Stripe’s big global moment won't be currencies -- it will be more countries
Yesterday, PayPal competitor Stripe announced it could now process payments in 139 currencies. That was a big leap for the startup, which previously could only handle four currencies--euros, US dollars, Canadian dollars, and British pounds. Per usual, most of the industry press covered the news excitedly, with headlines "Stripe steps up international expansion” "Stripe goes global" and Stripe launches currencies to "power global business."
Certainly it was a big announcement for the company, following close on the heels of its recent $80 million funding round. It's also an important benchmark, one that will make it more attractive to potential merchants. But what it shouldn't be mistaken for is the scaling step that will dramatically change Stripe's reach across the globe.
Stripe's big global moment won't be when it starts processing more currencies -- it will be when it starts processing payments in more countries.
At the moment businesses that want to process their payments through Stripe can only do so if the business itself is in one of twelve countries listed here, support for eight of which are in beta. The countries currently supported stretch from Canada to Belgium to Australia, but they some things very clear in common. The only merchants that can use Stripe are in English speaking or Western European nations.
By adding 135 currencies, Stripe is allowing the businesses who already use it -- only in those twelve countries -- to accept payments from customers all across the world. If you live in the United Arab Emirates and love One Kings Lane products, you can now pay in dirhams for them (that doesn’t mean One Kings Lane will ship it to you there, but that’s a different issue).
For the businesses using Stripe, particularly the small ones, that's impactful. They can expand their international customer base without having to manually set up a partnership with a foreign bank to do currency conversions. Stripe has developed relationships with foreign banks for you, and seamlessly worked the conversion into its API.
But while this expands the companies’ international reach, Stripe's own international reach is unchanged. Stripe’s customers aren’t consumers -- they’re the businesses that sell to consumers. Although accepting more currencies will increase the amount of payments processed annually through Stripe, it isn't the huge global expansion of the business that media made it out to be.
The news of Stripe’s added currencies also isn't that exciting for the startup’s B2B2C businesses that use it to facilitate a process for other merchants. For example, an online store creator like Shopify is limited in the merchants they themselves can help with Stripe. They can only use Stripe to process payments for companies based in the twelve countries. If Shopify has a small-business merchant that wants to use Shopify's product in China, for example, Shopify has to route them through another payments processing company instead.
As a result, Stripe loses out on a chunk of the B2B2C processing it could be doing, in addition to losing out on international merchants.
Since its inception Stripe has been tentative about its global expansion, hesitant to leap before looking. The company has expressed that it wants to get everything perfect so that the technology is as effortless to implement for its international customers as it is for its American ones. As a result, it has resisted expanding quickly abroad until it has its own partnerships and agreements with banks and regulators in each country. That way, international companies that implement Stripe don't have to go through any special application or vetting process. They just add the API and it will meet their needs. As one might imagine, striking deals with foreign regulators and banks is slow going.
Stripe also does research in each new market before it enters it, so it's prepared for cultural payment differences. For example, in Germany credit card use is far less frequent so Stripe wanted to make sure its technology could handle other payment options -- like debit cards.
It dabbled in the foreign market by moving into Canada first in 2012, then England and Ireland in 2013 along with betas in the other eight countries. But it hasn't managed to expand to the rest of the world yet.
That slow and steady tactic can be seen in its approach to currencies too. One of Stripe's biggest competitors, Braintree, has been processing payments in more than 130 currencies for some time now. That made Braintree an obvious choice for companies that needed to accept international payments. Stripe missed out on that business by taking its time.
Now that Stripe does allow multiple currencies, the difference between it and Braintree's implementation is clear. Stripe's is instantaneous. Its website tells merchants, "You don’t need to do anything to enable this in your account—you can simply start passing the currencies throughout the API."
In contrast, on its support page Braintree cautions potential merchants that "Processing payments worldwide can be complicated" and that they'll need to go through a "paperwork and setup" process with an account manager to enable currency conversion.
That said, there's a lingering question: Will the time Stripe spent getting the product perfect irreversibly hurt the company? By waiting, it has allowed its competitors to snatch up businesses that needed international currency conversion. It has lost out on revenue in the process. Businesses that built a system on top of a competitor are unlikely to switch now just because Stripe has finally enabled other currencies.
Perhaps if Stripe was in a different industry, it wouldn't matter if it lost initial business by moving slowly. It could make up for it down the line. But in the online payments space, the "winner" will take all -- or most. Enterprises are more likely to trust bigger payments processing businesses that are guaranteed to be around for some time. If Stripe's competitors get much bigger faster, and do the job well enough, then Stripe will have a lot of persuading to do to convince big companies that it's the safer bet.