How Does Stripe Make Money? Business Model of Stripe


How Does Stripe Make Money

Stripe is a fintech company that offers payment technologies to help businesses handle things like subscriptions, marketplace payments, in-person transactions, and e-commerce purchases. Transaction fees are a big part of Stripe’s revenue. But they have more sources of revenue than you would expect!

Stripe makes money through a wide variety of payment, financial, and business services. These include billings and subscriptions, terminals for in-person payments, online payments, corporate credit cards, corporate financing, banking-as-a-service, and business services like fraud detection and risk management technology.

Founded in 2010 by Patrick Collison and John Collison, the brothers built a highly successful fintech payment and business services provider. This is a significant accomplishment given Stripe is in a competitive category. Not only does the company have to fend off traditional financial services providers like credit card companies and banks, but they also have a number of fintech competitors such as Square, Zelle, and PayPal.

What is Stripe & How Does It Work?

Stripe, which is headquartered in San Francisco, calls itself the ‘most complete payments platform’ and the ‘payments infrastructure for the internet.’ Millions of businesses use Stripe either through its own platforms or through an API that can be coded into third-party apps. This allows companies to easily accept payments, send out money, or manage their revenue and payments online.

Some notable companies that use Stripe include Instacart, Slack, Google, Shopify, Zoom, Amazon, and Lyft. What many companies appreciate about Stripe is that they offer a number of different kinds of payment or financial services all from the same trusted provider.

For example, they don’t just do online payments but also in-person payments. They don’t just allow companies to process subscriptions but also can issue their employees virtual or physical credit cards. Need financing? Stripe also offers loans to companies needing to finance an acquisition or to boost their cash flow.

Stripe has also expanded into other areas outside of typical payments and financial services such as fraud detection software. They use their large data set to train machine learning applications on the data from millions of businesses in order to detect fraud more accurately and reduce the loss businesses experience from fraud.[1]

Stripe’s global reach also allows companies to easily expand into new markets without having to find another payment provider. Stripe can accept more than 135 currencies and dozens of payment methods.[2]

When it comes to in-person payments, Stripe offers a point-of-sale solution to unify your online and physical payments. That allows you to see and manage all your sales and payments in one place. It also simplifies things like cross-channel actions. For example, with Stripe you can reserve something online and pay for it in store. Their point-of-sale solution allows developers and companies to create their own customized Stripe Terminal in order to develop a richer checkout experience with customized receipts and splash screens. [3]

Furthermore, Stripe can automatically optimize for conversion by doing things like adapting to your customer’s device and location. It also allows you to design your own payments form on your website for a more integrated brand experience.[4]

Ultimately, the reason Stripe has been so successful is that it allows companies to implement an integrated payment system, and get multiple kinds of services from the same provider.

 

Business Model of Stripe

While Stripe has a number of revenue streams that you would expect from a payments provider, they also have a few that you wouldn’t expect. Perhaps the most interesting thing about Stripe’s business model is how many different products they offer to their customers.

That makes Stripe an all-in-one payments solution for small, medium, and even very large businesses. Their business model is to provide comprehensive services for businesses in order to take over a large proportion of their financial services business.

While not all companies will take advantage of all Stripe’s services, the depth of the company’s product portfolio creates a lot of rich opportunities for cross-selling to existing customers and increasing customer lifetime value. This means that Stripe likely has the capability of bringing in significantly more revenue per customer than an alternative payments provider with fewer products.

Stripe makes money on its services and products in a few different ways:

  • Transaction fees for processing payments
  • Transaction fees for providing services
  • Fee for service

Transaction fees for processing payments: Stripe charges businesses a percentage of every transaction and a per transaction fee for every payment processed by the platform.

Transaction fees for providing services: Stripe charges a per transaction fee for providing services for things like fraud screening and exporting your Stripe data to your data warehouse.

Fee for service: Stripe also charges a per service fee for things like identity verification. For example, identity verification costs $2.00 per verification.

Stripe has considerable infrastructure, staffing, and hosting expenses to run such a large global payments network. Stripe has acquired a number of companies over the years, as well. These include Kickoff, Paystack, Tax Jar, Bouncer, and Seachange. It also has invested heavily in other companies including companies like Fast, Balance, Ramp Financial, Check, Assembled, and Pilot.[5]

However, Stripe’s revenue has been growing significantly in recent years. The company went from $2 billion in revenue in 2019 to $7.4 billion in revenue in 2020. In 2021, it was reported that Stripe brought in $12 billion in revenue and had a net revenue of $2.5 billion.[6]

 

How Does Stripe Make Money?

Stripe makes money in over 19 different ways. These include:

  1. Stripe Checkout
  2. Stripe Payments
  3. Stripe Terminal
  4. Stripe Invoicing
  5. Stripe Connect
  6. Stripe Elements
  7. Stripe Atlas
  8. Stripe Identity
  9. Stripe Radar
  10. Stripe Sigma
  11. Stripe Billing
  12. Stripe Climate
  13. Stripe Data Pipeline
  14. Stripe Financial Connections
  15. Stripe Payment Links
  16. Stripe Revenue Recognition
  17. Stripe Tax
  18. Stripe Treasury
  19. Stripe Capital

As Stripe is not a public company, how much the company earns in revenue from each of these services is not clear.

Stripe Checkout

Checkout is a prebuilt, hosted payment page that companies can use for one-time online purchases or subscription sign-ups. It’s optimized for any device, designed for conversion, and supports over 30 languages and over 135 currencies. It can be customized in order to match the branding of a company’s site.

Stripe charges 2.9% plus a flat rate of $0.30 for each transaction. It also charges an additional $10 a month if a company uses their own domain. [7]

 

Stripe Payments

Payments is an API and software solution that allows companies to integrate Stripe’s payment platform with their own website. Customers can accept funds for their ecommerce stores, subscription businesses, and marketplaces. Like Checkout, it has global reach and accepts a variety of different currencies.

The company does not publicly list the transaction fees for Payments on their website, but they are likely similar to those charged for Stripe Checkout.[8]

 

Stripe Terminal

Terminal is an in-person checkout that accepts payments at physical stores. It was created for retailers and allows companies to unify their online and offline payment systems. Stripe also allows customers to customize their payment terminal interfaces.

Stripe charges 2.7% plus a flat rate of $0.05 per transaction. It also charges $59 for a Stripe Reader or $249 for a more sophisticated point-of-sale machine.[9]

 

Stripe Invoicing

Invoicing is a global invoicing platform that allows companies to create and send Stripe-hosted invoices – without the need to create new websites. Companies can also access to invoicing API to build their own integrated invoicing app. Their invoicing product has advanced features like automation for processing and reconciling payments.

Stripe doesn’t publicly state how much they charge for this service. [10]

 

Stripe Connect

For companies with their own marketplaces or software platforms, Connect is a way to integrate payments via programmable APIs and tools to send global payments. Companies can extend these payment services to companies who use their platform and can also provide white labels version of other Stripe products such as financing and expense cards.

Stripe doesn’t publicly say how much they charge for this service.[11]

 

Stripe Elements

Elements provides companies with UI building blocks to help them design their own payments experience on their site that matches their site design. It is a service that helps companies who optimize their online payments for conversion.

Stripe doesn’t publicly say how much they charge for this service.[12]

 

Stripe Atlas

Atlas is a platform that helps companies incorporate their startups. It helps streamline paperwork, reduce legal complexity and manage the costs of setting up a business. Stripe offers this service in more than 140 countries.

This service costs as little as $500 to set up a company and $100 per year thereafter.[13]

 

Stripe Identity

Identity allows companies to confirm the identity of users or customers so companies can quickly reduce fraud and streamline onboarding.

It coasts $1.450 per verification and $0.50 to validate ID numbers against government or other databases.[14]

 

Stripe Radar

Radar is a service that helps companies fight fraud and reduce risk via machine learning training on data from Stripe’s vast ecommerce database.

Stripe does not say how much it charges for this on their website. [15]

 

Stripe Sigma

Sigma gives companies access to their Stripe data in order to pull reports and queries right inside the Stripe dashboard. Companies can schedule reports, structure access to their data, and better understand how to optimize their businesses.

Stripe charges per transaction but the amount that they charge varies depending on how many transactions your company processes.[16]

 

Stripe Billing

Billing is a fast way for companies to send bills and invoices to customers, including recurring global payments. The service can support any billing model and integrate into a company’s existing tech stack.

Stripe does not list the prices for this service online but do say it’s a pay-as-you-go service.[17]

 

Stripe Climate

Climate allows companies to donate a portion of their revenue towards carbon removal technologies. This service is available to global Stripe customers.

Companies themselves are able to choose what percentage of their sales they would like to direct to this project. [18]

 

Stripe Data Pipeline

Stripe’s Data Pipeline allows users to send all their Stripe data to analytic databases like Snowflake and Redshift. This allows companies to include their Stripe data with their other data for better business insights.

Stripe charges companies $0.03 per transaction to send their data to their data warehouse.

 

Stripe Financial Connections

Financial Connections allows a company’s users to share their financial data with you easily and securely. This can help companies better reduce fraud, understand underwriting risks, and build additional products and services.

Stripe charges $1.50 per verified account, $0.10 per balance check, and $1.50 to pull account owner information.

 

Stripe Payment Links

Payment Links allow you to create a payment page quickly and then share a link to it with customers.

Stripe charges 2.9% of the transaction and $0.30 per transaction for this.[19]

 

Stripe Revenue Recognition

Revenue Recognition allows companies to streamline their accounting so that they can simplify the work it takes to create audit-ready financial statements.

Stripe charges 0.2% of your transactions if they are worth more than $100,000 per month and 0.25% if your transactions fall below that.[20]

 

Stripe Tax

Tax allows you to automate your calculation and collection of sales tax. It also allows you to quickly access your sales tax reports to easily file tax returns.

Stripe charges 0.5% per transaction under $100,000 per month and 0.4% per transaction when a company brings in more than $100,000 per month.[21]

 

Stripe Treasury

Treasury is a banking-as-a-service option that lets companies embed financial services in their platforms. This allows customers to pay bills, manage cash flows, and hold funds in their accounts. This is an API aimed at companies building platforms for their customers.

Stripe does not list how much they charge for this service on their website.[22]

 

Stripe Capital

Capital allows companies the ability to access fast and flexible financing so that they can make investments in their business and better manage their cash flow.

Stripe charges a fixed percentage of your daily sales until you repay the total.[23]

 

Stripe Funding, Valuation & Revenue

Stripe has been through a number of funding rounds in its long life as a private financial services company. Stripe has over 39 investors and has raised a total of $2.2 billion.[24] While many companies raise four or five rounds of funding before going public, Stripe continues to raise money by giving away equity.

In total, they’ve had almost 20 funding rounds. They are not slowing down in their equity financing either. In 2020 and 2021, the company raised $1.6 billion in three funding rounds.[25]

So, just how much is Stripe worth? The company was valued at $94.4 billion as of 2022.[26] The driver of that large valuation is Stripe’s accelerating revenue growth. The company went from revenues of $450 million in 2016 to $12 billion just six years later in 2021.

YearRevenue
2016$450 million
2017$1 billion
2018$1.5 billion
2019$2 billion
2020$7.4 billion
2021$12 billion

Since Stripe is still a private company, its revenue breakdown is not make public via quarterly or annual mandatory filings. All that the public knows is what Stripe chooses to release. However, it is clear from the numbers above that Stripe is continually improving their gross revenue. In 2021, they also released that they made a net profit of $2.5 billion.[27]

 

Is Stripe Profitable?

The payments company was reported to have brought in $12 billion in revenue in 2021 with a net profit of $2.5 billion.[28] As Stripe is still a private company, the breakdown of the company’s revenue was not released.

However, the company did report that they processed $640 billion in payments in that year – which was an increase of 60% over the previous year. They also reported an average daily addition of 1,400 companies to their customer roster.[29] With numbers like that and the company launching new services every year, the future looks bright for Stripe.

 

Conclusion

Thank you for joining us on this journey through the world of Stripe and how it makes money. We hope you enjoyed learning about the company, its business model, and its future.

Stripe has been around for a while now, and they’ve grown into one of the most trusted platforms for online payments. And with good reason: they offer a simple and intuitive dashboard that makes it easy for anyone to get started with their service.

They’ve also become a household name. And as they continue to innovate and expand their product offerings, they’ll continue to be one of the biggest players in the space.

But what’s next? What do you think Stripe will do next? Do you think that it will continue to grow and prosper in the coming years? What other companies do you think will emerge as competitors for Stripe in the near future?

We’re curious! Let us know!

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