Online acquiring: Stripe and Competitors

Top companies in the global online acquiring industry and ways how they turn challenges into opportunities.

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Payments startup Stripe moved away from the cutting edge of the developers’ world to mainstream business awareness in 2015. Nearly two decades ago, PayPal transformed the world of e-commerce by offering to mask a user’s credit card information for online transactions. Today, that baton could easily pass to Stripe, a San Francisco-based payments startup founded by two young Irish entrepreneurs, brothers John and Patrick Collison.

“According to Forrester, e-commerce market in China will reach $1 trillion in 2019.”

Sometimes the most stunning changes arise from the smallest ideas. Like many Silicon Valley luminaries, the Collisons dropped out of Harvard and MIT to launch their first startup, an auction and marketplace management system for eBay merchants. That business, called Auctomatic, sold for $5 million in 2008 to a Canadian media company, making the Collisons millionaires when they were still teenagers.

Collison brothers are startup prodigies. The brothers are good coders, for sure. But succeeding in today’s saturated startup market takes more. From concept to product to sales pitch, the Collisons have in five short years put Stripe at the center of Silicon Valley’s most vigorous crosscurrents.

Stipe’s raked in tens of millions of venture capital; sealed important payments deals with prominent companies; and brought on high-profile executives who should help the company grow and scale. And, as e-commerce moves increasingly to mobile, Stripe has positioned itself to capture the momentum, financial industry analysts say. Meanwhile, the milestones of 2015 have laid the groundwork for next year and beyond.

Stripe operates in the $1.5 trillion global e-commerce market. It lets merchants process credit cards directly from their own desktop and mobile platforms, by way of a few lines of code. Its simplicity is considered groundbreaking by many industry analysts. For businesses, the service is aimed to improve the payment experience by keeping customers at merchants’ websites and by reducing the time it takes to pay. That, in turn, increases the likelihood customers to buy, and come back to buy again.

In the past year, Stripe has struck blockbuster deals to support Apple Pay, tech giant’s digital wallet, as well as Google’s Android Pay and payment capabilities for other Silicon Valley luminaries including Facebook, Twitter, Lyft, Pinterest, and Salesforce. Big companies including American Express and Sony have also lined up, and it’s gotten a strong boost in China by processing a chunk of payments for Alibaba’s Alipay.

Meanwhile, in July, Stripe landed $90 million in a Series C round led by Kleiner Perkins Caufield & Byers, Visa, AmEx and Yuri Milner’s DST Global. That pushed Stripe’s valuation to $5 billion. All told, Stripe has raised nearly $300 million from prominent investors, including PayPal founders Elon Musk and Peter Thiel, as well as gold-plated VC firms such as Andreessen Horowitz, Khosla Ventures, and Sequoia Capital.

Stripe has something of a first-mover advantage, and its deals with big Silicon Valley companies will give it scale. It has also shown intelligence in the way it’s going after a global market for digital payments, which are expected to grow exponentially in the next five years to $6 trillion.

Even if you haven’t heard of Stripe, you’ve used it if you’ve called a car on Lyft, ordered a delivery on Postmates, or backed a project on Kickstarter. The company that processes billions of dollars a year for tens of thousands of businesses and startups introduced Relay, a service that adds one-click buying to mobile apps, most notably Twitter. It also lets people buy straight from the ads that run in mobile apps. Stripe’s proposed fix, Relay, builds the whole buying process right into an app that integrates it—and Twitter was the biggest example announced today.

Instead of clicking on a link in the Twitter app and going off to an e-commerce site like Warby Parker’s, someone can now click right on a Buy button in the tweet and finish the purchase inside Twitter. “Twitter is already being used by merchants of all shapes and sizes as a direct-to-consumer distribution and communication platform,” added Nathan Hubbard, Twitter’s head of commerce, during Collison’s presentation. In addition to Twitter, Stripe announced some other partners, including shopping site and app ShopStyle, which lets users peruse products from 1,400 retailers, and Saks Fifth Avenue. “We don’t enable payments for Saks Fifth Avenue,” says Hughes Johnson. “But now we’re enabling them to sell products though an integration through Stripe’s Relay.”

It may be more than a year out from the presidential election, but there is already a clear winner in the race for the White House – that would be Stripe, which has become the go-to platform to support the donation systems for almost half of the major presidential candidates. Based on filings with the Federal Election Commission, candidates including Democrats Hillary Clinton and Bernie Sanders as well as Republican Senators Marco Rubio and Rand Paul have all sided with Stripe, which received more than $800,000 in total donation processing fees from eight different campaigns. “Campaigns get that tech and the velocity and quality of their tech teams really matter,” said Stripe cofounder and president John Collison. “Over the course of a campaign you have to build sophisticated commerce, [customer relations management] and data analytics platforms that work all the time.”

American Express launched a new feature for cardholders called Amex Express Checkout, which it says will let them pay for goods and services on web, mobile and in apps with a single password that cardholders already have and use to access their Amex accounts — not unlike PayPal’s password-based checkout option. Amex also announced a new partnership with Stripe to help the new feature pick up critical mass with more online businesses.

The financial terms of the deal between Stripe and Amex are not being disclosed. However, Amex confirmed to me that it is a backer of the payments startup, something that doesn’t appear to have been reported before, so it seems to stem out of that strategic investment. Stripe has a new way for businesses to track purchases and user activity — an iPhone app.

The app does basically everything its existing online dashboard does, but brings it to an interface more suited for a mobile device. Businesses can also set up notifications for whenever a payment or purchase is made or set up a daily summary. Stripe’s iPhone application also has a search function.

Balanced, a payments platform for peer-to-peer marketplace businesses, closed its doors after failing to grow fast enough, or as co-founder Matin Tamizi describes it, “reach the escape velocity necessary to be a large, innovative, independent player in the payments space.” The company, a Y-Combinator alum, has struck a deal with one of its longtime rivals, Stripe, to act as its transition partner for existing customers.
Stripe and Intuit started to work together on a product that will instantly recognize earnings that on-demand workers receive and help them optimize their taxes with write-offs for work-related expenses.

Through the partnership, people who work for on-demand platforms that make their payments through Stripe will be able to easily connect with Intuit’s new QuickBooks Online Self-Employed software. Once that’s done, the QuickBooks product will be able to immediately recognize payments as income, and as a result will be able to help workers track their finances, and especially their tax obligations.

The company has been focused on growing its international footprint for some time, which is another reason it is teaming up with Visa. CEO and co-founder Patrick Collison told The New York Times that Stripe will lean on the payment giant’s international presence and know-how to expand its current coverage of 20 countries. Stripe’s co-founder John Collison announced at MoneyConf in Belfast that the company is launched across Sweden, Denmark, Norway and Finland.

To enter Japan’s online payments market is to embrace battle with a hydra. Outstripe one competitor, another one grows just as a quickly. Well-known players include the likes of PayPal Japan, GMO Payment Gateway, and Rakuten Checkout. Nipping on their heels is a host of fast-growing payment-focused businesses led by Spike from Metaps and Line Paywith nascent services like from Base (Japan’s version of Shopify) waiting in the wings. Nevertheless, Stripe announced its invitation-only private beta, with an eye to having a full launch by the end of the year. Stripe is also joining this fight with a hefty secret weapon – a partnership with Sumitomo Mitsui Credit Card (SMCC). SMCC is part of Sumitomo Mitsui Financial Group (SMFG), the second largest financial institution in country behind Mitsubishi UFJ. Stripe also making its way to the Singapore market.

Competition is very high: Braintree, Klarna, Adyen and others

PayPal’s Braintree is now look likely bigger than Square and Stripe combined. Braintree announced that it is on track to process $50 billion in total authorized transaction volume in 2015. Braintree provides backend payment processing for companies like Munchery, Uber, and Hotel Tonight. For context, when it was acquired by PayPal in 2013, Braintree processed $12 billion.

Braintree has enabled 250 of the top 500 Internet retailers with PayPal OneTouch, PayPal’s one-tap mobile payment method. For instance, in the J Crew and Nordstrom mobile apps, shoppers can check out with a credit card or PayPal. Stripe has a similar offering, enabling Apple Pay, Android Pay, and an American Express buy-button for hot startups like Kickstarter, Instacart, and Lyft. Braintree can also outfit mobile shopping carts with Apple Pay and Android Pay buttons. Both are also providing backend processing services for Pinterest’s buyable pins program.

Even so, with PayPal One Touch, PayPal stands to make money on both the merchant transaction and the consumer wallet transaction. This is why PayPal head of product and former Braintree CEO Bill Ready said he made an early bet on consumer technology with his purchase of social peer-to-peer app Venmo.

Klarna arrived in the US via partnership. Klarna let’s any retailer put the equivalent of Amazon’s “buy with one click” button on its site. Like Stripe, Klarna handles payments on behalf of retailers. Klarna processed an incredible 30% of all online purchases in Sweden last year and crunched through $9 billion (£5.81 billion) worth of payments globally.

The company is backed by famous Silicon Valley VC Sequoia Capital. Collison name-checked Klarna as one of the most exciting fintech start-ups in Europe, alongside TransferWise, but didn’t talk about competing with Klarna in its home market. For the last few years, Sweden-based Klarna has slowly and steadily become a bigger e-commerce presence than PayPal…in Europe.

The launch partnership will have Overstock using Klarna Checkout for mobile web guest purchases in the US. Klarna first talked about a U.S. expansion back in Sept 2014. Last December, Klarna said it would likely spend $100 million on the U.S. expansion. Klarna has already set up its U.S. headquarters in Columbus, Ohio, with offices in New York City and San Francisco.

What sets Klarna apart from its competitors is how it analyzes credit risk. PayPal, for example, requires customers to have a credit card already on file or money in an account, whereas Klarna uses an algorithmic risk assessment of the customer based on behavior and credit scores, with the least risky guests able to make purchases with just their email and delivery address and pay within two weeks. Klarna’s business model assumes the payment risk in the interim, allowing those less risky guests (probably 80% of the time, according to The Wall Street Journal) to receive and review the item before paying.

In August 2015 the company’s valuation has nearly doubled to $2.25 billion in a secondary offering. Venture-capital firm Northzone, mutual fund Wellington Management Co. and foundation Wellcome Trust have bought about $80 million worth of stock from company insiders. The company was valued at about $1.4 billion in 2014 when it raised roughly $100 million from existing investors. Klarna promised to launch until the end of 2015 with at least 10 merchants in the U.S. using its digital checkout service. It currently counts about 55,000 merchants in 18 European markets.

Klarna, backed by Sequoia Capital, DST Global, Atomico and others, last year had about $300 million in revenue from roughly $7.8 billion in transactions. PayPal, newly-independent from eBay Inc., drew in $2.3 billion in sales from $66 billion in transactions.

When shopping on a site that uses Klarna, a customer only has to enter an email address and a ZIP Code to check out. Klarna then pays the merchant and collects the funds within 14 days from the customer. That is different than other payments services that require customers to enter their billing address, credit card and other information at checkout. Klarna claims to have superior fraud detection than other payments companies, including looking at what time of day a purchase is made, customers’ addresses and whether they have used the service before.

A lot has changed since Adyen‘s CCO Roelant Prins worked at RBS in London. For one thing, payments is now “the most exciting thing on Earth,” he told. Retailers and services today rely on retaining customers by offering them a totally frictionless payment method, and Netherlands-based Adyen has been working since 2006 to provide that.

The company, which counts, Spotify, Airbnb and Dropbox as customers, sells itself as a single global platform for accepting payments anywhere in the world.

Adyen is not a household name in U.S. business circles, even with a $2 billion-plus valuation. General Atlantic led a $250 million investment in Adyen at a $1.5 billion valuation a little over a year ago. And last year, Iconiq Capital, which manages the fortunes of wealthy tech titans including Mark Zuckerberg, invested an undisclosed sum that valued Adyen at $2.3 billion.

Index Ventures, Felicis and Singaporean Temasek are also between shareholders. The privately held payments company, which has its headquarters in Amsterdam, Netherlands, announced that its revenue doubled to $350 million in 2015, as the company crossed $50 billion in the amount of payments it processed. The company says it has been profitable on an Ebitda basis — a measure of a company’s operating profit — since 2011. Kamran Zaki, Adyen’s North America chief, said: “We want to get our brand name out there and … show we’re at a pretty sizable scale.”

Adyen is 10 years old and was built to help online businesses in Europe accept a variety of payment methods, including credit cards. A few years ago, it started pitching European retailers and fashion brands on using its software to accept payments in their brick-and-mortar stores, too.

Now, today’s financial disclosures come as the company begins courting U.S. retailers to also use its in-store payment tools. The company’s pitch centers on the idea that retailers can get a better understanding of their customers if both online and in-store purchases run through the same payments platform. And with that information, retailers can more easily provide services such as “buy online” and “pick up in store.” The company also has a more global footprint, thanks to its European roots, than a host of competitors.

Not many people have heard about Adyen, but it has carved out a powerful place by laying down smooth payment rails all over the world for the biggest names in tech: Facebook, Netflix, Spotify, Airbnb, Uber.

Adyen can handle 250 payment methods and 187 currencies, more than some of the big incumbents such as Chase Paymentech, WorldPay and GlobalCollect. Competitor Stripe, a fast grower in mobile, is in only 23 countries and 139 currencies. Breadth matters in global commerce. Americans may be addicted to credit cards, but Asians like to pay with their phone bill. Germans and the Dutch use bank debit cards. In underbanked regions like the Philippines and Brazil people exchange cash for bar-coded cards to make purchases online.

If you are looking for a full breakdown of payment producer you can compare them online at

Adyen doubled its transaction volume last year to $50 billion, while net revenue grew a “mere” 89% to $350 million, due to conversion from a weak euro. While Adyen’s fees fall with volume, the company grosses less than 1% of every dollar processed, far below the 2% to 3% that Square, PayPal and Stripe make. This is why Adyen has lower revenue than Stripe does (an estimated $450 million last year) on twice the payment volume.

“We’re a true IT company and have the freedom to move and innovate.”

It’s not a knock against Adyen: The company made a profit of $45 million in 2015 and has been in the black for five years straight–a rare thing among unicorns. The companies are in different segments of the market. Adyen caters to big, international operations while Stripe targets the startup app developer community, making up for lower volume by charging a slightly higher margin.

The name “Adyen” is Surinamese for new beginning, and that mentality became its secret weapon. For global companies more payment methods translate into more sales.

“We want to provide a localized experience and give people their preferred payment options,” says Airbnb’s payment boss, Kapil Mokhat. “Instead of building direct integrations to each payment method, we have Adyen.”

Spotify, which uses Adyen for a majority of its international markets, saw its checkout conversion nearly double. Evernote, which does 70% of its business outside the U.S., went through its global expansion early. It took three months of work to process yen using standard payment integration. Says Nancy Magee, director of commerce at Evernote, “With Adyen we opened 30 currencies in two weeks.”

Adyen’s next move is into physical stores. Its new terminals are in use at stores run by Inditex (owner of Zara), Lacoste, Crocs and O’Neill. Zara is interested because Adyen terminals mean one platform for purchases on mobile, desktop and physical stores, which makes it easier to deter fraud and offer loyalty points and real-time discounts at checkout. Massive incumbents like Chase Paymentech, Vantiv and First Data won’t give up ground easily. Van der Does thinks they will. “They’re traditional with multiple platforms and are stuck in what they can do,” he says. “We’re a true IT company and have the freedom to move and innovate.”

Optimal Payments Plc (LSE: OPAY), the group behind the popular NETELLER payment solution, revealed it would buy rival Skrill Group (Sentinel Topco Ltd) for a sum of about 1.1 billion euros in order to expand its online services.

Skrill is one of the largest online pre-paid cards providers in Europe with its paysafecard brand. Its shareholders include CVC Capital’s Sentinel Group Holdings SA, Investcorp Technology Partners and others. Back in August 2013, CVC acquired a controlling stake in Skrill for €600m from Bahrain-based Investcorp.

French startup SlimPay raised $16.6 million (€15 million) from Prime Ventures for its payment processing solution. SlimPay is all about making recurring payments in Europe as easy and seamless as possible. In a few clicks, you can set up SEPA bank account debits without having to mail an authorization to your bank.

The company also takes care of credit card payments, but this space is much more competitive. The startup’s motto is that SlimPay should be able to take care of all sorts of payments as long as it’s recurring. And this is key to understanding SlimPay from an American perspective. In the U.S., most online recurring payments take advantage of your credit or debit card. It’s very rare that you link your bank account directly with a newspaper website to pay for your subscription for example. Even for your mobile phone bill you can pay with your credit card.

Job marketplace announced that it has agreed to purchase for $7.5 million in cash. The acquisition was funded by through an placement of $10 million AUD (about $7.8 million) in ordinary shares of to institutional investors.

As its name suggests, provides online escrow services for e-commerce sites by holding payments for goods or services until a transaction is successfully completed. Its commercial partners include eBay, GoDaddy,, and

One of the biggest issues with online marketplaces is that buyers and sellers rarely know or trust one another, which often leads to disputes between the two parties. PromisePay aims to fix this issue by providing marketplaces with a payment platform to manage the entire transaction.

The company announced that it has raised an additional $2 million from strategic investors like Mark Harbottle (co-founder of popular design marketplace 99designs), and Cultivation Capital (led by Jim McKelvey, co-founder of Square). PromisePay’s solution allows marketplaces to ditch an in-house payment solution, essentially outsourcing the entire process. Marketplaces can easily integrate features like dispute resolution, escrow, and advanced fraud detection.

Japan’s GMO Internet is often in the news as an investor, but this year the Japanese internet service and online payment provider was the one receiving funds. The firm announced a JPY 8 billion (US$65 million) investment by multinational banking giant Mitsui Sumitomo to strengthen its GMO Payment Gateway ecommerce payment solution and aid the startups that it serves.

Turkey’s Iyzico, which provides a platform to let e-commerce sites and other apps easily accept online payments, has raised a $6.2 million Series B. Leading the round is International Finance Corporation (IFC), the World Bank’s investing arm, while Istanbul-based VC 212, Endeavor Catalyst, and Austria’s Speedinvest also participated. The startup has now raised $9.4 million in total since it was founded in 2012.

According to Forrester, e-commerce market in China will reach $1 trillion in 2019. It became the world’s largest e-Commerce market in 2013 reaching a turnover of $307B. According to Forrester, that figure grew up to $440B in 2014 (9,8% of all retail sales in China). However, according to other analytical companies mentioned in our research, Chinese eCommerce turnover is estimated at $180-$220B. 25% of respondents shop on a mobile phone at least once a week, 15% – once a day, while 4% – several times a day.

TMall (Alibaba) holds 57% of the eCommerce market, holds another 21%. TMall and Taobao (another Alibaba project) combined are holding 85% of mobile commerce market, while their closest competitor has only 7,1% market share.

There’s a myopia blinding e-commerce players to the reality of opportunities in Southeast Asia. Everyone is looking at Asian economies from under the shadow China casts on the economic landscape, which can’t help but obscure the picture. China is one of the most developed markets in e-commerce today and with mobile commerce via WeChat, the dominance of Alipay and the entrenched online shopping behavior it is arguably more developed than Western markets.

However, businesses are, in fact, wasting their time and resources expanding into China and Southeast Asia will be the next gold rush. China’s e-commerce, m-commerce and payments lead the world. But China is, well, China. A less appreciated Asian story is Southeast Asia where approximately 70 percent of residents do not have access to traditional banking services (McKinsey), with card penetration in some markets below 5 percent.

Cash remains the primary means of settlement for online transactions, braking any significant momentum the region’s e-commerce landscape could potentially build. And that is the great challenge and the greater opportunity. With 620 million people, a 400 million-strong middle class by 2020 (Nielsen), 688 million mobile devices, nearly 200 million Internet users and a GDP over US$2.4 trillion, the region’s star is rising fast.

2C2P, a Singapore-headquartered startup, has closed a $7 million Series C round to help solve the complexities across Southeast Asia. The round was provided by Hong Kong-based Amun Capital and GMO Venture Partnersfrom Japan.

It takes the startup at $40 million pre-money, and takes it to $10 million from investors to date. Also 2С2P launched in Myanmar (53 million citizens) first online acquiring platform. Now 900 000 of citizens who hold Union’s cards are able to buy goods and services online. 2C2P is now one of the most prominent startups in Asia.

Omise, a Thailand-based payment enabler, is in the money after it raised a $2.6 million Series A round to develop its payment gateway system and expand across Asia. Two-year-old Omise’s funding was led by Indonesian VC SMDV, with participation from existing investor East Ventures.

500 Tuktuks — 500 Startups’ dedicated fund for Thailand — and, interestingly, Thailand-based mobile operator True completed the line-up. (Working with a telco in Southeast Asia often open doors and scaling opportunities with both partners and consumers.) In Indonesia the most popular method of online payments are manual bank transfers (57%) and cash-on-delivery 28%.

Aliexpress has partnered with DOKU, the largest Indonesian online-payments provider, and launched its services in Indonesia. In 2015 Indonesia is expected to become the largest e-commerce market in Southeast Asia.

We’ve all been privy with the fact that e-commerce growth has broken all boundaries across the globe. The success stories have been equally plausible in India, with the market being pegged at US$22 billion by the end of this year. Consequently, the online payment services market alsi has witnessed a huge growth.

Citrus Pay is a leading online checkout and payment solutions company in India. Headquartered in Mumbai, Citrus is backed by Sequoia Capital and Beenos Asia, a subsidiary of Japanese e-commerce and incubation company Netprice. As per a recent news report, PayPal Founder Pieter Thiel is rumoured to be planning to infuse US$25 million into the company as the fin-tech space is getting hot.

Indian Razorpay follows the way billion-dollar “unicorn” Stripe, offering a very simple interface and gateway for businesses that want to take payments for goods or services online.

Photos: Getty, company profiles

Life.SREDA VC is a global fintech-focused Venture Capital fund with HQ in Singapore