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At the end of the day they are an API connector and Independent Sales Organization on one of the major platforms (First Data, Tsys, etc) who processes the autho

At the end of the day they are an API connector and Independent Sales Organization on one of the major platforms (First Data, Tsys, etc) who processes the authorizations for Visa, Mastercard and such. The space has many competitors like Braintree, PayPal, Authorize.net and many more, each with their own twist on what makes them unique. Stripe's only moat is switching costs, but with their current pricing model it can be justified for customers that have scaled to migrate away. If Stripe had better customer support than average, clairvoyance on what limits your account has, or vaguely competitive rates (especially on Debit & ACH) they might have more of a moat. ISOs are a dime a dozen and there are many groups like Gravity Payments that are willing to commit fraud against Visa and Mastercard to get clients rates that are 0.10% lower, nevermind the double to quadruple interchange rate that Stripe charges...

toomuchtodo 4y ago
To add on to this, FedNow Instant Payments are going GA in a few months, which are instant payments from any US deposit account by way of the Federal Reserve for a nickel per transaction (up to $25k limit to start, approaching $100k after the system shakes out). Margin compression in the entire credit card supply chain should be a expected, as they’re about to lose their primary benefit: immediate auth and quick settlement.
dmazin 4y ago
Thank you for your insightful answer. As I understand, Stripe grew so huge first via its great API (I distinctly remember comparing it against its competitors back in the early 2010s, and even though Stripe was more expensive, the developer ease was worth it) and then by being the go-to default. As you say, now other products have long caught up w.r.t. API niceness, and Stripe is simply riding momentum. Of course, Stripe has also expanded into tons of other categories. I wonder how much of their revenue comes from those other new products. If they are successfully growing those products, I still think Stripe has good fundamentals... but I don't actually know how well those products are doing and how much revenue (and revenue growth) comes from them.

toomuchtodo 4y ago

To add on to this, FedNow Instant Payments are going GA in a few months, which are instant payments from any US deposit account by way of the Federal Reserve for a nickel per transaction (up to $25k limit to start, approaching $100k after the system shakes out). Margin compression in the entire credit card supply chain should be a expected, as they’re about to lose their primary benefit: immediate auth and quick settlement.

dmazin 4y ago

Thank you for your insightful answer. As I understand, Stripe grew so huge first via its great API (I distinctly remember comparing it against its competitors back in the early 2010s, and even though Stripe was more expensive, the developer ease was worth it) and then by being the go-to default. As you say, now other products have long caught up w.r.t. API niceness, and Stripe is simply riding momentum. Of course, Stripe has also expanded into tons of other categories. I wonder how much of their revenue comes from those other new products. If they are successfully growing those products, I still think Stripe has good fundamentals... but I don't actually know how well those products are doing and how much revenue (and revenue growth) comes from them.