In 2010, two brothers John and Patrick began to ponder – in a world of digital transformation where internet companies were leading the way, why was it so difficult to accept payments on the web? While companies like PayPal existed, these payment options were often clunky and did not integrate into the merchant’s website directly. Even more problematic, PayPal “owned” the customer experience, by taking customers off the merchant’s website to PayPal’s own website where users were forced to use PayPal-specific log-in details to pay. If companies did not want to relinquish their customer purchasing experience to a payment gateway like PayPal, the company had to go through the arduous and time-consuming task of setting up a merchant account with a bank, which came with high fees, long delays, and clunky online interfaces .
With this context, John and Patrick saw an opportunity that digitization posed – they created a software company, Stripe, that allows businesses to cut through bureaucracy and instantly accept payments online from countries across the globe.
Stripe’s Business Model
At its core, Stripe’s business model is fueled by using digital technology to capitalize on the wave of e-commerce and marketplace platforms emerging – Stripe differentiates itself from other digital payment processors by building the most beautiful, high-converting payment flows for internet and mobile commerce. Whether the business is a subscription service (i.e., Blue Apron), an on-demand marketplace (i.e., Uber), an e-commerce storefront (i.e., Saks), or a crowdfunding platform (i.e., Kickstarter), Stripe designs APIs that creates the best possible experience for users . The companies listed here are a sample of Stripe’s 100,000+ customers, where, unlike PayPal, users like you and I don’t know we are using Stripe when we pay, and businesses still own the customer experience that is integrated seamlessly onto their websites and mobile apps!
Stripe’s Operating Model
As Stripe is not the only fin-tech start-up disrupting payment processing (its biggest competitor is Braintree, which was acquired by PayPal in September 2013), Stripe has had to have a relentless focus on innovating new products to stay ahead of competition :
- In September 2016, for marketplace models (i.e., Lyft, InstaCart), Stripe made it possible to send instant payouts to service providers (i.e., drivers, shoppers) on their platform. Unlike traditional bank transfers, payouts are deposited in drivers’ bank accounts within minutes after a ride is completed, allowing Stripe’s customers to be even more nimble in attracting service providers onto their platform who value receiving earnings faster .
- A few months ago, Stripe announced its latest product, Stripe Atlas, that gives entrepreneurs the building blocks to start a global internet business within a couple of days. Atlas helps an entrepreneur incorporate his/her company in the U.S., open a U.S. bank account with Silicon Valley Bank, and start a Stripe account to accept payments from countries around the world . Stripe is working with 100+ accelerators and VC firms to get Atlas in the hands of promising start-ups.
- In October 2016, Stripe released Radar, which uses advanced machine learning algorithms to learn from Stripe’s global network of businesses to automatically detect and block fraudulent charges in real-time .
Beyond product innovations, in my opinion, one of the most remarkable operating practices that Stripe has followed is partnering with its own competitors to ensure its long-term success. For example, Stripe partnered with ApplePay (to enable any business with Stripe’s mobile application to instantly accept ApplePay when charging for physical goods) and Alibaba’s Alipay (to allow all Chinese customers to pay using Alipay during checkout) . Most recently, in July 2015, Stripe announced that it raised a new round of funding from Visa and American Express, valuing the company at $5 billion and signaling to the marketplace that Visa and AmEx, who both have their own branded competing solutions Visa Checkout and Amex Express Checkout, have incredible confidence in Stripe and Stripe’s ability to win in this market .
The digital payments business has relatively low barriers to entry and thus has seen a number of entrants. For Stripe to maintain its sustainable competitive differentiation, it must continue to innovate its business model and execute on its operating model. Specifically, Stripe will face margin pressure in the future as competitors try to sell their products for cheaper. Instead of competing on price, Stripe should continue to differentiate itself from competitors by innovating on products that deepen the value proposition for existing and new users. Stripe should also focus its resources on speed-to-market in new emerging countries (Stripe currently operates in 25 countries) to capture market share as these economies open to ecommerce and consumers begin trusting online payment processing . To achieve this success, it will all come down to one thing: as Stripe scales, can it hire and retain the best talent to win in this market?
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 Scott Carey, “Which is the right online payments solution for your startup? Stripe vs Braintree vs Worldpay vs Adyen,” Tech World (blog), July 28, 2016, http://www.techworld.com/startups/which-is-best-online-payments-solution-for-your-startup-stripe-vs-braintree-3644141/, accessed November 2016.
 Stripe. “Customers.” https://stripe.com/customers, accessed November 2016.
 Bill Ready, “Two Years After Acquisition, Braintree’s Authorized Payment Volume to Cross $50B this Year,” Braintree (blog), September 17, 2015, https://www.braintreepayments.com/blog/two-years-after-acquisition-braintrees-authorized-payment-volume-to-cross-50-billion-this-year/, accessed November 2016.
 Stripe. “Connect Overview.” https://stripe.com/docs/connect, accessed November 2016.
 Stripe. “Stripe Atlas Frequently Asked Questions.” https://stripe.com/atlas/faq, accessed November 2016.
 Stripe. “Radar.” https://stripe.com/radar, accessed November 2016.
 Olga Kharif and Serena Saitto, “Stripe Lands Apple in Quest for $720 Billion in Payments,” Bloomberg Technology, September 17, 2014, https://www.bloomberg.com/news/articles/2014-09-17/stripe-lands-apple-in-quest-for-720-billion-in-payments, accessed November 2016.
 Rebecca Borison, “PayPal Faces New Threat as Visa Partners With Payments Startup Stripe,” TheStreet, July 29, 2015, https://www.thestreet.com/story/13234280/1/paypal-faces-new-threat-as-visa-partners-with-payments-startup-stripe.html, accessed November 2016.
 Stripe. “Global.” https://stripe.com/global, accessed November 2016.