Stripe: Platform of Platforms | Hacker News Reader

Stripe: Platform of Platforms

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153 pointsrazin39 comments

Stripe Treasury thread here: https://news.ycombinator.com/item?id=25289626

This looks like a good article but we probably shouldn't have two on the front page at the same time.

Wow - I wonder if this is how Bezos felt when he said (paraphrasing) he feared the internet was taking off without him?

Stripe Capital is their iPhone moment -- they've learned much from the software payments market, setting up an 'import Financial Foundation,' and now can use their novel data stream to effectively transform business cash flow financing.

Capital will be a a beautiful take on an old way of financing (factoring accounts receivable), at the scale of big tech, and in immediate payback terms -- since CC's settle comparatively (to 1-3 day ach) 'instantly' in the US.

This combined with the data on sales will allow them to pick better winners and allocate capital -- the impacts of this will be mind boggling. I wish I could buy stock.

(Disclaimer: I work at Stripe, but commenting purely in my personal capacity.)

> I wish I could buy stock.

Something I wish I'd internalized much earlier in my life: if you're a programmer or otherwise have skills relevant to a startup (many HN participants fit this bill!) then you do have access to stock in companies like Stripe. In exchange for your time and expertise, they will pay you in both stock and cash.

My contact information is in my profile and I would love to help anyone I can in this endeavor.

> you do have access to stock in companies like Stripe. In exchange for your time and expertise, they will pay you in both stock and cash.

That's not really a fair comparison. There are two huge differences between that and "buying stock".

1. You don't have to jump through arbitrary interview hoops in order to buy stock. I personally had a horrible initial interview experience with Stripe (I 100% don't believe Stripe's process is bad, but my experience was poor). This shouldn't prevent me from buying stock

2. This method of acquiring stock leaves you putting all of your eggs in one basket. You can only work for and get stock from a single company at a time, and you have to dedicate at least a full year to that one option.

Is it really a novel data stream?

I believe you can already purchase billions of anonymized credit card transactions... https://datarade.ai/data-products/us-consumer-card-payments

Yes, and I know of startups using data like this to find financial influencers that if customer A makes a purchase / visits a store, customer B, C, and D will show up in 3 months. Same goes for Square -- but for some reason, the emphasis on these integrations seems to be lacking... I've interacted with both and Stripe seems to 'get' this integration value.

For them, the hardest part was getting the data, then maintaining the relationship to keep access. Stripe has a 0 cost data stream (which is a slightly different definition I guess for novel data stream) - it's novel in that it's kind of like the Rockefeller 'what's this stuff we dump into the river? oh gasoline?' type of novelty.

Also, the metadata that sits on top of all of this - which products are selling, what's the product life cycle of company A in similarity to company B, makes this so much more potent than just the CC data itself. Stripe understands your business better than you do.

Second Market tried to make this possible years ago. Now you have options like Forge (formerly Equidate) and Carta recently announced a product called CartaX which will be a market for shares of non-IPO companies.

> Stripe is enabling standardized access to global banking capabilities via APIs...

The API is Stripe's core competency, and they've been excelling at it for a long time.

I think one thing that Stripe does very well is allow developers to focus on developing. Setting up a business relationship with financial institutions is cumbersome and the legal details can be daunting.

While their engineering reputation is high quality, I'm curious to know how much of Stripe's headcount is in lawyering and policy work.

I think there’s going to be some reckoning in the payments industry in general, though, in the next 5-10 years.

Covid has forced more businesses to go cashless and pay the 3% payment transaction toll, which is a hidden tax we all pay.

Could easily see post-recovery legislation scrutinizing payment players who’ve all seen their stock skyrocket this year, similar to what happened after the GFC with the Durbin Amendment (however flawed that legislation is).

DOJ blocking Visa’s acquisition of Plaid feels like a hint of things to come.

However impressive Stripe has become the core issue for me is that it’s made it really easy to work with a legacy entrenched card processing system, and it’s incentivized to maintain that system rather than replace it with something better.

For countries which have good customer protection (), use of credit cards online can be reduced to just a transfer between 2 bank accounts.
That should be a lot cheaper than current fees, especially for large amounts, as you cut out a lot of expensive middlemen. It will be interesting to see if Stripe or Apple does this first.
It seems like 2 opposing fights are going on:
1) Mastercard and VISA tries to be the only methods of payments by trying to get rid of all national payment cards.
2) EU seems to want to reduce payment fees, but doesn't want customers to know the fee. I don't think they are ready to want the fees to be much lower.
Nice fees also allow for nice lobbying.

() e.g. in Denmark business's are not allowed to draw money from card before the goods are shipped

Good customer (or rather consumer) protection does not necessarily make getting money back straightforward. It just means that if you sue in court you should get a slam dunk ruling against the seller.

A card chargeback may be easier than going down that route, and you know you're going to get paid if they find in your favour, which is not guaranteed if a court finds in your favour...

the Fed Reserve has been working on FedNow real time payments for a few years now.

That could be a great achievement for replacing ACH and debit.

Roughly 1.8% of a credit transaction fee goes to the bank that issued the card. About 15-30 bps go to the card networks, much higher for cross-border. Acquirer and PSP fees are minimal in comparison. Legislation would be more effective in lowering overall merchant cost by targeting banks and networks.

It’s probably less now though because we’ve seen a macro shift to debit from credit this year, which are cheaper to process and have much lower interchange fees, so processors that charge a fixed fee are keeping more of every transaction.

>About 15-30 bps go to the card networks

Sorry, I'm not familiar with 'bps' in this context. Techie me read that with no pause as 15-30 bits per second, and then had to slow down as that did not make sense within context.

BPS = basis points

A basis point is a hundredth of one percent:

0.0001

Any idea how much of that 1.8% that issuing banks charge goes back to cardholders in the form of rewards and cash back?

a good portion of it

Good points. I had to do some research on the Durbin Amendment [1]. It seems to be a legal cap on debit card swipe fees, which saved money for merchants.

I could see a scenario where Stripe is currently capturing market share with a 2.9% + $0.30 fee, and then starts increasing this fee once it has a monopoly.

However, Stripe Payments isn't a loss leader that's focused on growth. I would hypothesize that Stripe Payments is profitable [2] and that the 2.9% + $0.30 fee isn't a huge sacrifice. If this is true, I don't see the incentive for a monopolistic Stripe to raise the fee.

[1]: https://en.wikipedia.org/wiki/Durbin_amendment [2]: https://www.nasdaq.com/articles/stripe%3A-the-internets-most...

For me, as a business owner, I am inundated with letters from companies offering capital. I understand that this is a platform play and could well succeed but for me feels like a very crowded market. Maybe worth it as a convenience thing?

I can imagine most Fintechs are working on similar at the moment. Curve, Monzo, Revolut, Starling are all going too need lending to profit in the future.

Maybe the success of this will be driven by the economic engine. Lets hope it doesn't stall.

Edit: > I can imagine most Fintechs are working on similar at the moment. Curve, Monzo, Revolut, Starling are all going too need lending to profit in the future.

^ None of them are vertically integrated with customer status quo payment methods. This 'moment of transaction' access to payback across all payment types is astounding. It's easy to do - but don't significantly underestimate the financial value of compounding interest in these quick of terms. This is almost like high frequency trading on small businesses.

The loss ratio and their interest rates will be much more competitive than these outlets -- much less their cost of doing due diligence since a significant portion of your sales go through them.

Also, they clearly get to define the maturity date with the % of transaction payback.

This is one of those -- just try it both ways and see which one you like more.

(Also, not trying to be a shill... honestly feeling like I'm missing out on this huge opportunity... kinda sucks)

I was happy to see that they added payouts as this is something I queried before.

However, it seems linked to Connect, which makes it very expensive at £2 per month per active account.

I realise that there are plenty of regulations that they take care of, but really what I want is an API to send money to an account or card and that's it.

Stripe is ideally placed for being an economic platform. They understand developers better than most of their peers. They know how to write and document APIs. They have traction - arguably the most important part of being a platform.

Of course current customers of Stripe like Shopify are already big enough that they could take a stab at empire building themselves. But probably they have no material incentive now as their core business is growing so fast and I am sure Stripe has given them great terms.

I’ve moved on to Square this year. They’ve been moving quite fast to shore up their online payment platform.

Square and Stripe seem to serve two completely different markets. I always saw Square as having a physical point of sale focus. All the websites I use go through Stripe, but all the small businesses/individuals go through Square.

Stripe, like PayPal, is becoming too fundamental as a layer of our financial infrastructure. One issue I have with them is that they take an aggressive approach to censorship and deplatforming, encoding their political biases into their offerings instead of taking a hands-off pro-free-speech approach. There are many examples of them banning users or organizations who are not aligned with their progressive world view. Stripe is basically PayPal 2.0, and their censorship actions remind me of PayPal and the credit card processors blocking donations to WikiLeaks.

You have examples of this? Are you saying they lean left or right? You have the axe to grind, so I feel like the burden of proof is on you. Your down votes makes me feel like I'm not the only one thinking this way, but without evidence to back up your claims... Your throwaway account is also very chickenshit-esque.

There are many examples of Stripe leaning left, in terms of who they are deplatforming. They tend to take action whenever facing activist pressure from random people/organizations on Twitter like the "Sleeping Giants" group. From a quick Google search, here is an example I turned up, where Stripe discussed deplatforming Gab with activists directly - those activists then demanded Stripe change their TOS, and threatened to leak all their emails discussing Gab with them: https://www.breitbart.com/tech/2018/10/29/left-wing-deplatfo.... The same article notes a couple other examples of people banned from Stripe towards the end.

I should also note, that I don't actually use Gab and don't follow these particular conservatives that Stripe kicked off their platform. However, I think free speech is a fundamentally important principle to uphold, particularly at the base layers of society. Payment processing is in reality a function that should just be a public utility (and therefore subject to constitutional free speech protection). When a cabal of banks and other payment systems (PayPal, Stripe) can be targeted/pressured to deplatform someone, and even act in coordination (as Visa/MasterCard have many times), the victims of their action effectively lose their right to free speech for all practical purposes.

This opaque, arbitrary process of judging who is allowed and not allowed on their platform also raises questions as to whether Stripe can be trusted as a stable foundation to build a business on. For example, if I am a business owner and I make donations to Republican candidates, will I now have to think about whether Stripe will suddenly block me? And with Stripe moving from service customers to enabling customers of their customers, does their political judgment also extend to indirect customers? I don't want to lend more platform power to PayPal 2.0 - Stripe needs to get away from political activism and come out in support of being hands-off except for what the law minimally requires.

> Your throwaway account is also very chickenshit-esque

Regarding my account...I am not sure why that is relevant. The name has 'throwaway' in it but this is my only account.

Did you seriously just use a Breitbart link for proof? I think that's all the proof that I needed. Not for the actual question at hand, but it definitely answered a lot more.

Yes I did use a Breitbart link, because they happened to have good coverage of that story and showed up at the top of search results. Other sources, such as more 'mainstream' ones I follow (NYT, WaPo, WSJ, etc.) did not cover this story seemingly, which may be either a simple omission or a product of their own bias. The fact that the link is from Breitbart shouldn't be a reason for you to disregard my argument. Evaluate the content in there describing the particular incident - it's easy to corroborate.

Banks tend to be just as picky. Seeing as Stripe needs continuing love from banks, they are probably contractually obligated to be equally picky.

This is a banking and regulation issue probably and not a Stripe or Paypal specific issue.

Can stripe 1st work on reducing their fees?

They're just like the incumbents. Only surrounded by more silicon valley sycophants.

Taking 2.6%+ of every merchant transaction is nuts.

Small businesses pay >2.9%+0.30¢ all the time.

Yeah, it's sad to see.

There's now no economic reason for these fees to remain so high. I worked at a payment processor.

Exactly! Credit Card fees are supposedly set according to risk. However, the way the networks are setup is a legacy from last century.

The way I always think of it is like this: You would NEVER accept to pay to send an email per number of the words in that email, at the end of the day it is just transferring bytes. However the payments industry has been working like that for too long, why does the cost of sending some "money transfer" bytes be a function of the number you are sending? (like, sending $9156 is more expensive to transfer than $100000 bc of compression)

That's why I joined Paystand [1] to do "Payment as a Service". Similarly how you pay a fixed monthly a month to receive emails, you should be able to pay a fixed amount to receive payments (using the Paystand network). Nevertheless, we have to support legacy networks such as Mastercard, VISA or Amex which still charge customers per transaction.

[1] https://venturebeat.com/2020/02/06/paystand-raises-20-millio...

Aren't the fees about covering the transacted amount rather than simply enabling the transaction?

What are you comparing this to that makes you think it is nuts?

Square's is 2.6% + $0.10

Paypal's is 2.7%

Fees directly from the merchant card issuers (Visa, Mastercard, etc) are sometimes lower (ranging from 1.4% - 2.6%, and even 3.5% for AmEx) but Stripe is a service that is on top of those fees , and any merchant will add on top of those fees as well.

> Fees directly from the merchant card issuers (Visa, Mastercard, etc) are sometimes lower (ranging from 1.4% - 2.6%, and even 3.5% for AmEx) but Stripe is a service that is on top of those fees , and any merchant will add on top of those fees as well.

The way it works for "the networks" (Visa, Mastercard, Amex) is that they have several "interchange rates" ( https://www.helcim.com/us/pricing/visa-interchange-rates/ ) which vary depending on the risk of the card [transaction].

"Flat fee" card payment providers win by setting an average flat-fee that they believe will be higher than the mixed (average) interchange range of the payers. Also, lower card rates can be obtained capturing what is called "level 2" or "level 3" data ( https://www08.wellsfargomedia.com/assets/pdf/small-business/... ).

I think you are being downvoted for the tone, but I agree the problem stripe's customers face is 99% the large fees for credit card processing. Anything they can do here would be good.

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