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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 yesterday, 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.

Go deeper: Read more about Stripe's pay-by-bank plans.

Stripe's big push beyond payments

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

Photo illustration: Axios Visuals. Photo: Stripe.

FlexFactor, a startup tackling lost revenue from payment snafus, raised $16.8 million from Bessemer Ventures, the company tells Axios exclusively.

Why it's the BFD: FlexFactor has a novel approach to rejected payments — it foots the bill if it lets a bad one through.

How it works: Payments fail for reasons ranging from insufficient funds to suspicion of fraud.

FlexFactor's bet is that it can use data and AI to reliably predict in real time whether a payment failure was legitimate, or due to error.

If the data predicts a payment was rejected in error, Miami-based FlexFactor pays on behalf of the end-customer and takes over the recoup process — buying the invoice and taking on the risk itself.

If a card issuer rejects a payment alleging insufficient funds, for example,  FlexFactor may use historical data to judge whether a customer will soon be able to pay the invoice back. If the answer is yes, it takes over the bill and might retry their payment method at a later date.

If it made the wrong call, the loss is its to bear. In return, it charges a percent off each transaction it "saves" from the decline pool.

Behind the scenes: Selling to merchants, FlexFactor makes these calls using a mix of proprietary data, including the historical transactions of its merchants and IP addresses. 

It may also use third-party sources such as credit scores. But CEO Elio Vitucci says the company increasingly finds its own sources to be more predictive.

The entire process is automated, says Vitucci, requiring no additional input from the customer or their bank.

Between the lines: By buying the invoice, FlexFactor can tackle one-off e-commerce payments, rather than subscriptions, on which churn companies have historically focused.

Subscription-based businesses generally have the luxury of time to chase down and retry a customer whose card was rejected, something non-subscription businesses can't do.

Taking over the bill buys FlexFactor time to try to fix the issue causing the failure. For a payment erroneously flagged as fraud, FlexFactor may retry the customer's payment and add information showing the bank that the transaction isn't fraudulent.

By the numbers: FlexFactor limits itself to 15 days to fix the payment issue. After that, it considers the payment a loss. Though Vitucci notes it usually recoups the payment within the first three days.

The company is cash-flow positive, he says, as the end-customer usually pays FlexFactor back before the merchant requires a settlement. The company has, on average, saved 20% to 30% of declined payments.

The company currently caps its transactions at $400.

The big picture: Startups have launched in the hope of tackling the issue of failed payments, and larger companies including Stripe have made it part of their broader product suite.

Bessemer partner Charles Birnbaum says he sees this area squarely as a standalone opportunity, not just a feature, as more merchants are using multiple payments service providers.

"The problem is so complex, so massive. There's different types of merchants, of different type of risk profiles. It's a global opportunity," he says. "We definitely feel that a standalone company can be built here, especially one that is neutral and not exclusively tied to one payment service provider."

FlexFactor's $16.8M Series A

Illustration of a phone dispensing money.

🪙 Stripe reinstated crypto support, allowing businesses to accept USDC from customers in more than 150 countries. (Decrypt)

💰 Ripple is launching a crypto custody service for banks and fintechs. (CNBC)

🏦 TD Bank will pay $3 billion in penalties and accept limits on growth as part of a settlement with U.S. regulators. (WSJ)

💳 Revolut Business partnered with Amex to enable merchants in the U.K. to accept American Express payments. (PYMNTS)

Credit score

Illustration of positive and negative trend lines coming out of center point.

Go deeper into our full database with the Axios Pro Deals Tracker.

• Imprint, a NY-based co-branded credit card startup, raised $75m in Series C funding led by Khosla Ventures, with participation from investors including Thrive Capital, Kleiner Perkins and Ribbit Capital. It values the firm at $600m. Go deeper

• Qantev, a French health insurance claims platform, raised €30m in Series B funding. Blossom Capital led and was joined by Omnes, Raise Ventures and Elaia. Go deeper

• Delta, a blockchain network focused on decentralized applications, raised $11m from investors including Figment Capital, Maven 11, Variant and DBA. Go deeper

• AtVenu, a San Clemente, Calif.-based live event payment processor, raised $130m in equity funding from Sixth Street. Go deeper

• TA Associates agreed to buy a majority stake in Solifi, a Minneapolis secured finance software firm, from Thoma Bravo. Thoma Bravo still retains a stake. solifi.com

• Victory Live, a Clearlake Capital Group portfolio company, acquired Logitix, a Boca Raton, Fla., live event ticketing tech provider, from ZMC. victorylive.com

• Warburg Pincus is pursuing a sale of a majority stake in Kestra Holdings, a $117bn network of RIAs and broker-dealers, per Citywire. Go deeper

• Pockit, a Prepaid card startup, agreed to acquire U.K.-based challenger bank Monese, which had raised some $200m and was once valued at around $500m. Go deeper

• Banked, a British pay-by-bank provider, acquired Australian payment technology firm Waave. Go deeper

Deals!

• Gyubin Kim, former head of product, has been appointed CEO of Toss Securities. Former chief exec Seungyeon Kim stepped down citing personal reasons. Go deeper

• Eric Noll, former CEO of Stone Ridge Capital Partners, joined FusionIQ as CEO. Go deeper

It's Personnel

"The scariest moment I had in 2008 was in 2007." 

 Lloyd Blankfein on the financial crisis, speaking at Stripe Tour NY

💬 Quote of the day

🇬🇧 @Lucinda is looking forward to meeting folks in London next week. 

⚾ @Ryan is over the Phillies and ready to be disappointed by a different local sports team.

Thanks to George Moriarty and Rob Reinalda for today's edits.

And thanks to you for reading this edition of Fintech Deals. Please tell your fintech friends and long-suffering fans about this newsletter. They can sign up here.

1 big thing: Stripe's big push beyond payments

2.    The BFD: FlexFactor's $16.8M Series A

3. Credit score

4. Deals!

5. It's Personnel

6. 💬 Quote of the day

October 10, 2024

1 big thing: Stripe's big push beyond payments