Two years ago payments startup Stripe launched a new product called Stripe Connect to serve a growing number of marketplace customers. Today the company is launching a new set of capabilities that will enable new marketplace categories and help companies sign up and onboard sellers and service providers to their platforms.
“When Stripe launched in 2011, very early on, one of the fastest growing use cases we saw was companies not accepting money on behalf of themselves but accepting money on behalf of third parties,” co-founder John Collison told me. Those businesses included e-commerce marketplaces, crowdfunding platforms and 1099-style gig economy startups.
In each case, what they had in common was that they needed to build their own systems for managing payments coming in, tracking who earned what and then dealing with all the regulatory and tax implications of making payments out to sellers or service providers. The situation was even more complicated for businesses that operate internationally and need to deal with multiple regulatory regimes and payment endpoints.
Rather than having to each build their own in-house payments teams, Stripe Connect was launched to commoditize all the payments infrastructure needed to serve both sides of a two-sided marketplace. According to Collison, that included building a funds-routing engine, a
payouts engine, onboarding management, receipts verification, as well as compliance and platform operations for U.S. and international regulatory regimes.
With those problems mostly solved, Stripe Connect is looking to tackle some of the more complex issues its marketplace customers face. For instance, not every marketplace has just two sides of a transaction: Increasingly, customers are looking for ways to manage one-to-many payments and many-to-many fund flows. Meanwhile, other customers desired tools that would allow them to hold funds in an escrow-like state or provide direct account debits.
By offering new payment types within Stripe Connect, the company is providing more flexibility around the way payments are routed. Ultimately that will simplify the business logic of some existing customers, but it could also enable new business models to emerge.
The second big addition to Stripe Connect is a new onboarding flow called Express, which customers can use to get sellers and service providers signed up to receive payments. For businesses like Lyft or Postmates, where growing their supply of service providers is critical to providing a high level of service, reducing the friction associated with getting them paid can become a key differentiator.
With Express, those businesses no longer have to manually import their outgoing payment information into Stripe’s platform. Instead, Stripe Connect provides a landing page where sellers or service providers are asked to input their own personal and payment information, which is then connected to the business’ payment system.
That not only shortens the time it takes for service providers to get paid, but it also removes a step in the onboarding process for the marketplace company. “Very small improvements can represent very big gains down the line in getting a marketplace set up,” Collison told me.
For Stripe, that doesn’t just mean making customers happier — it also means driving more payments through its APIs and developer toolkit. And that, ultimately, means more volume and more money for Stripe.