Stripe

Product Model






Stripe is a payment processor that operates a product business model. The company sells a payment system that can be incorporated into websites and mobile applications enabling businesses to offer a fast, simple, secure online purchasing. Stripe’s payment solution provides the technical, fraud prevention and banking infrastructure to facilitate online payments and it is often used as an alternative to a merchant account.

Merchants embed Stripes payment solution into their website or app allowing customers to make purchases using their credit or debit cards. The customers’ payment information payment does not pass through the merchant’s server and is only accessible to Stripe. This removes the risk of fraud for merchants as Stripe takes responsibility for all payments. Stripe stores customer credit/debit card data on its own servers and utilises tokenization to enable merchants to bill accounts while never having to access the information.

The payment software is incorporated into online and mobile sites and can also be accessed via an online dashboard allowing businesses to enter customer’s credit or debit card information manually, allowing for telephone and mail orders.

The company charges a flat rate of 2.9% + 30 cents for each transaction – large volume customers can negotiate a discount on this price but these details are not revealed and are on a case-by-case basis. These rates are the same as rival PayPal and comparable to Klarna. Unlike PayPal, Stripe is only available to business users and does not charge a monthly fee.

HISTORY

Brothers Patrick and John Collison founded Stripe in 2010 to provide a simpler solution for taking payments on the web. The company was originally named “/dev/payments” but the company became Stripe due to a range of difficulties associated with the original name, including how to pronounce it. The business has secured funding from various high profile private equity investors including Elon Musk and Peter Thiel. In total the company has raised $290million and is valued at $5billion.

CUSTOMERS – WHO THEY ARE:

Customers range from SMEs to multi billion dollar companies; all require fast, simple, secure payments.

Stripe accounts support businesses that receive payments; Stripe does not provide consumer accounts, namely accounts that allow consumers to manage their payments.

ENGAGEMENT – VALUE CREATION PROPOSITION:

Stripe generates value for customers by:

  • Providing a payment service that is easy to incorporate in web sites and mobile apps
  • Reducing the risk of fraud as Stripe takes responsibility for payments
  • Removing the need for a merchant receiving payments account in a bank
  • Increasing conversion rates with simple and well-known check-out service

DELIVERY – THE VALUE CHAIN:

Merchants access the service by creating an account on Stripe’s website. Once the account is created companies can take payments immediately via the online dashbord. The payment platform can be incorporated into mobile applications or websites by adding Stripe’s code into the page or application.

MONETIZATION – VALUE CAPTURE:

Stripe charges 2.9% + 30 cents for each transaction, these fees are comparable to competitors PayPal and Klarna. However, these fees are for SMEs and the fees charged to larger businesses are negotiated on a case-by-case basis and these details are not released. Stripe does not publish details of its revenue but industry sources state that it processed $20billion worth of payments in 2015 with revenue approximated at $450million.

Sources:

http://www.forbes.com/sites/miguelhelft/2016/01/04...
https://www.startupgrind.com/blog/the-collison-bro...
https://memberful.com/blog/stripe-vs-paypal/
http://uk.businessinsider.com/fintech-unicorns-ran...

Disclaimer:

Written by Thomas Murray under the direction of Prof Charles Baden-Fuller, Cass Business School. This case is designed to illustrate a business model category. It leverages public sources and is written to further management understanding, and it is not meant to suggest individuals made either correct or incorrect decisions. The information contained here should not be used for investment advice and is simply indicates the individual’s understanding of the company’s business models as of October 2016. © 2016


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