Coronavirus paves a path for Stripe's latest fintech investment
Payments technology is a relative bright spot as coronavirus’ economic fears hit venture capital, since an emergency can be a catalyst for early-stage innovation designed to ease digital commerce.
Stripe on Thursday made a $20 million Series A investment in Fast, an investment more noteworthy for its timing than its size or the company's recognition. The San Francisco-based Fast is one year old.
Fast's attempt to build a universal multi-merchant buy button describes a slow trend in shopping and payments that’s become an urgent need.
Fast says it's a B2B2C company. Sellers add a Fast checkout button to their e-commerce page. Clicking Fast prompts the user to enter their name, phone number, card information and email. Fast stores these credentials for that device for future “Fast” checkouts at other merchants.
The platform needs lots of merchants to make that work, which is something Stripe can provide. Stripe has built an international network of merchants that use its technology to support card-not-present payments, enough for Stripe’s valuation to expand past $35 billion. Stripe's growth has given it a wide reach and influence over merchant technology, and has made Stripe a competitor to the large payment processors that have also built their networks by teaming with bank technology providers over the past year.
Fast could become the front end for Stripe, creating a multiplier effect that would make Fast a universal buy button, at least for Stripe-influenced merchants.
“Stripe’s job is to make it easier to accept payments. Our job is to make it easier to make payments and for consumers to interact with all companies online,” said Domm Holland, co-founder of Fast.
Most internet transactions are “one to one,” Holland argues. “Stripe touches almost every consumer who shops online,” Holland said. Holland did not detail an automatic link between Fast and Stripe, yet there would be considerable synergy. Stripe reports it has millions of companies in 120 countries in its network.
The card networks are also trying to streamline online checkout by offering their universal buy button for digital payments. Stripe’s investment in Fast gives Stripe the ability to provide an alternative, and a way to compete with PayPal for a growing share of online merchant payments.
The competition to build universal buy buttons comes against a backdrop of a sudden closure of brick and mortar stores, a spike in online buying and an expected market decline for public and private investment in financial technology.
“Fast is taking a novel approach to improving the login and checkout process for online businesses. We support their vision to remove friction from internet commerce wherever possible,” said Jordan Angelos, head of corporate development at Stripe, in an email.
Like the general stock market, fintech funding faces a sudden downturn, with most sectors expected to suffer for at least the next few months. Most financial services professionals expect a negative impact to their business due to the virus, according to research from Arizent, PaymentsSource's parent company.
Of the six categories of fintech Rosenblatt Securities covers, payments technology companies are the best positioned fintechs to navigate the crisis given the need for digital transaction technology and the corporate structure of most payment technology companies.
“The economic lockdown will hurt overall payment volume, but P2P and digital are the saving grace,” said Dushyant Shawrawat, director of fintech investment banking at Rosenblatt Securities, during a conference call. The firm forecasts weakness and potential consolidations for fintech challenger banks, alternative lenders, digital lenders and capital markets, but says payment technology firms have lower cost pressures and flexibilities due to their business models. “The long term value proposition for payments technology continues to be robust.”
Beyond e-commerce, the crisis has exposed other payment technology gaps. Many businesses, for example, centralize their corporate payments, leaving them scrambling to respond when staff were forced to work from home.
There’s also an opportunity in health care and insurance payments. Health care payments often remain paper-based, creating further complexity as the overall health crisis advances.
“We’re hearing about people who have been printing checks, who have had work from home orders,” said Brent Young, CEO of Dream Payments, a Toronto B2B fintech. Dream’s backers include Real Ventures, a Toronto-based VC firm.
“After the health crisis, we think there will be an acceleration since many insurance carriers for example, should have digitized their claims payments,” Young said.