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BFD Expert Voices - Private Credit

BFD Expert Voices

Stripe is making a big push to rapidly expand its product suite and support for third-party processors, an effort that could decouple its broader product offering from its core payment processing business.

Why it matters: That separation will enable Stripe to offer more products to more customers — particularly in the enterprise. 

Driving the news: At its Stripe Tour event in New York on Wednesday, the payments giant announced plans to double the number of third-party payment providers it supports.

At the same time, executives from across the company unveiled updates to a series of products that customers can now access without relying on Stripe for payment processing.

Axios spoke with Will Gaybrick, Stripe's president of product and business, at the event. 

(This interview has been edited for brevity.)

Q: Can you explain why you're focusing so heavily on partnerships and what that means for Stripe's strategic direction?

With major successful B2B companies, like Microsoft or Oracle, there's always a sort of strategic laddering that happens, and it's always user-motivated. 

As we started to focus on enterprises, we heard, "You have to become the best PSP on the market." We worked hard on that, and then the user requests started to evolve.

It turns out that some of the major blockers to their businesses [included] navigating these entrenched multiprocessor environments they have. ... They say, "We want to use your PSP cores, but we can't just rip and replace everything." So that's been the primary motivation. 

A good example of this would be the FreedomPay partnership. It's particularly poignant because we own our own hardware company. But when you are a major enterprise and you have 10,000 POS devices deployed to outlets all over the world ... the idea that you're going to get a new device to every one of your retail locations is tough. 

Q: Based on today's presentation, Stripe's future seems to be focused on everything adjacent to payments rather than just payment processing itself. Am I misreading that?

It's not an abdication of being the world's best PSP. We care desperately about that. But as we go up into the enterprise, sometimes that's not their most feverish ask of us. By all means, we want to process all of their payments, but there's also an infinite problem space. 

[For example], there will be a payment method in Myanmar that we are not supporting with the same fervor as a local processor there. So, the best thing for users is ... just plug that into Stripe's API so we can cover everything.

Q: You announced a partnership with Nvidia this morning. Can you explain what that actually means for your future?

We have been deploying AI across Stripe for years. Every year, internet fraud goes up — and that's being driven by many of the advances in AI — and every year, Radar is more effective at mitigating fraud. 

We have something like 150 models deployed across Stripe right now. So, AI has long been part of our strategy and is only becoming more so. 

But when it comes to working with Nvidia, we use their GPUs, which are the best technology on the market. What they need from us is the best commerce infrastructure to grow their business faster.

Q: In the keynote, you mentioned crypto as one of the foundational changes in the payments space. What's Stripe doing with crypto now?

Today, we shipped the acceptance of stablecoins. Zooming out, I think many crypto protocols are better than existing payment protocols. It's just faster and cheaper. 

Part of the challenge has been consumer adoption. Enabling merchants to accept crypto doesn't really help if no one wants to pay with it. It's a bit of a chicken-and-egg challenge. 

My personal hypothesis is that the adoption you see in more developing countries will pull developed countries into the crypto ecosystem. 

Q: You also announced some interesting new products related to pay-by-bank. What's merchant demand for that these days?

It's very robust, which is part of the challenge. Users have wanted this for a long time, but bank-mediated debit protocols are just bad.

All these debit protocols are fundamentally flawed, because you don't get instant confirmation that the payment will work, and you have unilateral dispute schemes. ... If a consumer says, "I didn't make that payment," it just flips, and there's no way for merchants to say, "Yes, you did."

We're super-excited to start decreasing prices on pay-ins today, supporting pay-by-bank at 2.6% + 30¢.

Underneath the hood, we're using ML to underwrite those transactions. We decide whether to authenticate it or decline it. If that transaction eventually gets reversed, we're on the hook.

So we're taking a money movement protocol that's flawed, and we're enhancing it to make it instantly confirmable. Money settles faster. We take the risk.

Q: Honestly, I was a little surprised by how high that is compared to your standard card processing fees (2.9% + 30¢) and the underlying cost of ACH.

This is where having ML across a giant network comes into play because 4-5% of ACH transactions are reversed four days after they occur.

So, while it may seem that the underlying cost of an ACH transaction is not that much ... when you fully load it with risk, it is much higher than 2.6% + 30¢.

Stripe's big push beyond payments

The payments giant wants to expand its product suite and support for third-party processors

Photo illustration of Will Gaybrick with Stripe's logo repeated.

Photo illustration: Axios Visuals. Photo: Stripe.

Fintech

Stripe is making a big push to rapidly expand its product suite and support for third-party processors, an effort that could decouple its broader product offering from its core payment processing business.Why it matters: That separation will enable Stripe to offer more products to more customers — particularly in the enterprise.

Stripe's big push beyond payments

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