Building your own Airbnb just became radically easier, thanks to Stripe Connect and WePay

We may earn a commission from links on this page.
Patrick Collison, co-founder of Stripe, says his real target is the entire legacy finance industry
Patrick Collison, co-founder of Stripe, says his real target is the entire legacy finance industry
Image: Stripe

Payments company Stripe just unveiled a new service that should make it significantly easier to build startups that depend on turning people into merchants. This class of startup, in which entrepreneurs create marketplaces rather than selling goods themselves, is white hot. Two examples are Airbnb, which helps regular people rent out their apartments to travelers, and Uber, which helps livery drivers sell rides in their cars.

Let’s say you’re a company like Shopify, one of Canada’s fastest growing startups and a beta tester of Stripe’s new service, which is called Stripe Connect. Shopify’s entire business is based on easing the pain for small businesses that want to set up storefronts on the web. Previously, Shopify had two unsavory options for approaching this:

  • force all of its sellers to acquire their own merchant accounts with services like eBay in order to accept credit cards, a non-starter for a site whose business is built on ease of use; or
  • handle all credit card transactions on behalf of its merchants—and then deal with the headache of figuring out who is owed what at the end of every month.

With Stripe Connect, Shopify can offer a payment system to all of its users without their having to sign up individually for Stripe. With just a few clicks, the subsidiary merchants on any marketplace can accept credit cards.

Want to launch your own Airbnb? No problem.

Apartment rental service Airbnb, which is less than five years old but may be worth more than $2 billion, “had to build a mini payments company internally because our product didn’t yet exist,” says Patrick Collison, co-founder of Stripe. That payment service is devoted entirely to collecting funds from renters’ credit cards and then disbursing those funds to the tens of thousands of landlords who advertise their apartments as short-term rentals on its site.

Airbnb has the scale to run its own internal payments company, but most startups don’t. Shoplocket, another Stripe Connect beta tester, is a good example of the sort of business that wouldn’t be possible without this kind of solution. The two-person venture based in Toronto describes itself as an outfit that “makes selling anything online as easy as embedding a Youtube video.” Shoplocket gives merchants embeddable tools to showcase their wares in an attractive fashion anywhere on the web. All of its transactions are now handled by Stripe.

Competition from WePay

Stripe has competition in this endeavor, most notably from Boston-based payments startup WePay, which was founded in 2008. In August the company released tools that make it possible for developers to use WePay in almost exactly the same way they might use Stripe Connect. WePay even offers something like Shopify and Shoplocket, called WePay Stores, which makes it easy for someone to set up an online storefront.

WePay is adding 1,000 merchants a week and processes hundreds of millions of dollars in transactions a year, says co-founder and CEO Bill Clerico, but it’s targeted exclusively at small businesses and sole proprietors. Their core users are nannies, dog walkers, accountants, and smalltime retailers, and the company goes out of its way to provide them with customer service from real human beings.

Whole new classes of startups

All this competition in what might seem like an obscure niche–helping others help others accept credit cards–expands the range of startups that entrepreneurs can launch. For example, let’s say you want to create the Shopify of wine. Well it exists: Blacksquare. It’s powered by Stripe Connect, and it allows individual vintners to sell directly to consumers. Or take invoicing software BallPark, which allows freelancers to track their time, measure their wages, and automatically email the bill to their customers. Now, thanks to StripeConnect, clients can pay freelancers who use BallPark simply by clicking on a payment button embedded in the invoice itself.

Dismembering legacy payments systems

The founders of both Stripe and WePay are gunning for the most visible online payment services company in the US, PayPal, which processed $34.4 billon in payments last quarter. WePay’s strategy has been to capture small businesses through ease of use and customer service, but Stripe’s aims are broader.

“We say that Stripe is not competing with PayPal but really this legacy finance industry,” says Collison. “And when we say that we’re trying to facilitate new kinds of commerce, [Stripe Connect] is exactly what we have in mind.”

Collison likens Stripe Connect to the universal identity systems that you encounter when a website has asks you to log in with your Twitter or Facebook account. By taking care of the “who are you?” portion of signing up for a new service, Twitter and Facebook have become part of the internet’s plumbing, and that’s exactly what Collison has in mind for Stripe. (It’s worth noting that Stripe is even using the same technology as Twitter to accomplish this: the OAuth standard for authorization.)

Stripe Connect also allows users to access all of the payments data generated when they conduct transactions. This could allow developers to integrate such data with the kinds of customer relations management software used to measure how websites, pr and advertising campaigns are performing. It’s a departure from the kind of payments data merchants normally receive from credit card companies in a statement at the end of the month.

The democratization of electronic payments

The way that Stripe and WePay make handling payments dead easy draws comparisons with another business that transformed a once-essential function into something that was cheaper and easier when outsourced. That would be Amazon and its on-demand cloud computing services, which are used by everyone from Instagram to Netflix.

“If [payments] were strategically important to keep in-house, they would,” says Collison. A decade ago, companies thought they had to host their websites themselves with their own servers. Startups are now leaner than ever because they can simply rent time on the cloud in order to serve their websites. Payments are the next piece of the ecommerce puzzle that’s best left in the hands of specialists like Stripe and WePay.