merchant of record product, Managed Payments, which adds 3.5% per successful transaction to standard processing fees, with Stripe acting as merchant of record. Stripe bought Lemon Squeezy, another merchant of record, in July 2024.
These prices are not like for like, and we found no independent total-cost comparison.
Founders weighing Paddle fees against Stripe should price in the tax and compliance work they would otherwise carry themselves.
Is the Merchant of Record Model Worth It? Trade-Offs for Founders
The merchant of record route carries a higher headline fee, and in return Paddle takes on tax collection, refunds and chargeback liability for each sale.
The trade-off is control. Paddle’s developer documentation says most refunds on live accounts need Paddle’s approval, and customers see Paddle’s name on their card statement.
Founders should also look at who they are choosing.
In June 2025, Paddle agreed to pay $5 million and accept a permanent ban on processing payments for specified tech-support telemarketing schemes, settling US Federal Trade Commission allegations that it processed payments linked to deceptive tech-support operations.
Paddle disputed the allegations, so the FTC’s claims and the company’s response should be considered separately.
Paddle’s Cut vs Your Own Compliance Bill
Paddle shows that selling software globally can be bought as a service, with one percentage fee standing in for separate payments, tax and compliance work.
The Paddle revenue model asks you to pay a higher fee and hand over the seller role, and Paddle carries the liabilities that come with it. We think the useful question for a founder is what that fee replaces in your own business.
Add up your tax and compliance workload, then compare it with Paddle fees at your average sale price. If the Paddle merchant of record route removes more cost than it adds, it earns its cut.
FAQs
1. Is Paddle a payment processor?
Paddle processes payments, but legally it acts as the merchant of record, which makes it the seller of your product instead of only the payment gateway. A payment service provider handles the transaction, while a merchant of record also takes on order, tax and chargeback liabilities.
2. What is a merchant of record?
A merchant of record is the legal entity that sells goods or services to the end customer and manages the payment, including sales tax, PCI compliance, refunds and chargebacks.
3. Is Paddle cheaper than Stripe?
On headline rates, Stripe’s standard UK card-processing fees start lower, at 1.5% plus 20p for domestic cards, compared with Paddle’s 5% plus 50¢ per checkout transaction. However, the prices cover different services: Paddle acts as merchant of record, while standard Stripe Payments does not. Stripe Managed Payments adds 3.5% to standard processing fees, with additional billing fees potentially applying to subscriptions.
Also Read: The Deliveroo Founder Took the Order, DoorDash Took the Lot
Sources: Data drawn from Paddle (pricing page, seller handbook, merchant of record guide, funding and acquisition announcements), Stripe’s pricing and Managed Payments pages, the US Federal Trade Commission, Willkie Farr & Gallagher, FinTech Futures, Finextra, TechCrunch, Infosecurity Magazine and UKTN’s reporting on Paddle’s 2023 accounts.
The EP+ Editorial Desk covers UK startups, founder stories, and venture capital. All editorial content is independently produced and human-reviewed before publication.
