Stripe Expands Payment Options for Sellers
By Greg Holden
Online businesspeople face lots of "either-or" decisions. Either you choose one service provider or another. But online payment services are an "and" rather than an "or" decision - the more choices you offer shoppers in how they can pay you, the higher your conversion rate.
If you don't want to go through the effort of applying for and obtaining a merchant account, or if your customers just don't like using PayPal, a service called Stripe presents an additional option. Like PayPal and other online payment processors, Stripe validates a credit card transaction by sending an authorization request to the cardholder's bank and receiving the funds on behalf of the merchant. It then deducts a fee and transfers the remainder to the merchant, enabling a business to accept credit cards from its customers.
David Edwards, president of New Mexico Tea Company, Inc., says Stripe saves his company some money and gives him a higher level of control than PayPal. He offers both payment options in his online tea store, which is hosted by 3dcart.
"One of the great things about Stripe is there is no monthly fee regardless of if you have an integrated solution or not," he comments. "With our old processor (Authorize.Net) we were paying about $80 a month just in fees that had nothing to do with the actual transactions. While Stripe's rates can be a bit higher when you just compare the percentage of transactions, its actually much lower for us in total cost."
PayPal Payments Standard has no monthly fee; PayPal Payments Advanced costs sellers $5 per month; PayPal Payments Pro carries a monthly fee of $30 for sellers (see PayPal's pricing here). All three options charge sellers 2.9 percent plus 30 cents per transaction - the same as Stripe.
Edwards also likes additional services that Stripe provides for free including the ability to save a customer's credit card for future use, and their acceptance of American Express cards. "If you cancel or refund a transaction, you get your fees back - similar to PayPal, but different than Authorize," he adds.
Stripe has a lot going for it. It's being adopted as a payment platform by many popular ecommerce hosting services, including Ecwid, Weebly, 3DCart, Shopify, BigCommerce, Volusion and Squarespace. Three founders of PayPal - Peter Thiel, Elon Musk, and Max Levchin - are among those who have invested $50 million in the company. There's a definite buzz about the company. In fact, before this article went to press, ReCode reported Twitter was nearing a deal with Stripe to help it accept credit card payments from its users.
Since it was founded less than five years ago, Stripe has grown to process billions of dollars for thousands of merchants. Stripe is becoming popular because of the lack of a monthly fee, the ease of setup, the support for American Express, the level of control sellers have over the payment process - and because it's not PayPal. Some reports state Stripe can be set up on a site in about an hour.
"Rather than redirecting customers to a third-party site (like PayPal or Amazon) for payment, sellers get to own the end-to-end experience," says Stripe co-founder and President John Collison. "Stripe helps sellers manage subscriptions, fraud, third-party payouts, checkout design, and much more." Sellers who don't like their customers having to go to PayPal to complete checkout like the fact that Stripe's payment flow occurs entirely on their own site.
Stripe was founded by Collison and his brother Patrick Collison, who both grew up in rural Ireland at a time when dial-up Internet connections were hard to find. They previously had built web apps, and Patrick helped found the auction and marketplace site Auctomatic, which was eventually purchased by Live Current Media. "Accepting payments was always the hardest part," says John. "So we decided to build something better. We started building Stripe in October 2009, and shortly after that launched a private beta. We released Stripe publicly quite a while after, in September 2011."
Today, Stripe's customer list includes well-known companies like Foursquare and Reddit. Its staff of 80 is located in the Mission District of San Francisco. When asked what Collison likes best about running Stripe, he says:
"In a lot of ways, payments is the last hard infrastructural problem of the Internet. We're bringing more and more people online, but less than 5 percent of global retail spending happens on the Internet today. It's still really hard to move money around the world. Stripe is (gradually) removing barriers to transacting with each other online. That's a lot of fun."
Stripe isn't without its downsides. At this writing, the service is only available to sellers in the U.S. and Canada, the UK, and Ireland (though the service is in private beta in several European countries). And Stripe holds on to a merchant's funds for seven days before releasing them. "This is not an issue with us, because we have a steady business, so each day we have about the same deposit," comments Edwards. "But for some businesses which have fluctuating daily totals, this might mess up their cash flow."
But one seller says even that is a positive. "It is certainly better than Amazon Checkout," says Quincy J. Freeman, who owns QJ3 Speed store, which sells high performance automotive parts and accessories. "Amazon takes about 14-21 days to release funds whereas Stripe releases them in 7 days. I am very happy with Stripe and certainly prefer it over Amazon Checkout."
Learn more about using Stripe to accept payments on your online store on the Stripe website.
About the author:
Greg Holden is EcommerceBytes Contributing Editor. He is a journalist and the author of many books, including "Starting an Online Business For Dummies," "Go Google: 20 Ways to Reach More Customers and Build Revenue with Google Business Tools," and several books about eBay, including "How to Do Everything with Your eBay Business," second edition, and "Secrets of the eBay Millionaires," both published by Osborne-McGraw Hill. Find out more on Greg's website, which includes his blog, a list of his books, and his fiction and biographical writing.
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