Stripe is a company worth $9.2 billion. It is also a company that the vast majority of people around the world have never heard of, but most have probably used.
Founded by two brothers from Ireland, Patrick and John Collison, the concept of the company was to provide payment solutions for e-commerce companies. This, in itself, is far from revolutionary. It was started in 2010, by which point Paypal had been around for 12 years, had gone public, been sold, and already had 100 million users across the world. You can hardly say that Stripe was ploughing a new furrow.
However, it is not the fact that the Collisons were doing something new, it was more the fact that they saw a gap in the market and exploited it mercilessly.
Paypal was originally founded in 1998, but since then it had not really changed itself too much. It gained a huge amount of business by being the best known way of allowing people to pay each other online. If you wanted to buy something, you could go to the Paypal site, put in the payment details then pay the other person, whether that’s a company or an individual. It required a complicated piece of coding to track the payment, then the customer was forced away from the seller’s site, needing to pay through Paypal, then redirected back to the original site. It was a hassle for customers, it was a massive hassle for commerce companies, but it was often the only viable option outside of creating your own custom payment platform, which could cost hundreds of thousands to implement.
Much of the pain of this was not felt by consumers because it was simply the way it had always been. If you wanted to pay for something on eBay, you needed to go from eBay to PayPal, send the money to the eBay seller, then go back to eBay to finish the transaction. When written out it sounds cumbersome, but the reality is that because this was at the start of the e-commerce revolution, it was not seen as a pain because it was so much easier than it had been before. However, whilst most didn't see it as too cumbersome and not in need of a rethink, it was ultimately a perfect metaphor for Henry Ford's most famous quote about user needs - 'If I had asked people what they wanted, they would have said faster horses'.
Some companies had created their own payment platforms, but the expense of doing this meant that only the biggest companies could do it. There were other payment systems that could be added to sites, but the cost and complexities of these meant that it was prohibitive to smaller companies or those who weren't pure e-commerce. It meant that the clunky, multi-step PayPal systems were the only option for many.
It was within this system that the Collisons saw an opportunity, so they created Stripe with the idea of simplifying the process, allowing any company to easily connect to their banking systems through only a few lines of code.
It was quickly a success and was soon adopted by companies like Lyft and Facebook, who made it their primary payment gateway. They saw millions of people suddenly making their payments through the Stripe system and with the huge interest amongst some of the biggest companies in Silicon Valley their valuation quickly skyrocketed. Today the company is valued at $9.2 billion, although some, such as Brendan Miller, an analyst at Forrester Research Inc., believes that 'we’re a ways out before they can satisfy that valuation'. However, in August 2017 it was reported that Stripe has struck a deal with Amazon, the world's largest online retailer. Given that Stripe makes money through every transaction this could go some way to justifying that valuation given Amazon's revenue is constantly increasing and in 2016 grew by 27% to $135.99 billion.
Another key element of their success has been that their simplicity combined with strong service offering meant they were attractive to startups who then quickly grew. It meant that peer-to-peer companies like Lyft, who have a relatively complex financial model that consists of multiple payments needing to be made after a customer pays the company, found that Stripe was the perfect system for them. This system helped them to grow, which in turn meant more money was given to Stripe as the number of transactions increased. It created a situation where Stripe was the ideal solution for small companies who then had no need to change providers once they grew.
However, as you might expect from two people who aimed to change the way e-commerce companies operated forever, they have bigger plans than just providing a payment platform. In fact, their plan for the future is the ambitious goal to 'Increase the GDP of the Internet' according to Patrick.
Over the next few years, they want to give 'two people in a garage the same infrastructure as a 100,000-person corporation' and move into areas like salary payments, fraud detection, and the way companies incorporate. This will pit them against some of the fiercest competition in the world and move into more B2B focused areas where they are yet to work. It will mean that they need to look at things in a completely different way to how they have, especially as by their very nature, they are not household names like their rivals such as PayPal.
What makes them genuinely innovative is that they have done all of this, yet they have still managed to stay relatively under the radar. According to Bloomberg, half of all online transactions that took place in the US in 2016 were done through Stripe, with the vast majority having no idea that they were interacting with the company. They have created an architecture so seamless that companies can take credit for it and increase sales because of the platform, the perfect system for today's e-commerce economy.