Stripe is a payment processing platform making money based on the transactions processed. Stripe charges 2.9% per successful card plus 30 cents. As a SaaS business, Stripe offers Billing (Starter and Scale), enabling customers to schedule clients’ invoicing or charging to analyze the subscription revenues. Other services also comprise Connect, Radar, Terminal, and Atlas.
The company was founded in 2010 by Irish brothers Patrick and John Collison. Both were college drop-outs who received a seed investment from the start-up accelerator program Y Combinator.
In fact, the idea for Stripe was so compelling that it managed to attract $2 million in capital from one of its main competitors in PayPal.
Fundamentally, Stripe exists to remove the difficulty associated with processing online payments. This reality was highlighted for the Collison brothers when they launched their first company Auctomatic back in 2007. They noted that large companies had the capital to build their own payment systems, but smaller start-ups had to engage in lengthy and frustrating conversations with banks.
Collison would later note that “Stripe really did come about because we were really appalled by how hard it was to charge for things online”. The company is now worth about $95 billion, making it the most valuable privately-owned company in Silicon Valley.
Stripe revenue generation model
Stripe make money on every successful payment it processes.
It does this through multiple products and associated price packages.
The Stripe Integrated service is the most simple pay-as-you-go payment platform for businesses. To use it, the company charges 2.9% per successful card charge plus 30 cents. International cards requiring a currency conversion will attract a further 2% in fees.
Here, there are two plans:
- Starter – charging 0.5% for recurring charges, or invoices sent every billing cycle. Stripe also charges $7 per invoice for invoice auto-reconciliation.
- Scale – which charges 0.8% on recurring charges but offers free invoice auto-reconciliation and includes a connection to the NetSuite ERP finance system.
The Connect application allows sellers to partner with Stripe and add payments to their platform.
There are three Connect options, with each offering a different level of functionality:
- Standard – recommended for platforms to directly accept payments with account losses backed by Stripe. Free of charge.
- Express – suited for marketplaces who need to pay out sellers and service providers. In this case, Stripe charges 0.25% plus 25 cents for every payout sent.
- Custom – for those who want a flexible API to build a custom user interface. The same transaction charge of 0.25% plus 25 cents applies. There is also a $2 monthly fee per active account.
Radar is an application based on machine learning enabling customers to identify fraudulent transactions. Stripe charge 5 cents per transaction.
Stripe also sells two physical payment terminals with card readers. The cheaper of the two is $59 while the other is $299. Both attract transaction fees of 2.7% plus 5 cents.
Stripe customers can also use the platform to form a legal entity. The Atlas application helps users submit the required paperwork and informs of them important ongoing costs once the business has been incorporated.
For this service, the company charges a one-time fee of $500.
- Stripe is a financial services and SaaS company with headquarters in both North America and Ireland. The idea for the platform arose from the difficulty start-ups faced when creating a system to accept customer payments.
- Stripe drives revenue in multiple ways. Firstly, the company makes 2.9% plus 30 cents from every single transaction it processes. The company also makes money from its Billing and Connect products. These products help businesses schedule invoices, evaluate subscription revenue, and accept Stripe payments on their own platform.
- Stripe also offers several ancillary services. The company sells two physical payment terminals for use in bricks-and-mortar stores. It also provides an incorporation service, helping start-up founders navigate their first few months in operation.
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