The Australian payments market has a brand new player, with San-Francisco based Stripe officially entering the fray.
After running a private beta in Australia since August last year, Stripe has now opened its doors to Australian merchants and company president and co-founder John Collison reckons he has what it takes to compete with the gorilla in the payments space, PayPal.
That’s no empty boast, either. Valued at $US1.75 billion, Stripe is the hottest thing in the payments market and is backed by three of PayPal's co-founders: venture capitalist Peter Thiel, Tesla Motors Inc chief executive Elon Musk, and Max Levchin.
In just three years John and his brother Patrick have managed to build a healthy customer base and processes billions of dollars a year for a wide variety of businesses.
So why does a three-year-old start-up think it can mix it up with an industry pioneer like PayPal?
The secret ingredients, according to Collison, are simplicity, optionality and a toolkit that that he hopes will give Australian merchants the ability to truly go global.
Stripe's technology can be seamlessly integrated into any app or website, as long as the business has an existing Australian bank account. Pricing for Stripe in Australia will be 1.75 per cent plus 30 cents for domestic transactions, and 2.9 per cent plus 30 cents for international and American Express transactions.
Think global, build global
The international footprint pitch from Stripe is largely based on what is perhaps the biggest deal in Stripe’s relatively short history: an agreement with Chinese e-commerce giant Alibaba’s affiliate, Alipay.
According to Collison, the one clear message from the beta process was that Australian businesses are increasingly focused on competing at a global scale.
“The trade link with China is a great opportunity for Australian merchants and we provide the infrastructure for businesses to make it happen,” Collison told Business Spectator.
Stripe is hoping to capitalise on this aspiration by removing some of the attendant barriers, especially for smaller, younger businesses and those with limited international finance expertise.
Stripe provides instant multiple currency support, with over a 100 foreign currencies in play. While multiple currency support isn’t a new function, it has until now been a complex process.
Collison says that the complex mechanisms have been a potent barrier for many merchants but they don’t have to be anymore.
“The rate of business creation isn’t set in stone and turning a good local business into a global one shouldn’t be hard,” he said.
Stripe’s Alipay deal in some ways highlights how the Collisons want the payments space to work. The deal allows Chinese buyers to pay for purchases on the US service, in a rare agreement between a Western payments service and the Alibaba affiliate, which handles about half of all online transactions in China.
While Stripe offers support for as many as 1 billion card holders using payment options like Visa, American Express, Mastercard and PayPal, the problem was that these channels are not widely used in China.
Stripe’s solution was to forge a partnership with Alipay, allowing users to enter their email address and a six-digit SMS code to buy things from companies that use Stripe to process payments.
It’s these sorts of open, global platforms that Collison says are the future of payments.
“How people pay for things is always changing,” he says, "and Stripe’s mission is to give businesses the infrastructure and the platform to connect with customers everywhere.”
PayPal tests its limits
With the e-commerce market still in a relatively nascent state globally, both Stripe and PayPal want to make the most of it. While Stripe is now officially open for business, PayPal is getting ready to press go on a 24-hour hackathon in Sydney, which promises one Australian app developer a trip to Silicon Valley and a grand prize of $US100,000.
Far from resting on its laurels, PayPal's BattleHack initiative is a sign of how serious PayPal is about testing the limits of its API and cultivating a healthy developer ecosystem.
John Lunn, the global director of the PayPal and Braintree developer network, told Business Spectator that while building the technology in the payments space is relatively easy, reconciling compliance, security and regulatory needs in particular geographies can be a real challenge.
PayPal may be an incumbent in the payments space but both it and Stripe are essentially chasing the same goal of making payments as seamless as possible, where the actual of act of payment is removed from the equation.
As Lunn puts it, "We are a highly visible company that wants to become invisible." And with its legion of developers, PayPal just might get there.
Stripe's Collison shares a similar ambition but his path to that ultimate goal relies on giving businesses a unique toolkit and a globally connected platform that removes the barriers posed by traditional merchant processing.
"We don't think we have all the answers, but at Stripe we want businesses to have the tools to build a solution that suits them the best," he says.