It seems Stripe is living up to the hype.
The fintech unicorn was just revalued at $9 billion after its latest round of funding led by General Catalyst Partners and CapitalG, the investment arm of Google’s parent company Alphabet Inc. The new financing, which almost doubled Stripe’s valuation, occurred despite a general slow-down in venture capital funding over recent months.
Why are investors doubling down on Stripe? It’s because the company seems poised to continue revolutionizing online payments, and it’s creating a ripple effect that is spreading throughout the entire e-commerce landscape.
The above infographic, courtesy of payment analytics software Control, gives insight into the rapidly evolving Stripe ecosystem – a key differentiating factor that investors are banking on with this five-year-old startup.
Breaking the mold
As is often the case with game-changing companies, Stripe was born out of frustration. Co-founders John Collison and Patrick Collison created the payment-processing platform after seeing an opportunity to improve the cumbersome online payment experience not just for entrepreneurs, but also for web developers and customers.
Stripe lets business owners set up an online payment system and start accepting payments in as little as 10 minutes, with a process that’s as simple as embedding a line of code.
Cutting Red Tape
To fully understand how freeing this is for business owners and web developers, consider how limited online payment processing used to be.
Traditionally e-commerce companies accepted payments online by connecting with third-party software such as PayPal, or by spending time and money setting up a merchant account and building a network for securely storing sensitive credit card information. While larger companies with teams of developers could do this, smaller companies were limited in their options.
Furthermore, setting up a merchant account required an arduous waiting period – sometimes even months – before approval could be granted and payments could be accepted. Once payments were processed, they were subject to days-long holding periods while they were put through various levels of regulatory bureaucracy.
How Stripe Works
Stripe is a PSP (Payment Service Provider) that lets business owners collect payments, including recurring payments, and transfer them directly to their own account instantly.
It does this by eliminating the need to store credit card information, which is what limited business owners before. Previously, when setting up an internal online payment system, web developers had to adhere to strict regulations surrounding the storing of credit card information, as per the Payment Card Industry’s Data Security Standard (PCI DSS). This is a complicated process that often requires a lot of paperwork and costly third-party consultation.
While any business or individual merchant collecting or handling credit card information is still required to maintain PCI-compliance, Stripe takes care of a lot of the legwork. Customers can enter their credit card information, which goes directly to Stripe’s secure servers, so site owners don’t have to store sensitive user data. Stripe processes the payment, checks for fraud, and takes a fee of 2.9% plus 30 cents. Business owners see the money in their bank account instantly, rather than having to wait days for clearance.
To customers, the payment experience is much the same, but faster and without the need to leave a current web page to visit a third-party page – as is the case with PayPal.
The Stripe Ecosystem
Perhaps one of the most unique aspects of Stripe is the ease with which web developers can build their own integrations that can merge with Stripe’s technology to fulfill other business requirements.
In many ways Stripe is like a giant lock into which web developers can insert their own custom-built “key”, unlocking a payment process that’s tailored to e-commerce. This has created a third-party integration ecosystem that spans nearly every aspect of running a business, from analytics to accounting, email, expenses, and shipping processes.
The best part? The massive Stripe ecosystem is accessible to anyone who uses the platform to run their online payment processing, and it truly allows developers and entrepreneurs to better serve their customers.
Big Players are Switching to Stripe
While Stripe was created with small business owners and startups in mind, recently some very big fish have joined forces with the payment processing platform, including Facebook, Lyft, Slack, Macy’s, and Target. With users in 110 countries and a recent foray into Asia, Stripe is now considered PayPal’s main competitor.
It’s no surprise then, that PayPal alumni saw Stripe’s potential early on. That’s why PayPal co-founders Elon Musk, Peter Thiel, and Max Levchin have all invested in the now $9 billion payment startup.
Article by Caitlin Cheadle, Visual Capitalist