5 ms·

What is Stripe's moat? It's developer friendly but from my experience management will only care about the cost.

pxue 6y ago
they locked in the bottom up approach. Payments typically isn't something people have deep knowledge about, so management defer to devs to do the research, when that happens devs going to pick the easiest API to work with.
- that_guy_iain 6y ago
  Honestly, I find that a lot of the time it's management picks a payment provider and then devs have to implement it. You don't need to have deep knowledge to know you want to accept payments and how much it'll cost. And if I remember correctly when they entered the market they were all about how much you paid was cheaper and clear than with the big boys who all had a higher barrier to entry.
manishsharan 6y ago
Think of it this way: there is no opportunity for an new entrant into this market almost globally. Stripe's fee is low enough and its API is super easy to use and the brand is well loved by most ecommerce companies. A new entrant will have to go up against this enormous amount of goodwill that Stripe has accumulated. The only danger to Stripe is if a major bank decides to get into this space. I work for a major bank and let me assure you that the technical expertise , market savvy and wisdom to pull off a new venture like this just doesnt exist in banks.
- Graffur 6y ago
  > there is no opportunity for an new entrant into this market almost globally? Why is that? Is it something Stripe achieved over time?
- abalone 6y ago
  Low pricing is not a moat.
  - klelatti 6y ago
    Why? If you have scale and the cost base that enables you to sustain the pricing profitably in can be very, very difficult for competitors to enter your market.
    - abalone 6y ago
      You’re assuming the low pricing is profitable and in this case it probably is not (and it’s not that low). Stripe’s play here is to upsell premium services.
  - 0xy 6y ago
    This is totally wrong, considering Stripe has enormous negotiating leverage. My employer never bothers switching to any competitor because Stripe match any deal that their competitors present to us. Could you, a single person and $500m of seed funding match Stripe's prices? Not without hemorrhaging cash. One of Amazon's moats is low pricing as well, which can only be achieved with eye-watering scale (their margins are 0% in some categories, they make it up by delaying payments to vendors and pocketing the interest).
    - ianhawes 6y ago
      Fun fact: I presented Stripe an opportunity to meet or beat a proposal by Braintree. They countered with a microscopic fee decrease and wanted to lock us into a 2 year deal. Not only was the offer from Braintree way better, they gave us a better deal on PayPal fees as well. Stripe’s focus on their supplementary offerings, like Billing (which used to be effectively free) and Checkout show that they’re trying to eat more of the transaction percentage. Try mentioning PayPal button on a Stripe Checkout page and you will be muted from talking in their YouTube broadcast. Overall, I’m bearish on Stripe and look forward to shorting them on the public market, whenever that day comes.
- buro9 6y ago
  Disagree. Every ecommerce company and retailer looks at payment fees as money left on the table. The more money Stripe take on, the more they need to return to investors, and so the more pressure to make margin. That is the opportunity for the future. I too doubt it would come from a bank, nor from Visa and Mastercard... but could another exist? Yes! If it came from a big player, I'd be looking at Shopify.
  - ampdepolymerase 6y ago
    Shopify already has a first party processor, but they are not available to non-shopify customers.
    - masom 6y ago
      We use Stripe...
      - moneywoes 6y ago
        Yeah like don’t y’all partner with them? On the other hand, could Square compete?
  - aliyfarah 6y ago
    100% agree. Customers do not know or care whether Stripe is being used to process their credit card transactions. There is zero brand loyalty on their side. And merchants absolutely will switch in a heartbeat if there was an existing service with similar ease of use and lower fees.
SmellTheGlove 6y ago
Think about how much complexity Stripe abstracts away from you as its user. In the US it might seem "simple" in that it's just cards, but each network/acquirer behaves differently enough that even that isn't easy. Now incorporate payment methods that aren't cards -- which are way more popular than cards in other parts of the world. Then think about decoupling the payment method from the geo. And then decouple the pay-in from the pay-out. We're not even talking about their other products at this point, and already it's a pretty complex business. The fact that we can think "what's so hard about that?" is declaring Stripe's moat without even knowing you did it.
- TulliusCicero 6y ago
  One of the sort of conundrums of UX is that the more work you put into it, the easier it looks (because you've simplified it for the user by moving the complexity to the app/service's end of things). So a shitty UI with a million random buttons looks complicated and hard and users respect it, but an intuitive UI looks so simple and clean it's like the software's barely doing anything!
klelatti 6y ago
I just listened to a podcast with Patrick Collison in which he listed the ways in which Stripe's market seemed unattractive when they started out. Dauntingly complex, highly regulated etc. Anyone looking to compete with Stripe will have the same thought process and probably won't bother. And if they do then they will have to execute as successfully as Stripe over an extended period. Edit: Just to add that the podcast was "The Knowledge Project" [1] - just a fascinating conversation. [1] https://fs.blog/knowledge-project/patrick-collison/ https://fs.blog/knowledge-project/patrick-collison/
- disiplus 6y ago
  sure that was then, but that changed over the years. stripe is not cheap, i'm pretty sure if somebody came with the same UX many would switch, us including. We are B2B and with postpaid so the customers are using Stripe to pay Invoices. There are zero charge backs or fraud but still have to pay high fees.
  - klelatti 6y ago
    You'll notice I didn't mention price! Sure you'd like an identical service to Stripe for a lower fee but the moat is that doing what Stripe does isn't easy at all. You're paying for that fact.
    - disiplus 6y ago
      Sure it is not easy, but it is also not impossible. We accepted card payments before stripe came. There are a couple of clones. Most of our customers pay with bank transfer and not online. If we would have all our invoices paid with stripe i'm sure we would try the other solutions. Don't get me wrong i'm not trashing stripe and they captured huge part of the market that is growing daily. But i'm not sure most people care about stripe, and if somebody else came along people would use the that other provider. In europe a lot of alternative payment methods are popular.
      - klelatti 6y ago
chiefalchemist 6y ago
Moat? The payments market is growing. A lot, to say the least. All you need is a small percentage of that and it's still significant. It's like the soft drink market. You don't have to be #1 or #2 and you can still do quite well. Stripe might never be on top but it'll print money fairly easily for a long time.
lr4444lr 6y ago
That's pretty relevant though: if you're doing large order volume, the "cheaper" option maybe isn't anymore if you need a multiple of the dev effort to build and maintain it, especially if it's all proprietary stuff that you can't really do without specialized consulting firms charging a boatload. I don't think there are any close competitors at the price point and in-house or commodity contractor developer friendliness as Stripe. It's really a fine platform
rglover 6y ago
Time to market, maintainability, and ease of regulatory compliance. The developer-friendly bit is just a marketing/sales tactic (make the developers swoon to force the hand of co's to implement it).
jjevanoorschot 6y ago
I don't think any reply to this comment mentioned Stripe's actual moat: vertical integration between their products. HN loves Stripe's Payments API, but in my experience from having worked on payments at a large ecommerce unicorn, APIs from companies like Adyen and Checkout.com are just as easy to work with. Stripe's real moat is that they offer so many useful products around payments and finance that integrate really well. You can get fraud detection, billing, invoicing etc. from other merchants, or you can build your own, but it's probably cheaper (and much simpler) to use Stripe for all of that. At the moment this is true from small to medium sized companies. Past a certain size you will most likely be using multiple Payment Service Providers anyway, so the vertical integration is not as useful.

pxue 6y ago

they locked in the bottom up approach. Payments typically isn't something people have deep knowledge about, so management defer to devs to do the research, when that happens devs going to pick the easiest API to work with.

that_guy_iain 6y ago
Honestly, I find that a lot of the time it's management picks a payment provider and then devs have to implement it. You don't need to have deep knowledge to know you want to accept payments and how much it'll cost. And if I remember correctly when they entered the market they were all about how much you paid was cheaper and clear than with the big boys who all had a higher barrier to entry.

manishsharan 6y ago

Think of it this way: there is no opportunity for an new entrant into this market almost globally. Stripe's fee is low enough and its API is super easy to use and the brand is well loved by most ecommerce companies. A new entrant will have to go up against this enormous amount of goodwill that Stripe has accumulated. The only danger to Stripe is if a major bank decides to get into this space. I work for a major bank and let me assure you that the technical expertise , market savvy and wisdom to pull off a new venture like this just doesnt exist in banks.

Graffur 6y ago
> there is no opportunity for an new entrant into this market almost globally? Why is that? Is it something Stripe achieved over time?
abalone 6y ago
Low pricing is not a moat.
- klelatti 6y ago
  Why? If you have scale and the cost base that enables you to sustain the pricing profitably in can be very, very difficult for competitors to enter your market.
  - abalone 6y ago
    You’re assuming the low pricing is profitable and in this case it probably is not (and it’s not that low). Stripe’s play here is to upsell premium services.
- 0xy 6y ago
  This is totally wrong, considering Stripe has enormous negotiating leverage. My employer never bothers switching to any competitor because Stripe match any deal that their competitors present to us. Could you, a single person and $500m of seed funding match Stripe's prices? Not without hemorrhaging cash. One of Amazon's moats is low pricing as well, which can only be achieved with eye-watering scale (their margins are 0% in some categories, they make it up by delaying payments to vendors and pocketing the interest).
  - ianhawes 6y ago
    Fun fact: I presented Stripe an opportunity to meet or beat a proposal by Braintree. They countered with a microscopic fee decrease and wanted to lock us into a 2 year deal. Not only was the offer from Braintree way better, they gave us a better deal on PayPal fees as well. Stripe’s focus on their supplementary offerings, like Billing (which used to be effectively free) and Checkout show that they’re trying to eat more of the transaction percentage. Try mentioning PayPal button on a Stripe Checkout page and you will be muted from talking in their YouTube broadcast. Overall, I’m bearish on Stripe and look forward to shorting them on the public market, whenever that day comes.
buro9 6y ago
Disagree. Every ecommerce company and retailer looks at payment fees as money left on the table. The more money Stripe take on, the more they need to return to investors, and so the more pressure to make margin. That is the opportunity for the future. I too doubt it would come from a bank, nor from Visa and Mastercard... but could another exist? Yes! If it came from a big player, I'd be looking at Shopify.
- ampdepolymerase 6y ago
  Shopify already has a first party processor, but they are not available to non-shopify customers.
  - masom 6y ago
    We use Stripe...
    - moneywoes 6y ago
      Yeah like don’t y’all partner with them? On the other hand, could Square compete?
- aliyfarah 6y ago
  100% agree. Customers do not know or care whether Stripe is being used to process their credit card transactions. There is zero brand loyalty on their side. And merchants absolutely will switch in a heartbeat if there was an existing service with similar ease of use and lower fees.

SmellTheGlove 6y ago

Think about how much complexity Stripe abstracts away from you as its user. In the US it might seem "simple" in that it's just cards, but each network/acquirer behaves differently enough that even that isn't easy. Now incorporate payment methods that aren't cards -- which are way more popular than cards in other parts of the world. Then think about decoupling the payment method from the geo. And then decouple the pay-in from the pay-out. We're not even talking about their other products at this point, and already it's a pretty complex business. The fact that we can think "what's so hard about that?" is declaring Stripe's moat without even knowing you did it.

TulliusCicero 6y ago
One of the sort of conundrums of UX is that the more work you put into it, the easier it looks (because you've simplified it for the user by moving the complexity to the app/service's end of things). So a shitty UI with a million random buttons looks complicated and hard and users respect it, but an intuitive UI looks so simple and clean it's like the software's barely doing anything!

klelatti 6y ago

I just listened to a podcast with Patrick Collison in which he listed the ways in which Stripe's market seemed unattractive when they started out. Dauntingly complex, highly regulated etc. Anyone looking to compete with Stripe will have the same thought process and probably won't bother. And if they do then they will have to execute as successfully as Stripe over an extended period. Edit: Just to add that the podcast was "The Knowledge Project" [1] - just a fascinating conversation. [1] https://fs.blog/knowledge-project/patrick-collison/ https://fs.blog/knowledge-project/patrick-collison/

disiplus 6y ago
sure that was then, but that changed over the years. stripe is not cheap, i'm pretty sure if somebody came with the same UX many would switch, us including. We are B2B and with postpaid so the customers are using Stripe to pay Invoices. There are zero charge backs or fraud but still have to pay high fees.
- klelatti 6y ago
  You'll notice I didn't mention price! Sure you'd like an identical service to Stripe for a lower fee but the moat is that doing what Stripe does isn't easy at all. You're paying for that fact.
  - disiplus 6y ago
    Sure it is not easy, but it is also not impossible. We accepted card payments before stripe came. There are a couple of clones. Most of our customers pay with bank transfer and not online. If we would have all our invoices paid with stripe i'm sure we would try the other solutions. Don't get me wrong i'm not trashing stripe and they captured huge part of the market that is growing daily. But i'm not sure most people care about stripe, and if somebody else came along people would use the that other provider. In europe a lot of alternative payment methods are popular.
    - klelatti 6y ago

chiefalchemist 6y ago

Moat? The payments market is growing. A lot, to say the least. All you need is a small percentage of that and it's still significant. It's like the soft drink market. You don't have to be #1 or #2 and you can still do quite well. Stripe might never be on top but it'll print money fairly easily for a long time.

lr4444lr 6y ago

That's pretty relevant though: if you're doing large order volume, the "cheaper" option maybe isn't anymore if you need a multiple of the dev effort to build and maintain it, especially if it's all proprietary stuff that you can't really do without specialized consulting firms charging a boatload. I don't think there are any close competitors at the price point and in-house or commodity contractor developer friendliness as Stripe. It's really a fine platform

rglover 6y ago

Time to market, maintainability, and ease of regulatory compliance. The developer-friendly bit is just a marketing/sales tactic (make the developers swoon to force the hand of co's to implement it).

jjevanoorschot 6y ago

I don't think any reply to this comment mentioned Stripe's actual moat: vertical integration between their products. HN loves Stripe's Payments API, but in my experience from having worked on payments at a large ecommerce unicorn, APIs from companies like Adyen and Checkout.com are just as easy to work with. Stripe's real moat is that they offer so many useful products around payments and finance that integrate really well. You can get fraud detection, billing, invoicing etc. from other merchants, or you can build your own, but it's probably cheaper (and much simpler) to use Stripe for all of that. At the moment this is true from small to medium sized companies. Past a certain size you will most likely be using multiple Payment Service Providers anyway, so the vertical integration is not as useful.