Stripe’s investments take it deeper into financial services
Stripe’s large and quickly expanding valuation enable it to forge connections among many sources of innovation, placing even more pressure on traditional technology providers and financial institutions.
It’s leading a $40 million investment in Rapyd, an amount far below Stripe’s own $22 billion valuation, but an investment than can expand technology that serves many major fintech movements at once, touching the gig economy, financial inclusion, e-commerce, and local payment processing in different countries.
The investment comes amid consolidation in the traditional merchant acquiring and financial services IT industries as Fiserv has agreed to buy First Data, a move that's likely to spur more deals. PayPal and Square, which are more direct rivals to Stripe, are also expanding beyond their core payment businesses to become broader merchant providers by adding credit and other encroachments into banking.
Rapyd has a mix of bank partnerships and diverse technology that could branch out with Stripe and General Catalyst's financial support and potential collaboration. Stripe can also continue its own diversification via Rapyd's products.
"Fiserv buys First Data, and Stripe invests in Rapyd. Payments capabilities [are] redefining what it means to be a core processor," said Richard Crone, a payments consultant, who says Stripe's investment is a competitive threat to both traditional financial services technology companies as well as smaller niche players.
General Catalyst, one of Stripe’s investors, is also part of the Rapyd investment. General Catalyst has been a collaborator with Stripe through a joint platform fintech fund for about four years.
“Rapyd is bridging the gap between robust economies and an increasingly important group of stakeholders in global commerce: the unbanked and the non-credit/debit card economy,” said Adam Valkin, managing director of General Catalyst, which has also invested in Gusto, Fundbox, Monzo, Cadre and others.
Rapyd’s fees are 3.5 percent plus 30 cents for "funds in" transactions; with different fees for other functions such as a $1.50 plus one percent fee for "funds out" that competes with MoneyGram, Western Union, and PayPal's Xoom.
Rapyd also has more than 100 bank partnerships, which could provide Stripe insight into how to gain access to the global banking system without becoming a bank, according to Crone.
"Think of Rapyd as a payments facilitator for alternative methods of payments, such as cash, bank transfers, e-wallets, local cards and other localized payments," Crone said.
Rapyd provides funds collection, disbursements, compliance, foreign exchange, card issuing and integration for clients in the gig economy, e-commerce, online banking, lending, remittance and travel. Rapyd will use the $40 million investment to expand its range of businesses and tools.
“There’s not just one capability but a variety of things,” said Arik Shtilman, founder and CEO of Rapyd, adding the mix of products serve use cases such as a ride sharing app that’s adding other services beyond collections. “A driver can pay utility bills, or use a cardless ATM network, or physical point of sale.”
Stripe’s expansive valuation and client base give it access to disparate tools, such as Google’s advertising and potential collaborations with Uber.
By investing in a broad toolkit like Rapyd, Stripe and General Catalyst can boost services to online marketplaces that sell across borders. They can also support gig economy apps and financial inclusion fintechs that have complex payment needs that cover digital channels, cards and cash.
“As global e-commerce merchants, sharing and gig economy marketplaces, banks, and telcos expand their global footprint, they face considerable challenges: making and receiving payments in hundreds of countries and currencies; navigating regulatory environments; supporting the locally-preferred payment methods,” Valkin said.
Rapyd and Stripe currently do not have direct product development collaboration, said Shtilman.
“In regards to the future, payments is a ‘co-opetition’ market which reflects the nature of the business," Shtilman said. "As Rapyd builds out its ‘network of networks,’ we have designed a partnership model that supports collaboration and growth.”
Stripe would not comment beyond the release, which said Rapyd addresses a growing market opportunity around local and cross-border use cases that require local payment methods.