Partnerships Pave The Way As Stripe Hits USD5bn Valuation
Stripe is a fast-moving payments disruptor that is attracting increasing interest from traditional financial powerhouses. Each new strategic partnership it inks is designed to open up new markets, currencies and customers for the young company, without making enemies along the way that could block its path to global expansion. Its latest partnership sees the Ireland-founded and San Francisco-headquartered startup join forces with one of the three major global credit card companies, Visa, alongside a new investment that means Stripe is now worth USD5bn.
Investors in the round, which is undisclosed, but under USD100m according to the company, include American Express and Sequoia Capital. Valued at USD3.5bn in a round at the end of last year, the new jump in its price tag is just the latest indication of investor confidence in the firm’s technology and its ambitions to transform the way money moves around the internet.
Stripe’s technology for letting businesses accept payments online put it on the map, but its approach to partnerships with existing payments providers is more interesting as it looks to grow. Visa’s size, experience and leverage is an important ally to have in this space. The company claimsto handle 56,000 payments globally per second, handling USD4.8 trillion in payments across a total of 101 trillion (payments and cash) transactions in the four months to March 31 this year.
Stripe says the partnership will enable it to expand its technology to businesses in more countries (it’s currently available in 25) through Visa’s giant global credit card market – including emerging markets that are tipped for rapid online spending growth in the coming decade. For Visa, the deal will enable it to grow its network even more and improve payment experiences. The firms will jointly develop technology to improve security, reliability and merchant experience when accepting Visa.
Just five years old, this is just the latest impressive partnership the firm has secured. Last year it was named as one of just a handful of partners at the launch of Apple Pay and it has secured a partnership with China’s Alipay network that opened up its platform to a potential 1.3bn new customers. It supports bitcoin and it’s secured deals with Facebook, Twitter and Pinterest to power the new ‘buy buttons’ on its site. Meanwhile, it also has a partnership with American Express (which also invests in Stripe) to build an Amex checkout, and let 20m Amex customers pay online without having to enter credit card details.
So what’s the attraction? It’s not the biggest player in the space: Stripe doesn’t disclose turnover, but says that it handles “billions of dollars” a year for thousands of businesses that range from startups to Fortune 500s. That sounds like it’s going to be less than PayPal, which handled nearlyUSD66bn in payments in Q2 this year alone. Its Braintree subsidiary operates a similar service to Stripe, also has a deal with Apple Pay and supports bitcoin with impressive customers including Uber, Airbnb and Github. Apart from having a strong product, its approach to working with – not against – established players is likely playing a crucial role. According to the New York Times, Visa is “concerned” about PayPal’s ambitions to pull more payments directly through its site and ultimately reduce the power of credit card companies. Stripe, instead of competing with existing infrastructure and trying to become yet another consumer-facing payments brand, wants to work with these companies to make payments move more easily around the web.
Commenting on PayPal and Stripe’s approach to branding in an interview last year, then-UK head Andy Young said: “We’re really focused on helping build the best possible experience for merchants and for merchants to connect with customers. The Stripe brand is something we want to get out there to people who want to sell online, but when you pay with Stripe we want to stay right out of the way.
“PayPal was a fantastic company around 2001, they really propelled internet commerce forward, but since then the work they’ve done in online has slowed down lot. They’re very much focused on the consumer brand and you see that from their ads around London. That’s a world away from what we’re doing with Stripe. They’re focused a lot on physical commerce, that in itself is a very exciting space, but we’re laser focused on selling globally, selling online through websites and apps.”
Is it worth USD5bn? Without knowing the details of the investment, it’s impossible to know. However, part of Stripe’s big new valuation is likely hitched to the chord it’s striking with a new generation of online marketplaces that are gaining rapid traction with consumers and changing the way consumers spend money online. Transactions on digital marketplaces today are very different to the way what was commonplace even a couple of years ago, with the simplicity of paying in a couple of taps at the heart of the booming on-demand app economy. Positioning itself as the‘Amazon Web Services’ of online commerce, the firm wants to help online services deliver the simplest payments possible to the customer, to help drive the overall spend online. While the firm has plenty of competition trying to do exactly the same thing, it’s building a powerful set of allies to help fulfil its ambitions and bring cohesion to today’s very fragmented payments market.
Speaking earlier this summer, Stripe’s new UK head James Allgrove said: “We’ve focused on building a platform that enables commerce, rather than replicating other people’s approach to payments or building a consumer brand out of it as others have. Our approach emphasises the customer experience and enables users to create whatever customer experience they want for their users.
“We trust them to know their customers best, know what their needs are and know what they want to do with their own businesses. That’s been a really good differentiator for us because it gives them a lot more flexibility, control and scope to experiment with their own business models.”