Stripe Business Model | How Does Stripe Make Money?

Stripe is a payment processing platform that earns money by processing transactions. Stripe charges 2.9 percent of each successful transaction plus 30 cents. 

Stripe Billing (Starter and Scale) lets customers plan client invoicing or charging to monitor subscription revenue as a SaaS product. The additional services Connect, Radar, Terminal, and Atlas, are also included.

Stripe is a finance company that provides businesses with easy, fast, and secure online purchasing through product-based business strategies. 

Stripe is a payment processor that allows the integration of payment functionality into websites and mobile applications.

The company’s payment system facilitates online payments by ensuring technological, fraud protection, and banking infrastructure.

Stripe has evolved from a mobile payment processor to a global business powerhouse operating in 130 countries and has a diverse customer base, including multinational companies such as Amazon and Google. In September 2019, the company announced its plans to expand into lending and credit.

What is Stripe?

Stripe is a SaaS startup that creates systems to allow companies to accept and process payments over the Internet. 

Among the company’s full-stack offerings are backend cloud infrastructure, a configurable payments platform, and billing and reporting applications.

Stripe Business Model

The Stripe business model is built around charging consumers a fixed and variable fee for each completed transaction. 

Also, Stripe earns money from startup company formation services, premium support fees, interchange fees, interest on loans, revenues from startup investments, and access to particular software products.

Stripe was founded by two Irish brothers who sold their previous company for $5 million at the ages of 19 and 17, respectively. It is presently the world’s second most valuable private firm, valued at $95 billion.

How Does Stripe Work?

Stripe is a financial software company that helps internet-based companies such as Google and Uber handle payments online.

The company estimates that 3% of global trade now occurs online. The Stripe payment platform aims to simplify the online transaction process – therefore leading to faster growth.

Stripe describes itself as a full-stack provider of payment software. Stripe consists of three layers of payment processing which is explained below:

  • Payment infrastructure built on cloud technology.
  • A payment platform that enables businesses to create unique applications.
  • Prebuilt applications for billing, reporting, and fraud detection, all powered by machine learning.

Stripe provides substantial documentation to its developers and consumers to ensure the best possible experience.

How Does Stripe Make Money?

Stripe earns money by deducting a percentage and a predetermined charge from each transaction that it facilitates. The company offers a variety of pricing packages based on what you buy.

It includes various software and services – such as billing tools, analytics, and fraud prevention – that complement the payment & transaction service. 

A Customised plan is designed for large companies and companies with high volumes of transactions, with a custom price.

Stripe Business Model

All successful transactions are subject to a 2.9 percent commission and a $0.30 fixed fee. In addition, there is a 1% surcharge applied to international transfers (to a total of 3.9%).

In addition to making its money from payment processing fees, Stripe also offers other products and services.

Stripe charges differently for each of the services included in the Integrated Package. Here is a breakdown of the costs by service:

Payments Fees of Stripe

Stripe’s fees are different for different types of payments. Below is a breakdown of various fees related to payment options:

Credit & Debit Cards

The Stripe Integrated plan charges flat fees of 2.9 percent plus 30 cents for every debit or credit card transaction. Stripe’s costs vary depending on your currency and location, so it’s best to double-check your currency or location.

International Cards

Stripe adds a 1% fee for international transactions and currency conversions.

ACH & Bitcoin Fees 

Bitcoin and ACH payments cost 0.8 percent of the transaction value through Stripe. Stripe, however, limits its maximum cost to $5.

Local Payment Methods Fees

The fee is the same as that imposed on card-based purchases.

Customized Plan

Stripe’s Customized Plan is tailored to the needs of organizations with a high volume of transactions, with fees and rates negotiated in advance. 

The plan also allows businesses to bargain and receive higher discounts on their Stripe accounts, ensuring the continued economic viability of both Stripe and your business.

Stripe Billing

Stripe customers can use the Billing application to invoice their customers, monitor their subscription income, and schedule when to charge them. 

Stripe Business Model

The tool is free up to $1 million in value; after that, recurring payments are subject to a 0.5 percent fee.

Customized Plan

Here, there are two plans for Billing:

  • Starter: By charging a 0.5% recurring charge or all invoices sent every billing cycle. Stripe also charges $7 for auto-reconciliation of invoices.
  • Scale: Provides free invoice auto-reconciliation and a connection to NetSuite ERP finance system, but charges 0.8% on recurring charges.

Stripe Connect Platform

Marketplace enterprises can make global payments to their sellers and vendors with Connect. These features include a configurable onboarding process for sellers, the ability to schedule payouts, handle sophisticated money transfers, and integrated financial reporting. The starting price for an account is 0.25% of the volume of transactions.

Stripe Business Model

Stripe Radar

Stripe Radar is a machine learning-based solution that helps clients evade fraud. Whenever a payment is questioned, it is flagged, and its processing is prevented. 

Radar’s direct integration with the platform’s other applications enables it to access rich payment data such as the client’s details, shipping, and billing addresses. The transaction fee for Stripe is 5 cents, but it is waived for customers on the regular plan.

Stripe Terminal

The Stripe Terminal has a physical card reader so businesses can collect payments in person. The company offers two different types of readers, priced at $59 each and $259 each. 

Stripe charges an additional 2.7 percent plus 5 cents for each transaction. In addition, users can monitor and compare transactions immediately by connecting the card reader to Stripe’s other services.

Stripe Sigma

‘Stripe Sigma’ is a data warehouse application developed by Stripe that allows its customers to query transaction data via SQL queries. 

Customers pay a fixed monthly fee for infrastructure. Furthermore, you will be charged a variable fee per credit card charge, starting at two cents per charge.

Stripe Atlas

Stripe Atlas is a cloud-based tool that allows clients to incorporate a business in just minutes. The service facilitates the formation of LLCs and C corporations, the establishment of US bank accounts, the issuance of stocks/shares to co-founders, and the use of startup-specific services (for example, $5,000 in free credits from Amazon Web Services). You must pay a one-time fee of $500.

Premium Support

Stripe Premium Support offers operational and technical support to customers (ranging from early startups to large companies) 24 hours a day, 7 days a week, around the globe. 

You can get help via email, chat, or phone. Starting at $1,800 a month, the service charge grows with the size of the business.


The solution offers a physical credit card as part of the spending management process. Every time a credit card is used, Stripe earns money from interchange fees, which merchants and sellers pay. 

Stripe also charges $3 for issued cards and $15 for lost cards. In addition, there is a currency conversion fee of 1% and $0.30.

Stripe Capital

Stripe Capital allows Stripe’s customers to borrow funds directly from the company. Stripe earns money by charging interest on these loans. The loan amount and other factors (like the firm’s monthly revenue, which indicates its capability to pay off the loan) determine the interest rate.

Last but not least, Stripe makes money when it sells startup shares for more than it paid. Because Stripe has accumulated a lot of data about various businesses (whether they’re its investments or its competitors), it can accurately predict the profitability of an investment opportunity. Since there have been 34 investments, it’s reasonable to assume at least some of them have been profitable.

Stripe Business Model

The Stripe business model is a combination of product- and fee-based – it provides payment solutions as its primary product and charges a fee for each transaction. 

Stripe does not charge a setup fee for its payment solutions. Instead, stripe charges a transaction fee only when a transaction takes place.

Stripe works as follows: 

  • The Stripe integration enables merchants to offer their customers payment solutions integrated into their services.
  • Stripe enables payments to be processed without merchants or third parties ever knowing the customer’s credentials.
  • Stripe accomplishes this by tokenizing its customers’ data. In addition, stripe’s servers ensure that no private customer information is ever divulged, ensuring that the transaction proceeds without delay and that the appropriate organization is billed.

The tokenized approach implies that Stripe is held accountable for payment processing. Still, it also significantly reduces the possibility of risk and fraud, as everything can be traced back to Stripe as the sole entity handling data and payments.

Success Story of Stripe

John and Patrick Collison, two Irish brothers, founded Stripe in 2010. Both brothers were capable of brilliant bursts of creativity in their young lives, paving the way for the founding of  Stripe.

At the age of sixteen, Patrick Collison was named Young Scientist of the Year for his work on the programming language Lisp. Following high school, he attended MIT  to study Computer Science.

Meanwhile, his brother, John, broke the record for Ireland’s highest Leaving Certificate score (the final examination to qualify for university). So he enrolled at Harvard University, two miles away from his brother, to study Computer Science in 2009.

After tiring of life in the Ivy League, Patrick and his brother John cofounded Auctomatic in 2007. Auctomatic is an auction management system that merchants can use on marketplaces such as Amazon or eBay.

Auctomatic was acquired through Live Current Media for $5 million in a few months following Patrick’s joining the batch of Y Combinator 2007 as the Head of Product Engineering.

After two years, he founded Stripe with his brother John (who left Harvard after his first year) and moved on elsewhere.

Y Combinator creator Paul Graham, therefore, invested the startup’s first capital. Patrick became acquainted with Graham through his involvement with Lisp and Auctomatic.

The brothers also met PayPal co-founders Peter Thiel and Elon Musk (among many other companies you may have heard of) in Silicon Valley because everyone is so close.

Consequently, Stripe received an initial investment of $2 million. In the beginning, everything was handled by John and Patrick. They both wrote code and handled customer support tickets.

They needed someone who could lead the organization consistently. In addition, they intended to expand their scope and attract other talents by hiring these individuals. 

Stripe reserved 10% of its stock for this first group of investors, which is unusual for a company of Stripe’s size. Furthermore, it was unusual since most candidates were themselves, previous founders.

Stripe was finally introduced in September 2011. Initially, the service appeared under the name of /dev/payments. However, they had to change the name for a variety of reasons.

The state of Delaware, where the business is incorporated, prohibits the use of slashes in business names. In addition, Amazon already offers a similar service to DevPay. Therefore, the founders had breached naming rights.

In just five months after launching, Stripe has already attracted another round of funding – an $18 million Series A worth $100 million. 

The investment was led by Sequoia Capital, along with Affirm and PayPal co-founder Max  Levchin. The company expanded to Canada later that year, becoming the first international market for the company.

Stripe’s rapid success also allowed it to buy its first company. In March 2013, it acquired Kickoff, a chat and task management platform.

During the next few years, Stripe expanded its product selection at an unprecedented rate. As a result of the large sums of finance raised by its founders and its developer-first culture, the company grew rapidly. 

Despite the high salaries and substantial ownership arrangements, the company was often able to attract world-class talent.

Stripe, however, attracted more than just staff. In addition, it was able to secure some high-profile customers. Some of the first clients were Lyft, Wish, and Kickstarter.

By 2016, Stripe had become so popular that other FinTech behemoths launched similar services. Within months, both PayPal (which had previously invested in Stripe) and Square released payment processing tools.

In 2017, a fascinating acquisition was made. Stripe acquired the business community Indie  Hackers, gaining access to a network of entrepreneurs. In addition, stripe signed up some of the biggest names in technology that year, including Amazon, Facebook, and Uber.

With Stripe’s aggressive expansion in 2018, it had built a foothold in an array of unusual business areas. As a result, it began investing heavily in other businesses, whether they were in the FinTech field or not. 

Stripe’s clients generate tremendous amounts of data, which led to those efforts (and continue to do so). As a result, Stripe can assess how those businesses are performing financially, particularly in comparison to potential competitors.

In particular, the year 2020 was highly prosperous for the company. As a result of Coronavirus, online sales exploded, forcing established businesses to adjust to online sales while increasing revenue from existing clients.

Stripe’s valuation increased from $20 billion at the end of 2019 to $95 billion in its most recent investment round. However, Patrick and John refuse to consider an IPO, even though rumors have circulated for months about an IPO.

The Stripe platform is now used by over one million companies around the globe. In addition, the organization employs around 4,000 people worldwide.

What is the Funding and Valuation of Stripe?

The Crunchbase page for Stripe reports the company has raised $2.2 billion in 15 funding rounds and is currently valued at $95 billion. However, some predict it may reach $95 billion.

What is the Revenue and Profit of Stripe?

Stripe reported total revenue of $7.4 billion in 2020. However, there is no official figure about the profit made by Stripe. 

Is Stripe Safe For Customers?

Stripe is a well-deservedly reputable company when it comes to security. Stripe is a PCI Service  Provider Level 1 certified company, which means it adheres to the most stringent security standards in the industry.

Stripe encrypts all of its services with HTTPS and TLS(SSL), including its public website and dashboard. In addition, credit card data is encrypted, and the decryption keys are stored on different devices.

Nevertheless, no one is perfect. Anyone who discovers and submits a qualified security vulnerability to Stripe’s security team is eligible for an incentive program. The minimum award for major bugs is $500. Vulnerabilities with fewer vulnerabilities may be rewarded with a monetary prize of at least $100.

Stripe offers a sophisticated fraud detection solution called Radar if you continue to be concerned about fraud. 

For most businesses, Radar is overkill, but it uses machine learning to predict which transactions might be fraudulent based on your data and Stripe’s knowledge of the card being used. 

The Radar add-on is free with Stripe accounts that pay the standard fee or available for $0.04/transaction. Chargeback protection is also available for 0.04 percent of each transaction.

In addition, you can use fraud prevention methods such as address verification and CVV  checks.

Also read, How Does HubSpot Make Money?

Key Takeaways from the Stripe Business Model

With headquarters in the United States and Ireland, Stripe provides financial services and software-as-a-service to consumers and businesses. The platform was born out of the difficulties encountered by start-ups in developing a mechanism for accepting client payments.

Stripe generates revenue in a variety of ways. Stripe charges the company 2.9 percent plus 30 cents for each transaction. 

The company also generates revenue from its Billing and Connect offerings. Businesses can use these products to schedule payments, track subscription revenue, and accept Stripe payments directly from their platforms.

Stripe also offers a variety of supplementary services. Two physical payment terminals are available in brick-and-mortar stores. Further, it offers a service for incorporation, which assists startup founders throughout their first few months of business.

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