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Business Operations Business Models

How Does Stripe Make Money (Business and Revenue Model)

The Stripe business model

How Does Stripe Make Money?
Here’s what you should know:
  • What is Stripe, and how does Stripe work?
  • How does Stripe make money?
  • Payment Processing Fees (4 types)
  • Atlas (Company Formation)
  • Stripe Capital (Business Loans)
  • Stripe Corporate Card (Credit Card)
  • Issuing (Create Cards For Your Business)
  • Radar (Fraud & Risk Management)
  • Treasury (Banking-as-a-service)
  • Sigma (Custom Reports)
  • Selling Hardware To Support In-Person Payments
  • Premium Support
  • What is the Stripe business and revenue model?
  • Stripe’s funding and valuation
  • Stripe’s profit and revenue

So you use Stripe and wonder “How does Stripe make money?” Here is a full, in-depth, breakdown of their ten (10) revenue streams and the different products and services they offer, as well as the Stripe business model, their year-over-year revenue, and how Stripe works.

What is Stripe, and how does Stripe work?

Stripe is a financial service company that calls itself the “payments infrastructure for the internet” by providing the payment software and infrastructure for any business’s revenue model. Handling e-commerce transactions, recurring billing, marketplaces, in-person payments, and more.

Founded in 2010 by brothers, Patrick Collison and John Collison, Stripe is taking strides toward becoming the biggest payment provider with a valuation of $36 billion while others speculate it could and could be as high as $100 billion.

Some of Stripe’s competitors include Square, Afterpay, Affirm, Klarna, Cash App, PayPal, Zelle, Venmo, and other financial service companies.

Stripe in Apple App Store | Stripe Business Model | How Does Stripe Make Money?
Source: Apple App Store

How does Stripe make money?

According to Stripe’s website, they say the company processes “hundreds of billions of dollars each year for startups to Fortune 500s” and “more than 250 million API requests per day.”

To give some context to how much that is, Stripe also makes note that “90% of U.S. adults have bought from businesses using Stripe.”

Another thing to make note of is, based on the data we pulled from BuiltWith, we found that over 2.8 million websites worldwide are using Stripe. Giving them a 5% market share in the “Payments” category for every website on the internet.

So, with a 5% market share and processing hundreds of billions of dollars each year, how does that translate into revenue?

Below is a detailed breakdown of every product Stripe offers and how much money they make from each service.

Here are the 10 ways of how Stripe makes money (in 2021):

Stripe has a revenue model that makes money in ten (10) ways.

Stripe Products | How Does Stripe Make Money?
Source: Stripe

#1. Payment Processing Fees (4 types)

As a financial service, the bulk of Stripes’ revenue comes from payment processing fees. Known as the “payments infrastructure for the internet,” they handle payment transactions fit for any business model.

The four (4) payment processing products they have are payments, billing, connect, and terminal. Each payment processing infrastructure product has its own set of fees, laid out below.

Payments is for online transactions and is the most popular payment type. Payments is used by clients like Amazon, Shopify, Insacart, etc.

  • Per successful card charge: 2.9% + $0.30, plus +1% for international cards and 1% if currency conversion is required
  • Instant payouts: 1% of instant payout volume ($0.50 minimum)

Billing is for subscriptions and invoicing. A payment infrastructure for companies with recurring revenue business models such as software as a service (SaaS) companies. Billing is used by clients like Meetup, Postmates, Slack, etc.

  • Starter: 0.5% of recurring charges
  • Scale: Starting at 0.8% of recurring charges

Connect is for platforms and marketplaces that need a payment infrastructure to pay their third-party sellers. Connect is used by clients like Lyft, DoorDash, Salesforce, Shopify, etc.

  • Standard: free
  • Express: $2 per monthly active account, plus 0.25% + 25¢ per payout sent

Terminal is for in-person point of sale (POS) payments. Terminal is used by clients like ShowClix, Warby Parker, and atVenu.

  • In-person card processing: 2.7% + $0.05 per successful card charge
  • International payments: 1% for international cards, plus an additional 1% if currency conversion is required

Note: Stripe Terminal only works with the hardware they sell (chip readers, test cards, charging cradles, connector cables, power adaptors, etc.)

#2. Atlas (Company Formation)

Stripe Atlas is a service offered to set up, incorporate, and assist with maintaining your startup business for you.

They incorporate the business in Deleware, integrate your business up with their payment infrastructures, and give free credits and discounts from partnering businesses like Amazon Web Services, legal and accounting firms, to get your company off the ground.

Cost:

  • Setup fee: $500
  • Ongoing costs: Delaware registered agent ($100 per year), corporate tax prep (starts at $250 per year), Delaware tax filing (starts at $225), and business bank account
Source: Stripe

#3. Stripe Capital (Business Loans)

Stripe has also branched out into becoming a lending company with a service of theirs called Stripe Capital.

The way Stripe Capital works is: you only pay a loan fee, also known as an origination fee. No interest and the repayment rate and amount are based on the company’s sales volume.

Loan Fee:

  • 10% of loan
Stripe Capital | Stripe Business Model
Source: Stripe

Note: Most origination fees are typically 0.5% to 1% of the loan amount. So Stripe is making up for the interest-free loans by increasing the origination fee of the loan by about 9% to 9.5%.

#4. Issuing (Create Cards For Your Business)

Stripe Issuing is a service that offers businesses the option to create cards for their business and its employees.

Cost:

  • Card creation: $0.10 per virtual card, $3 per physical card
  • Card transactions: the first $500K in card transactions are free, 0.2% + $0.20 for every transaction after that
  • International payments: 1% + $0.30 for international transactions, plus 1% for currency conversions
  • Disputes: $15 per lost dispute
Source: Stripe

#5. Radar (Fraud & Risk Management)

Stripe Radar is a service Stripe offers that can help businesses detect and identify fraudulent charges on purchases and is used by companies like Kickstarter, Instacart, OpenTable, and Fitbit.

Cost:

  • $0.05 per screened transaction*

* Waived for accounts using Stripe Payments

#6. Stripe Corporate Card (Credit Card)

Stripe also has its own credit card for businesses called Corporate Card that is interest-free and earns 1.5% cashback on every business purchase, across all categories.

This is a charge card, so it must be paid off in full each month. Interest, late fees, and penalties are unknown if the balance is not paid in full at the end of the month.

Stripe Corperate Card | Stripe Revenue Model
Source: Stripe

* Stripe Corporate Card is currently U.S. invite only

#7. Treasury (Banking-as-a-service)

Treasury is an invite-only service that provides companies with the infrastructure to embed banking services, such as interest-earning accounts, onto its platform for their customers to use.

Note: An example of a company that uses this service would be Shopify’s, Shopify Balance.

#8. Sigma (Custom Reports)

Stripe Sigma is used for business operations, finance, data analysis, and product management to quickly analyze Stripe data and to help teams get faster insights into their business.

Sigma is used by companies like Slack and ClickFunnels.

Cost:

  • $0.02 – $0.014 per charge + $10 – $100 infrastructure fee

#9. Selling Hardware To Support In-Person Payments

Stripe also sells chip readers and other accessories like test cards, charging cradles, connector cables, and power adaptors for Terminal, their in-person point of sale payments option.

Cost:

  • Products range from $5 to $299
Stripe Chip Readers | How Does Stripe Make Money?
Source: Stripe

#10. Premium Support

All Stripe customers have access to standard support at no cost. But, if you want prioritized, on-demand support in the dashboard, customers can upgrade to premium support at a cost.

Cost:

  • Starting at $1,800 per month

What is the Stripe business and revenue model?

Stripe makes money through a few revenue models that they combine within their company, they are:

  • Infrastructure as a service (IaaS) business model
  • Fee-for-service (FFS) business model
  • Pay-per-use business model
  • Transaction-based business model
  • Freemium (upselling) business model
  • Interest revenue model
  • Mergers & acquisitions (M&A) business model
  • B2B2C (partnerships) business model
  • Business-to-business (B2B) revenue model

Stripe’s funding and valuation

According to Stripe’s Crunchbase profile, Stripe has raised $1.6 billion over 14 rounds and a valuation that currently sits at $36 billion while others speculate it could and could be as high as $100 billion.

Stripe’s profit and revenue

It’s reported that Stripe’s revenue was $450 Million* in 2019, though we suspect it to be well over a billion by now.

*Stripe has not released any official numbers.