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Stripe (Products (Payments (2011)
Made it easier for business to accept…
Stripe
Products
Payments (2011)
- Made it easier for business to accept payments. Previously, software developer has to spent weeks navigating the payment bureacracy - spend weeks setting up merchant account and payment gateway. Have to engage multiple providers. Now just have to write a few codes via Stripe.
Pricing:
- Credit & Debit card: 2.9% + $0.3 per transaction
- Automated clearing house and Bitcoin: 0.8% per transaction; all payments above $625 capped at a $5 fee
Painpoints Stripe is trying to solve
- Integrating payment functionality into website and mobile apps was a complex task for software developers.
- People could apply for merchant accounts, and it require heaps of paperwork and an elaborate approval process - e.g. many businesses were rejected because they didnt have a history of receipts (but how were they supposed to have a business history if they couldnt even have merchant account - so is not friendly towards the software-first type of company, but prefer offline businesses venturing online).
- Didn't allow for recurring payments, marketplaces, or capture data associated with their transactions.
- Traditional payment processor also does not provide online storefront for merchant - which allow user to see the products in the shopping cart, select, unselect etc
How Stripe speed things up
- Traditional payment facilitators help merchants open accounts at acquiring bank, but process is very long and slow. And small businesses likely get rejected.
- What Stripe and its direct competitors do is to - create one merchant account at an acquiring bank and then provide sub-merchant accounts to their customers. In this way, Stripe could do the underwriting for thousands of merchants, while the acquiring bank only underwrote Stripe.
Have to go about securing early customers
- Convincing large financial partners such as Wells Fargo or American Express to partner Stripe.
- Not only need to convince how Stripe's products could help them, but how it will not hurt them too.
Connect (2012)
- Facilitate more complex flow of pay-ins and pay-outs in an online marketplace.
- Ensure sellers were paid the right amount of money at the right time; and helped with tax reporting requirements.
- Enable marketplace can transact globally.
Pricing:
- Instant payout cost 1.5% of funds paid out, with a minimum of $0.5 per payout
- Shopify, a marketplace owner, came to Stripe and asked Stripe to customise a product for Shopify that does not require Shopify's merchants to create a Stripe account. Want to simplify their merchants' experience - whole process of setting up, receiving money etc, are all done through its marketplace platform.
- Stripe then decide Marketplace is one worthy business area to pursue. More marketplaces are also asking for such white-labelled payment solutions. S decided to build a whole new product called Connect, which support a variety of use cases for Marketplaces.
- Decided the average Shopify's merchant is not its core customers. Instead, Stripe's core customers should be the likes of Shopify, who are marketplaces, and could connect them instantly to thousands of merchants.
- As Stripe engage more customers, incorporated more ideas. Example, Lyft want their drivers to be paid on the same day, so Stripe have to develop this instant payout feature.
- But this also begs a strategic question. With so many customers asking for new product features, how should Stripe evaluate and prioritse? Should it continue to add on product features that would benefit existing customers, or should you create new products that enable Stripe to tap into a fresh set of customers
- This brings us to Stripe Relay.
Relay (2015)
- Enable selling and purchase to happen through mobile application. Example - present mobile user a buy button to complete purchases with a single tap (e.g. Twitter), rather than sending user to a mobile website, which cause poor purchase experience.
- There are opportunities beyond traditional e-commerce; given the rise in smartphone ownership, usage and social media usage on it.
- Envisioned a world where one can purchase goods and services through mobile apps
- Noticed - As of 2016, mobile devices account for approx 60% of internet browsing, but only 15% of internet purchases. Furthermore, of the time users spent on mobile phone, 88% is within apps and 12% on mobile web.
- Painpoint: Making a purchase require you to be linked out to a mobile web. On top of that, the experience is broken with endless form fields, validation etc.
- Stripe began to partner Facebook which allow users to buy products via one-click.
- Stripe created Relay, which allow retailers to sell their products in multiple third-party apps with a single integration. Developed a set of API for developers to build great in-application buying experience.
- Customer segments: For merchants who already have strong digital sales, Relay served as a mean to expand their online presence even more quickly and efficiently, to even more platforms (Facebook, Instagram, Twitter). For retailers who sold primarily through brick-and-mortar stores, Relay was a simple tool that let them venture to online sales.
- Within a year of launch, merchants had created millions of product listing using Relay.
- Next, decide to venture to beyond payments. Help merchants better understand their customers - know where they come from, what they looked at, what they purchase etc
Atlas (2016)
- Majority of world population does not have access to quality banking or payment infrastructure.
- Aim to level the playing field by giving anyone, the ability to start a global business - give entrepreneurs access the building blocks needed to start a company: an incorporated US business entity, a US bank account and tax ID account; a live stripe account to receive payments from anywhere in the world; tax and legal guidance; and tools & resources from AWS to scale their business
- With Atlas, all of these only take days instead of months, and cost a fraction of what it would have cost previously.
- Competitors like Paypal already offered a suite of services to online businesses, including loans, invoicing and in-store payment options.
Radar (2016)
- Unlike brick and mortar companies, online stores are financially liable for fraud, which cost billion of dollars.
- Most legacy fraud tools were rules-based - overly blunt setting that block many legitimate purchases.
- Launched a ML tool that learnt from transactions, and fully integrated into Stripe's account
Competitors
Payment landscape
- Competitors are Braintree and Adyen.
- However, they function primarily as gateway processors. Does not address some of the more complicated painpoints such as building an online business (Atlas), managing pay-ins and pay-outs in a marketplace.
Financial Incumbents
- Banks, Credit Card providers, Digital wallet providers
- Strategy is to work with them rather than displace them.
- In 2011, partnered Ant Financial, Alipay, so Merchants who use Stripe can accept payments from chinese consumers.
- Accepted investments from Visa (Card network owner) and American Express (Card network owner + issuer + acquirer), and then work with them. Stripe typically work with merchants or Marketplace. For example, work with Amex to build Amex Express Checkout, a feature that allow cardholders to pay for services across internet and mobile via a single password.
- Stripe need to make sure these financial incumbents like Stripe to remain their payment partner of choice. Have to consider what if one days these financial incumbents decide to build their own payment products too
- Also, if they spent too much time with large financial incumbents, it risk falling behind its direct competitors (Braintree and Adyen).
Value preposition
- Started out by making it simple for companies to send and receive money around the world
- Instead of navigating the convoluted financial system - setting up merchant account, ensuring data security, transacting across borders in multiple currencies and figuring out how to enable complex financial transactions like recurring payments or multi-sided marketplaces - companies could use Stripe to bypass all these payment hurdles.
- In turn, companies can focus on growing their businesses instead of managing payments.
- By 2016, expanded beyond payments. Created tools for social commerce and online marketplaces, as well as products to facilitate the quick creation of new businesses.
- Still have many opportunities ahead:
- Growth of e-commerce sales per year is about 20%.
- Within, sales through mobile applications, as a percentage of total e-commerce spending, is also increasing rapidly. This also means any user can increasingly access products and services around the globe in the palm of his or her hand.
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