Known as the “PayPal for the mobile era”, operating in 130 countries, with customers like Google, Amazon, Microsoft, and National Geographic, the Stripe Business Model and history calls the attention of business scholars. Stripe Business Model offers a fast, simple, and secure online payment solution for businesses. It can be incorporated into any website or mobile application, in order to avoid fraud and facilitate online purchases with credit or debit cards. Besides, as customers’ information is only accessible to Stripe, the fintech takes the whole responsibility for the payments. If you want to understand more about Stripe’s business model, keep following up.
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Stripe is a young company, founded in 2010 by two also young prodigies: the Irish brothers Patrick and John Collison. Patrick, at only 16, was awarded the Young Scientist of the Year (for his work on Lisp programming language). He also had to leave high school earlier, in order to attend his Computer Science classes at MIT. On his side, John has the record of the highest score in the Irish Leaving Certificate (the last examination to qualify for university) and entered Harvard University for Computer Science too, another Ivy League institution.
At the beginning of his freshman year (2007), Patrick and John founded Auctomatic, an auction management system for marketplaces like Amazon and eBay. Auctomatic joined the winter batch of Y Combinator, a seed money startup accelerator. Some months later, the company would be acquired by Live Current Media for $5 mi — and Patrick became its Head of Product Engineering — at 19 years old. At that time, John was entering Harvard. The next year, John dropped out of Harvard and the two brothers started Stripe. Stripe’s first funding could not come from any other place than Y Combinator — actually by its founder, Paul Graham, who previously knew Patrick.
A little long later, the brothers met Peter Thiel and Elon Musk, founders of PayPal. The result was an investment of $2 million and great insights and orientation, according to Patrick. Stripe was finally launched in September 2011 and, five months later, raised another round of funding — $18 mi from Sequoia Capital, with participation from Affirm and PayPal.
In the following years, Stripe would expand its operation and product line, and its first clients included names like Lyft and Wish. In 2020, the coronavirus pandemic forced traditional companies to adapt to online sales, boosting Stripe’s path, which increased its valuation from $20 bi in 2019 to $95 bi the next year. Currently, Stripe works with more than one million businesses all over the world and employs over 4,000 people.
Stripe is still owned by its founders, the brothers Patrick and John Collison, with Patrick holding the position of the company’s CEO and John as the President.
Stripe’s mission statement is “Our mission is to increase the GDP of the internet”.
As a payment processing fintech, Stripe makes money by taking a percentage and a fixed fee (depending on the package selected) on every payment it processes. This multisided business model depends on two related clients:
Nowadays, the Stripe revenue model is based on 7 sources:
This is the greatest share of Stripe’s revenue, handling payment transactions through the internet. This involves five payment processing products:
It is a service for customers to set up and incorporate a startup business within minutes. Stripe incorporates the business in Delaware, integrates the business with their payment infrastructures, and gives credits and discounts from businesses like Amazon Web Services (AWS), plus legal and accounting firms. A one-time setup fee of $500 has to be paid. Also, the ongoing costs encompass a Delaware registered agent ($100 per year), corporate tax prep (starts at $250 per year), Delaware tax filing (starts at $225), and a business bank account.
It is a machine learning application that helps businesses detect and identify fraudulent transactions, used by clients, such as Kickstarter and OpenTable. Its algorithms mark suspicious payments and stop processing the transaction. Stripe charges $0.05 per screened transaction.
It is Stripe’s warehousing tool used for businesses to analyze their operations and finances to help teams get insights into the ventures. It charges a monthly fixed fee according to the infrastructure needed, plus a variable fee per credit card charge, which starts at $0.02 per charge.
It is a corporate service to create cards for businesses and their employees. Stripe charges $0.10 per virtual card and $3 per physical one. The first $500K in card transactions are free, after that, the cost is 0.2% plus $0.20 for each transaction. Again, for international payments, 1% plus $0.30 and additional 1% for currency conversion.
It is an invite-only service that allows businesses to embed financial services in their marketplaces or platforms, for their customers to hold funds, pay bills, earn interest, and manage cash flow. The fee is customized.
Stripe customers all have access to standard free support. However, Premium Support, with 24/7 operational and technical support across the globe has a cost of over $1,800 per month, depending on the company’s size.
Let’s take a look at the Stripe Business Model Canvas below:
Stripe’s customer segments consist of:
Stripe’s value propositions consist of:
Stripe’s channels consist of:
Stripe’s customer relationships consist of:
It is an automated self-service, with limited interactions with employees. There is a Help section and customer support through e-mail.
Stripe’s revenue streams consist of:
Commissions and fixed fees, monthly or per transaction.
Stripe’s main resources are its proprietary software platform and its strong brand.
Stripe’s key activities consist of:
Stripe’s key partners consist of:
Companies that enable customers to manage payments using Stripe’s service, such as banks, accounting, and analytics firms, CRM, eCommerce, electronic signature systems, fundraising & marketplaces, certificating firms, shipping companies, as well as integrators, and developers.
Below, there is a detailed swot analysis of Stripe:
Also, check Cred Business Model, an Indian startup fintech.
To sum up, although Stripe has conquered a great market share, it still has plenty of prospects to go even bigger, such as the mentioned initial public offering (IPO) — which may not happen anytime in the near future though, according to the founders —, and other possibilities in the financial market itself.
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