Visa Invests in Stripe to Prep for the 'Uberization' of Retail
Visa is partnering with and investing in Stripe, fueling the processing startup's international ambitions and product development while giving the card network added juice to build new technology.
"It's about enabling as many players as possible to embed payments in every commerce experience that may be out there," said Richard Crone, a payments consultant, who predicted Visa' stake will become a full acquisition at some point. Visa and Stripe did not comment by deadline, or divulge the size of the stake.
The two companies will power new e-commerce experiences, such as "buy buttons," a popular way to embed payment acceptance into social networking sites and mobile apps. The partnership should also create a pipeline of new payments technology from the two companies, according to a release from Visa.
"This is the 'uberization' of a retailer's application," Crone said. "It's allowing the customer to complete a payment with the retailer's app whether it's a mobile experience or an in-person experience."
Stripe will also be one of the first beta partners to connect to Visa's network through application programming interfaces (APIs) and software development kits (SDKs), or toolboxes that allow developers to connect to other technology. The link between Visa and Stripe will increase developer access to payment and risk management services, Visa's tokenization servicewhich replaces account numbers with one-time-use "tokens" to safeguard payment dataand other technology.
"Stripe has been novel in its simplicity to providing payment APIs to developers in every commerce experience, except for in-person point of sale," Crone said. "Stripe is one of these go-to providers for a simple API for payments."
The startup, which launched publicly in 2011, has also proven adept at enabling payments for social networks, winning several major clients in the space over the past couple of years.
Stripe was valued atvalued at $3.5 billion in December, and partnered with Apple for the release of its mobile payment system, Apple Pay. And the company isone of Alipay's few partners as the Chinese online payment service looks to build relationships with U.S. companies. Stripe was also one of theearly adopters of Bitcoin, enabling its clients to accept the cryptocurrency for payment.
One of Stripe's earliest and most important products is Stripe Connect, which allows businesses to accept credit and debit cards online. Its clients include Lyft, Instacard and Kickstarter. The vendor recently updated Stripe Connect to accommodate international payments, and also added support for managed accounts.
"[Visa's stake] is great news for Stripe. In addition to the actual funding, they get a strong strategic partner that will help them further expand globally," said Zil Bareisis, a senior analyst at Celent.
Visa is bolstering its technology as PayPal has just completed its split from eBay. One of PayPal's longstanding goals is to build an in-store network to complement its electronic transfer business and compete with the card networks.
Visa Checkout, the card network's digital payment system, has the support of 270 financial institutions, 160,000 merchants and 5 million registered users. Visa is also partnering with Verifone to connect Visa's Cybersource to Verifone's technology to create a single source for security, offline and online payments. Visa has additionally made inroads with Apple, which is supporting Visa's token program for Apple Pay.
Adding ties to Stripe improves Visa's ability to reach developers with new payments technology, in much the same way PayPal's 2013 purchase of Braintree improved PayPal's relationship with software developers. MasterCard has also encouraged an open development strategy.
"There's a big upside (in APIs), and we haven't even tapped the biggest potential," Crone said, adding the API market is expanding at a 50% yearly rate.