The sharing economy has made life's annoyances a little less irritating. In the old days, you would hail a cab on the street and pull out a $20 bill to pay the driver. Today, you find a Lyft nearby using a smartphone app, and the app just charges your credit card, which is on file. No muss, no fuss.
But the backbone of that seamless user experience is a third party you never interact with at all. Stripe, based in San Francisco, has staked out its spot as the easiest way to make any kind of payment to anyone, anywhere in the world. That's a lofty goal--but the company, which turns two years old on Monday, is well on its way to achieving it.
Stripe already powers the sharing apps that avid techies use daily, including Exec, Homejoy, Lyft, Postmates, SideCar, and other 21st-century marketplaces. It recently signed on to provide the infrastructure for Facebook's e-commerce experiment with Jack Threads and Mosaic. Next up: the brave new world of global finance.
Irish brothers John and Patrick Collison began working on Stripe in 2009. Like most startups, Stripe was born to solve a personal problem. The Collisons had developed apps before, and had struggled with the payment processing that would allow them to rake in revenue. There were two options, John Collison says: PayPal or a bank. So they decided to build Stripe, an infrastructure that stores users' credit card information, processes payments, and then pays out to companies every seven days. Stripe offers developers a set of APIs to place on their sites or in their apps that put Stripe in charge of their cash. Stripe takes 2.9 percent and 30 cents of every transaction.
"All you can do [with PayPal and banks] is charge credit cards," Collison told TechHive. "If you're building a company in collaborative consumption like Lyft or Postmates, you end up with this pile of money in your bank account from credit cards you've charged, but that's not actually what you want. You want to be able to manage a whole bunch of people paying [for] a whole bunch of other things."
Before Lyft started using Stripe, one of the ride-sharing company's employees was in charge of logging in to a bank account and sending payments to each Lyft driver. This was not a fast process, and as Lyft hired more drivers to give more rides, that workload would only increase.
"Lyft was becoming a money-management company, a little bank unto themselves," Collison says. "They had the tellers and everything. At Stripe, what we want to do is give people a huge amount of leverage, let people do these creative business models without having to become a bank. Now that [Lyft is] using Stripe, they can say, 'Charge $20 to this credit card, put $18 here, and keep $2 for ourselves.' It's a few lines of code in their application."
For apps such as Postmates, the process is a bit more complicated. When you place an order on the Postmates app, it arrives within an hour. Seems easy enough, but on the back end your payment has to be split among the courier, Postmates, and the retailer or restaurant that supplied the goods you bought.
It was a chicken-and-egg situation: Sharing-economy startups began using Stripe because the cash distribution possibilities were endless, and Stripe started adding more features because the company noticed those startups gravitating toward its service.
"We noticed that some of the fastest-growing companies weren't charging money for themselves," Collison says. "They were managing a marketplace of buyers and sellers, and helping broker those transactions...They would say, 'Okay, Stripe, you made it really easy for me to charge money and get it into my bank account, where it was really hard before. But I'm not actually looking to put all this money in my bank account, I'm looking to send it somewhere.'"
Postmates launched 18 months ago with Stripe built in from day one. Stripe added a feature for Postmates that allows the company to pay couriers immediately after Stripe processes each customer's credit card. That isn't such a big deal for users, but it keeps the bike messengers who carry all those deliveries happy. Happy bikers, happy customers.
"We want to give our riders and our couriers the money as fast as possible," Postmates cofounder and CEO Bastian Lehmann says. "That is something we developed together with Stripe."
Muddy international waters
Stripe is now available in Canada, the United Kingdom, and Ireland, and the company is beta-testing operations in Australia, Belgium, France, Germany, and Spain. Changing currencies is easy--Stripe has offered that feature for a while now. But each country has different ways of doing business, a whole new set of financial regulations, and varying cultural views about money. Plus, Collison says, the sharing economy in Britain isn't the same as in the United States. Stripe plans to establish teams and outposts abroad to learn the ins and outs on the ground.
But Stripe isn't just focused on the sharing economy, or on startups. The company already counts Blue Bottle Coffee, New York's Museum of Modern Art, Pebble, and Vice among its clients, with bigger brands signing on all the time.
"The larger [a] company gets, the slower it tends to move and adapt to new technologies," Collison says. But large companies are turning to Stripe to power their newer projects. "We're seeing [it] already today, where Rackspace is using Stripe, [the Museum of Modern Art] down the street is using Stripe. As they build new things, they say, 'Let's use Stripe for that.'"
The fast-talking Collison has no doubts as to whether Stripe and its 70 employees can scale to match the size and scope of his ambitions.
"We're not a San Francisco company building a San Francisco product," he says. "We're a global payment infrastructure. That requires a slightly different perspective."