Note - this article was written in January, 2014. Since then Stripe has grown to a $95 Billion valuation in 2021.
Stripe Payments surprised many in the investment community with a valuation pegged at $1.75 Billion early in 2014. I am both a customer of Stripe myself and a partner through my payment analytics company Control, so I personally am not surprised. Their simple integration technologies and easy merchant onboarding solve some of the biggest known problems in the payment processing space. Having worked in the online payments space for over 10 years, I have probably reviewed over a 1000 APIs and labored over 100s of payment platform integrations.
Most API documentation provided by payment platforms does not provide standardized programming languages nor flexible services such as REST (AKA as representation transactional states, which allows transmission of data via basic HTTPS protocols, the standard of the internet). I have also sweated through 100s of 10 page merchant applications, which ask for elaborate biographical detail and rows of data on the minutiae of monthly bank statements, revenues, declines, refunds, chargebacks…credit report, customer references, and on & on .
Once submitted, there is little guarantee of being accepted for an account. If you are a start-up, your chances of acquiring a merchant account via the big players such as Chase Paymentech and Worldpay are next to zero. I have never understood the paradox of blocking start-ups from payment processing. If new businesses aren’t approved for accounts to accept payments, how will they be able to demonstrate financial solvency ? And this is why Stripe has been such a powerful force.
The first time I signed up for Stripe I was asked for the most basic of information. The only thing required to prove my validity was my name, email, and bank account number. That’s it. I was approved instantaneously, and using their well documented and modern integrations APIs, I was accepting payments in a matter of minutes. Yes, you read this correctly- minutes. Before the advent of Stripe , the industry standard for acquiring a merchant account to start accepting payments, was about four months!
Admittedly , PayPal pioneered a simple way to accept payments online, but even PayPal has become stagnant with their ancient PayPal branded checkout flow (statistics show that redirects such as the ones PayPal forces significantly decreases conversions). Furthermore, there has been a backlash against PayPal in the startup community for indiscriminately holding merchants funds without rhyme or reason. Having your payments frozen for an indeterminate amount of time can be a death blow to a startup. The ability to accept payments is the absolute lifeline to any business. Stripe removes all of the traditional friction involved with accepting payments online. Stripe has also crucially pioneered another element so deprived in the financial services industry : innovation and agility.
Founded by two young Irish brothers, John and Patrick Collison, Stripe brings the fundamentals of product development used successfully by companies such as Google and Facebook, to ship products quickly, and (importantly) without compromising the essential user experience. Both these qualities have been long lacking in the traditionally conservative, slow moving, and non design-focused financial services/payments space. Stripe’s ability to launch quickly in new markets, with consistently thoughtful UX optimized across web and mobile, and willingness to support new alternative payments methods such as Bitcoin and AliPay, is evidence of their agility and ability to respond quickly to changing industry conditions.
Clearly the industry is taking notice. The Stripe model has been cloned in multiple different markets by the likes of Conekta in Mexico, Razorpay in India, Telr in South east Asia, and many more sure to follow. Even PayPal has responded in a material way to compete with Stripe. They acquired Braintree payments in 2013 for $800M all cash, and last week Braintree announced the launch of developer and merchant friendly tools that will place them head to head with Stripe’s core competencies. Stripe is a powerful disruptor and will continue to shake up the payments industry. Their support for expediting the merchants’ ability to get up an running with little barriers to entry will motivate more startups to create more online businesses create increasingly valuable services for consumers, in expanded markets, while challenging its competitors to do the same. The ultimate winners are both the businesses and consumers . Stripe is fundamentally important as it is changing the fundamentals of business itself.
Kathryn Loewen is an experienced CEO, aspiring data scientist & recognized thought leader in payments technology. She is the Founder of a complex business intelligence & payment analytics company. Control’s enterprise analytics are used by some of the world’s largest payment processors. Kathryn was responsible for negotiating and securing partnerships with Stripe, PayPal (PYPL), Square (SQ), and Visa Inc (V) (Authorize.net
/Cybersource ). Follow Kathryn on Github, Medium.com and AngelList.