What is Stripe’s Business Model?

Stripe’s business model is based on charging transaction fees to its customers. Stripe offers a payment processing platform with various applications to its customers worldwide.

Since its inception, it has attracted various investors as additional funding options for growth and development.

Stripe initially started with a payment processing application enabling businesses to go online. Since then it has rolled out many advanced revenue-based applications helping businesses to grow beyond payment collections.

Let’s briefly see which business model Stripe uses and how it works.

Stripe’s Transaction Fee Revenue Model:

The transaction fee or Transaction-based revenue business model is one of the most popular ones with SAAS companies. Clients subscribe to different packages and product features and pay fees on each transaction.

Payment processing once was considered a complicated and expensive option by conventional businesses. Thanks to evolving technology and service providers like Stripe, it has now become a norm.

Stripe’s Fee Structure:

Stripe includes payment processing, e-commerce security, fraud protection, invoicing and billing, virtual and physical cards, and many other services to its clients. Most of its application usage gets charged on percentage fee per transaction plus a nominal fixed cost.

Here is a quick break-down of the Stripe fee structure:

Fixed Charges Revenue:

In addition to its transaction based revenue, Stripe also offers fixed cost products to its customers. These fixed costs products also contribute a significant revenue stream for Stripe. Some of the fixed cost applications for Stripe include:

  • Atlas: offering company startups digitally in the US. It costs a one-time charge of $500.
  • Premium Support: that comes with significant monthly charges of $1,800.
  • Terminal: Stripe offers POS card processing machines at $59 and $299.
  • Issuing: the business card providing feature that comes with a 10¢ per virtual card and $3 per physical card fee.

Stripe’s Target Market:

Stripe aims to bring brick-and-mortar business to the e-commerce world. According to their vision statement, only 3% of global commerce GDP belongs to e-commerce. With various payment processing applications and cheaper costs, they aim at a wide-open target market.

Before Stripe, its only competitor and pioneer in digital payment processing was PayPal. The e-commerce economy has developed manifolds in the last decade. Yet, the potential for the e-commerce industry globally is enormous.

Stripe’s Competitive Edge:

Stripe offers sophisticated and tailor-made payment processing solutions to businesses of all sizes. PayPal introduced an online processing platform focused on individuals and retail customers. Stripe’s two-way payment processing tools attracted a large corporate customer base globally.

Although Stripe offers API source and documentation which require a bit of coding skills, it yet remains a powerful edge over its competitors. Another advantage for Stripe remains its open-source coding that others lack to offer.

Stripe offers some powerful applications to its customers that provide it with a competitive edge.

Radar is a dedicated security and fraud prevention tool for e-commerce businesses. Fraudulent transactions costing hefty amounts to businesses pose great challenges with e-commerce platforms.

Atlas turns your idea into a virtual company setup. The offer is initially for setting up a new company in the US only but the attracted revenue of over $200 million promises great prospects.

Premium Support although comes at a hefty cost of $1,800 per month but provides an invaluable and premium customer support experience.

Stripe Investment and Expansion Prospects:

Stripe is still a privately held company with a much awaited IPO. The company has attracted over $1.6 billion of investments in its series of investment calls over the last decade. The company operates in over 40 countries currently.

With a total market valuation estimated at $36 billion currently and an innovative product range, the global expansion for Stripe will likely to pace up. The company may open up investment opportunities through an IPO soon too.

Its business expansion plans are already rolling out with local partners and direct overseas presence globally.