Deconstructing Stripe’s Business Model

Financial services companies are expanding cross-border payments to support digital transfers, supercharge eCommerce, and eliminate risky and expensive intermediaries.

One such platform is Stripe. But what is Stripe’s business model, and how does it earn revenue?

What is Stripe?

Founded in 2010 by the duo, Patrick and John Collison; Stripe – a financial services company which enables businesses to accept payments virtually and physically in 46 countries.

Driven by Charlie Munger’s business philosophies, the company aims to facilitate finance-related transactions, operations, and adoptions for other businesses (large, medium, and small) and their consumers.

Stripe Customer Segmentation

Stripe primarily caters to two customer segments:

Businesses and merchants: The company helps businesses and merchants accept payments via multiple avenues, including bank transfer, digital wallets, credit and debit cards, Google Pay, and Apple It removes friction around finance-related operations so businesses and merchants can focus on scaling their businesses and taking advantage of lucrative opportunities. Crypto companies can also process fiat payments.
Developers: They can save time and money writing extensive lines of code and simply integrate Stripe’s APIs.

Stripe supported over $1 trillion in total payment volume (TPV) in 2023 and has 1,000,000 customers. But why do merchants, businesses, and developers use this payment platform? Let’s find out.

Stripe’s Value Propositions

Stripe’s unique value propositions for its customers and partners include the following:

1. Payment processing

Stripe’s biggest draw is its payment processing model. The company accepts payment for around 135 currencies and channels thus aiding the local businesses and merchants in their business. The frictionless process and option to accept payment in local currency aids conversion rates.

Plus, they don’t have to get tied up in tax calculations, as Tax (a Stripe integration) can automatically generate the numbers based on local laws. Similarly, Radar protects against fraud, and Terminal supports in-person payments.

2. Revenue reports

After assessing its customer’s pain points over the years, Stripe found that most businesses find it difficult to keep track of their revenue, especially if they have a subscription-based model. The financial services company solves this problem by allowing businesses to stay on top of their revenue reports through Sigma.

The SQL-based integration offers bespoke reports with actionable insights so businesses know where they stand. Additionally, Revenue Recognition promotes accrual accounting. On the other hand, for merchants and freelancers struggling to manage their invoices, Invoicing promotes invoice generation, payment collection, and tracking.

3. Multiparty payments and payouts

The platform allows eCommerce merchants and digital sellers to integrate payment across their marketplaces and platforms. This facilitates end-to-end payments and removes meddling intermediaries.

Instant Payouts are a good option for companies looking to pay their employees and contracted personnel instantly. They can even automate a few recurring payments. Know Your Customer (KYC) verifications become painless, too.

Moreover, Payment Elements lets businesses design their payment interface’s UI to match their brand color and design. BNPL (buy now, pay later) options, one-click payments, and intuitive address collection make the process simpler for end users.

4. Commercial card programs

With Stripe, firms can scale their financial offerings and dabble in banking-as-a-service. For instance, they can set up a commercial card program without incurring any fees. Connect, Treasury, and Capital are helpful in this regard.

5. Stripe App Marketplace

Businesses can connect their systems and workflows to Stripe’s partners, such as Salesforce B2C Commerce, Xero, PayPack, Adobe Commerce, Amazon Web Services, Accenture, WPP, Hubspot, SAP Digital Payments Add-On V2, PrestaShop, and more.

6. Company incorporation

Stripe is helping visionaries bring their ideas to life. Using Stripe’s API integrations or low- and no-code offerings, they can establish their startups and automate tedious operations.

7. Developer haven

Stripe isn’t just for businesses looking to solve their payments dilemma. Developers can use the customizable APIs and add them to their stack via the programming interface they like best, like REACT, .net, PHP, or iOS. Another perk is the ability to create apps for internal or external use.

Firms lacking the funds to hire a developer to take their business to the next level can capitalize on the low- or no-code solutions and get going. Stripe’s partner and professional services ecosystem is beneficial, too.

8. Cryptocurrency businesses

Breaking away from the norm, Stripe encourages crypto businesses to process fiat payments. Its API fan across varied segments, including crypto exchanges, wallets, and NFT marketplaces. KYC, fraud detection and prevention, and seamless payouts are a few other standout features.

Who are the Key Partners of Stripe?

Stripe’s partners have helped propel the company to success. Its key partners include:

Investors: Stripe’s investors are its backbone who help keep the company afloat and power its research and development segment.
Financial institutions: Stripe partners with multiple financial platforms, like Chargebee, to further its offerings. Financial Partners include card networks, Payout providers and payment method acquirers.
Customers and merchants: Several individuals, vendors, and enterprises use Stripe to seamlessly transfer funds.
Strategic partnerships: Stripe partners with several other businesses to grow and expand its business. An example is Stripe’s partnership with Salesforce.
Technology partners: These partners help the platform run without glitches and roll out new features or products.

What are Stripe’s Key Resources?

Stripe’s key resources include:

Stripe’s website and mobile app are its most significant resource.
Profitable partnerships and strategic investments across the globe.
Stripe’s ecosystem of over 7,000 employees globally.
Headquarters in Dublin, San Francisco, California, Seattle, London, and Singapore.
Intellectual property rights, like trademarks, domain names, patents, copyrights, trade dress, and trade secrets.
Excellent brand image in the financial services sector.

What are Stripe Channels?

Customers can access Stripe through its website. It also has dedicated apps to serve the iOS as well as Android users, which can be downloaded through the Google Play and the App Store.

Additionally, the fintech company is active on social channels like X (formerly Twitter) and leverages it to engage with its customers and partners.

How does Stripe Maintain Customer Relationships?

Stripe customers can sign in and visit the Support Center to get their queries answered. They can also contact 24/7 customer service for speedy grievance resolution. Developers may join its Discord channel to solve their issues with other developers. California residents can dial this number for instant redressal: +1 888 926 2289.

What is Stripe’s Cost Structure?

Stripe incurs transaction expenses, bears transaction, and credit losses, and incurs customer support and operations expenses. It also pays for sales and marketing, technology and development fees, and general and administrative expenses.

How Does Stripe Generate Revenue?

Stripe’s revenue was around $16 billion for the fiscal year ended December 31, 2023. The company was cash-positive and endeavors to maintain this stance in the future. But how does Stripe make money? Let’s find out.

Stripe’s revenue streams can be categorized into four sections:

1. Transaction fees

Stripe’s primary source of income is the fees it charges on each transaction processed through the platform. Its standard rates are 2.9% + 30 cents per successful transaction from domestic cards and wallets.

2. Currency conversion charges

Inter-currency payments are also one of the significant stream of Revenue for Stripe.

3. API integrations

Stripe’s custom API integrations, such as Elements, Atlas, Revenue Recognition, and Tax, account for a significant portion of the platform’s revenue.

4. Additional sources

Stripe also earns money from banking-as-a-service and fees on disputed or failed transactions.

The Bottom Line: Stripe is transforming the global economic landscape

Although Stripe is a financial services company at its core, its mission is to own a large part of global transactions and streamline the payment processes.

References & more information

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Deconstructing Stripe’s Business Model

What is Stripe?

Stripe Customer Segmentation