Fully Integrated Payments Without The Hurdles

by Darren Mulvihill


Merchant Account = Headache –> Stripe = Merchant Account

Stripe payments, as many of you will know, is the company founded by Patrick and John Collison which specializes in simple, fully embedded payments systems that developers love. It’s being heralded as the gateway that will do for in-app payments and e-Commerce what one-click payments has done for the App Store and Amazon. The API is so simple to use that Stripe has been able to carve out a nice primary customer-base by getting startups and some mid-size clients to use their system (mainly because it embeds like a native payments system and is so easy to integrate). Integration has been known to take as little as 2 days.

One hard fact about the payment card industry is that the barriers to entry are high. However Stripe is implementing a strategy that allows them to infiltrate companies from within by helping the people who organise eCommerce solutions and manage projects forget about all the monotony of getting a merchant account, finding a good payment service provide and then tying it all together. Stripe is a quick solution that brings these elements together.

But isn’t that just like PayPal or Google Checkout?

Yes, but no. There are a number of indirect competitors to Stripe that have garnered interest in the press lately (think of Square getting investment from Starbucks). While PayPal does offer an all-in-one solution for taking payments, the service bounces the user to PayPal’s website to conclude transactions, something that severely decreases the conversion rate (which is about 45%). Stripe’s solution is a bunch of APIs for all popular coding languages that integrates the entire experience within your website or app, but without the implications of going to banks for merchant agreements, finding compatible gateway software (from PSPs) and integrating the whole thing.

Instead of the following flow with PayPal or Google:

Credit card Order Form > off site > PayPal/Google Checkout > back to site > Thank You

With Stripe you get:

CC Order Form > confirm order > thank you

This is what all of the fuss is with Stripe. It facilitates a beautiful user experience that integrates fully with a merchant’s branded site without the difficultly of certification and integration. Stripe do background tests on all of their prospective clients before releasing the API to them. The back-end systems have been designed to be PCI (Payment Card Industry) compliant to the highest level, which removes a further headache for merchants. So the system has all the added background benefits of PayPal, but with the beauty of a fully integrated payments system.

Stripe’s pricing is straightforward – “2.9% + 30cents per successful charge”. This is exactly the same as PayPal’s entry-level product, and so is ahead of the pack in terms of value.

As great as this is, Stripe has a number of competitors doing basically the same thing.  Braintree is a very popular US-based m-commerce platform that offers a similar solution to some very high-profile clients such as Uber, Living Social and AirBnB.

Many journalists have been forthright in citing the obvious distinctions between Stripe and Square (electronic payments startup headed by Jack Dorsey of Twitter), two remotely indirect competitors. Square allows small businesses to take card-present payments using the smartphone as a terminal. Even though both companies have different offerings and target markets, there has been a coincidental collision in market segments of late. Starbucks recently invested $25m in Square, which opens up a new opportunity for online transactions at both companies. Starbucks has been taking in-store payments through its mobile app for some time (M-Commerce). With the Square deal all of these payments will migrate to Square’s systems. But what’s interesting from the point of view of Stripe, is that some (and perhaps all, eventually) Starbucks.com purchases will be handled by Square too.

Starbucks Chairman & CEO Howard Schultz with Square Founder Jack Dorsey

Might Square decide that they’re excellent at building eCommerce engines and frictionless check-outs for online, and try to further commercialise what they build for Starbucks? Who knows…