How Stripe is building its payments infrastructure business

July 24, 2019 09:34
Stripe began by serving startups for the most part, but now the firm also serves many of the world's largest technology companies, says Will Gaybrick. Photo: Stripe

Stripe, a payments infrastructure firm, has been a rising star in the increasingly competitive world of online payments. Founded in 2010, the San Francisco-headquartered startup has said that it aims to build the "economic infrastructure for the Internet".

The company powers businesses of every size, from new startups to public companies such as Amazon, Salesforce and Google, with its online payments and global operations software used in more than 120 countries around the world.

It enables businesses to receive payments in more than 130 currencies, supporting credit and debit cards, and alternative payment methods such as Alipay, WeChat Pay, mobile payment methods like Apple Pay and Android Pay, and others.

In January this year, Stripe raised US$100 million in a funding round that valued the company at US$22.5 billion. Heavyweight tech investor and PayPal co-founder Peter Thiel, Tesla founder Elon Musk, Tiger Global Management, DST Global and Sequoia Capital are among those who had invested in Stripe's previous financing exercises.

In an exclusive interview with EJ Insight, Stripe’s Chief Financial Officer and Chief Product Officer Will Gaybrick explained how Stripe supports various new business models like platforms and marketplaces in the payments arena and also helps with things like accounting and billing as well as optimizing the checkout experiences.

Edited excerpts from the conversation:

Q: In recent years, the global market has seen a burgeoning of players in the payments technology space, ranging from payment processors and payment gateways to e-wallets. What does Stripe do? What is your firm's role in the payment process? What, according to you, makes Stripe compelling to merchants/individuals in payments?

A: Stripe is an economic infrastructure for the Internet. What that means is, Stripe is like one layer below the payment methods, and allows technology businesses, software developers to accept payments through any payment instrument, whether that is credit cards or e-wallets.

Stripe is sort of a generalized infrastructure for moving money. You can accept money in, but then once you have accepted that money in, say, you are a ride-sharing company like Didi Chuxing or Lyft, then you need to pay that money out to all your drivers, and so Stripe has a way to programmatically take that money, and pay it out to millions of drivers.

We started by serving startups for the most part, and as startups grow very large, now we also serve many of these largest and most ambitious technology companies in the world.

Q: How does Stripe compete with rival payment gateways in the payments field?

A: No one is actually doing quite what Stripe is doing, it is just a lot more than a “payment gateway”, that word is incorrectly applied to Stripe… The foundation of what we build is what we call our global payments and treasury network, and this is the infrastructure for moving money in the Stripe network. It is virtualizing all the financial rails, whether those are credit card rails, or bank rails, making it incredibly easy for users to move money, in on those rails, or out on those rails.

We also think about a higher level of abstraction. We find that our users are not just trying to move money, in most cases, they are trying to build a marketplace, or a platform. Therefore, we have our product called Stripe Connect, which serves primarily platforms and marketplaces, including business models of on-demand businesses, crowdfunding, travel and events, to accept money and pay out to third parties.

We also have a product called Stripe Billing, which powers recurring payments and subscription business models with tools to reduce churn. Moreover, we have Stripe Radar, which helps detect and block fraud using machine learning trained by Stripe, and Stripe Issuing, an end-to-end platform enabling users to create employee expense cards, generate virtual cards, and others.

So, what we are building is a generalized financial infrastructure, it is a lot more than the traditional gateway. Our original positioning was payments for developers, and we really focus on technology companies and engineers, and there is like a whole lot more that we can do.

Compared with the traditional payment gateways, we do offer payments acceptance in a way that is quite similar to those payment gateways. But you cannot use us to replace the traditional payment processor. Very often, when it is a large company coming over to us, they are typically not turning off their entire payment stack and replacing with Stripe. It is typically because they are trying something new and hard, says going to a new geography, that is challenging for them, or a new business line, they will use Stripe to do that.

There is not really a single competitor that we see the most, and another part of the reason for that is that our users typically start on Stripe very early, they join when they are a startup or a growth stage company. And again, our focus is very much on developers and technology companies, so they are often either starting on Stripe, or switching over to Stripe very, very early. We do not really see one competitor or another.

Q: What do you think about the comparison drawn between Stripe and Adyen, the all-in-one payments platform?

A: We are very, very different in fact. Adyen is very much in the category of some traditional payments gateway; it looks like Worldpay, Chase Paymentech, companies like that is really what Adyen is. They want to be FirstData (US-based payment processing giant). Stripe does not want to be FirstData.

And another difference between the two is the difference in focus. If you are a technology company, a developer-like company, then it is overwhelmingly likely that Stripe is the right solution for you. Adyen's customer base is much more traditional e-commerce, it is a much more focused on a sort of traditional payments audience.

Look at the makeup of the two businesses, Stripe powers millions of businesses around the world, Adyen has thirty-five hundred customers, so it is a very, very different thing. If you are just solving that sort of core traditional e-commerce thing, Adyen, like a Worldpay, it can be a good solution for you. If you are doing something really complicated and hard, and you have complex money movements in and out of your business, it is very likely that we are a better solution.

Q: How would you describe Stripe’s partnership with payment processors and credit card companies?

A: For one, we have a principle at Stripe, which we call it “disruption through partnerships”. We are not actually disrupting our partners, we are not in any way trying to disrupt the card networks, or disrupt payment methods.

Instead, what we are disrupting is actually the sort of antiquated system, where all of these are very disconnected from each other, and we are unifying the structural layer, so that it should be incredibly simple for you to work with all of these at once. We are not trying to disrupt banks, what we are trying to do is take all the things that banks do so well, like guarding and storing money, and make it much easier for our users to leverage those capabilities of banks.

This is the first of a two-part interview with Stripe's CFO and chief product officer. 

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See also: Facebook's Libra plan holds promise: Stripe's Gaybrick


EJ Insight writer