How Stripe can win the payments war in Asia

Disclaimer: I am not an employee of Stripe – this piece was written out of excitement for the product and an intellectual fascination with the payments ecosystem.

Stripe is one of the most beloved startups in Silicon Valley, and understandably so. The breakthrough innovation is Stripe’s remarkably easy-to-use, developer-friendly APIs for handling online and mobile payments. It’s taking on mammoth incumbent Paypal in a fiercely competitive, winner-takes-all industry where players live and die by transaction volume.

It’s backed by Silicon Valley heavyweights Sequoia, Andreessen Horowitz, Khosla Ventures, and PayPal co-founders Peter Thiel, Elon Musk, and Max Levchin. Stripe has been a definitive success in the US, but it’s looking beyond those borders in its next phase of growth. Asia is a clear contender – it has about half of the world’s smartphone users and is predicted to see the fastest e-commerce growth in the world in the years to come. But before we talk future plans, let’s take a moment to understand the present:

5 things about Stripe & the current state of payments

1. Payments has many pains

Dealing with payments is notoriously complex and time-consuming for Internet companies (called “merchants” in the payments world). Enter Stripe with its secure, easy-to-use APIs, which reduces merchant setup and integration time to a matter of minutes, thanks to instant approval and clear documentation for developers. Stripe has also simplified the fee structure to a set 2.9% + 0.30 per transaction (note: fees are different in international markets) and promises no setup fees.

Merchants also struggle with abandoned shopping carts on mobile, so Stripe rolled out a one-click, seamless checkout experience that promises higher cart to payment conversion rates, along with a clear dashboard and analytics for merchants. The recent launch of Stripe Relay lets merchants customize the payment interface to their business so customers can pay without ever leaving the merchant site. These features are important for anyone who’s ever tried booking the last plane ticket available and lost Internet connection as the page was redirecting.

2. Now’s the time

PayPal was the disruptor in the dot-com era, but we are now in a mobile-first world with double-digit growth in smartphone ownership in the emerging markets. This means high tide for mobile payments: as income levels rise in Asia, Africa, and Latin America, mobile-first transaction volume will accelerate. Not to mention the Internet companies that don’t even exist yet but are bound to have payment needs as traditional industries come online.

An ever-expanding market is a good place to be, but credit card ownership remains below 10% in much of Southeast Asia due to underdeveloped financial services  and stringent requirements for credit approval. Non-card based transactions (e.g., bank transfers, cash on delivery, mobile money) are far more common in the emerging markets.

3. But the winner takes all

Sounds like a world of opportunity right? It is…but it isn’t. Since the business model is a simple fee per transaction, volume is key. Currently competition is fierce between Stripe and Braintree, which was acquired by PayPal in 2013 for $800M. Both companies have positioned themselves as the go-to gateway for Internet-based payments, and now it’s a war to acquire merchants for transaction volume.

How to win Asia