Where Stripe’s new mega-valuation places it among payment companies

Patrick Collison.
Patrick Collison.
Image: Reuters/Brendan McDermid
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Stripe’s valuation has more than doubled from a year ago to $95 billion, putting the fintech into the upper echelons of the world’s most valuable payment companies.

Despite the highflying fundraising round, age still comes before beauty in the business of digital transactions. At 11 years old, the quickly diversifying Stripe can hardly be called a startup any longer, but it’s still much younger than Visa, the credit card network, and PayPal, which pioneered payments for online commerce, each of which have market capitalizations in the hundreds of billions. It can take many years to build a payments network, but the companies that avoid disruption long enough to do so can become profoundly valuable, with massive protective moats around their businesses.

Stripe made its name by targeting developers and making it easier for companies to get paid over the internet. But its executives say their goals are loftier than that: As it tacks on things like treasury and banking services, Stripe says its ambition is to “to increase the GDP of the internet” and build the “economic infrastructure” of the online world.

Investors enamored with payments before the pandemic are even more in love now

Widespread lockdowns around the world have accelerated the shift to online shopping and digital payments. During the first half of 2020, US online retail spending hit $347 billion, according to McKinsey (pdf), a 30% jump from the same period in 2019.

“The shift to paying digitally and online—we are absolutely certain that it’s a shift that’s never going to shift back,” says Per Roman, managing partner and co-founder of investment firm GP Bullhound. The company has investments in Klarna, the online lending company, and the digital wallet Revolut.

“Stripe right now has become one of these darlings, if you will—if you’re a public fund manager, you want exposure to the space, you will buy into this story,” Roman said. “Do I think they’re the best game in town? Not necessarily. But are they a very strong and credible player? Absolutely, yes.”

Over the years, Amsterdam-based payment company Adyen and San Francisco-based Stripe have jockeyed for the higher valuation, but Stripe’s latest funding round puts it well ahead of its European rival. When it comes to merchant payments, Stripe and Adyen “lead the pack,” according to a report in September by Forrester. The research firm gave Stripe a slight edge when it comes to current offerings and strategy.