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Online marketing and social media tips for business from Shannon Belew, best-selling author of "Starting an Online Business For Dummies, All-in-One"

Online payment start-up takes a swipe at PayPal

Stripe: Why this online payment processor should matter to you.

If you sell products or services online, you have to accept payments online. But, aside from expensive merchant accounts, the options aren’t as varied as one might expect. PayPal  (thanks in large part to eBay) got a jump on the market and reportedly accounts for a hefty 30 percent of  today’s e-commerce transactions. While others have tried to jump in (Google Wallet, for example), PayPal has held a comfortable foothold – until now. Have you ever heard of Stripe? It’s come onto the scene in a big way.

While the start-up may not have a lot of name recognition, it’s got about 100 million other things going for it. Namely, a newly minted $100 million valuation, following an $18 million investment, according to a report from Bloomberg. The Bloomberg article by Peter Burrows indicates that this type of valuation is certainly not the norm for “such an early-stage company” and is leading others to speculate that the company must have something “red-hot” to warrant that type of funding and valuation. So, what does make Stripe so desirable and why should you pay attention to this San Francisco-based start-up?

For developers, by developers

For starters, the young company bills itself as “payments for developers,” noting that they are founded by developers who are “dedicated to building the best and simplest payment solution for developers.” Okay, so you’ve got code lovers who have made it easy to process credit cards, online. But, there has to be more to warrant 18 million bucks, right?

More than competitively priced

Well, the Stripe solution doesn’t require an online business to have a merchant account or gateway, as is typical. The processing fees are pretty low, too. Currently, Stripe charges 2.19% plus 30 cents, per transaction. That’s the same fee for all cards, including American Express, and for international transactions. There is also zero charge for refunds, chargebacks, or failed transactions. To top it off, there are no contracts and no set-up fees, monthly fees, cancellation/termination fees, or any other “hidden” charges. Right off the bat, that makes Stripe not only competitive, but downright attractive to an online business.

Two words: security and API

But, wait. There’s more. Two things of particular interest about Stripe are: the way PCI security issues are addressed; and the availability of an API (a programming interface that lets you create apps that work with the Stripe solution). Security, particularly PCI compliance, can be a nightmare for an online business – especially a small one that often has limited resources. Stripe essentially handles almost all PCI compliance using a “token” payment method that avoids transactions hitting your server and instead is handled entirely by Stripe’s servers – that means no worries about having card numbers and other sensitive customer payment data stored on your end. Even when using the Stripe API to build forms, the company claims that you avoid most of the PCI requirements when using these payment forms. Speaking of API, Stripe offers an app library for integrating customer forms, customized check-out pages, subscription billing, and more. In other words, there’s a lot of flexibility.

Even with all these great features on the table, it’s hard to say if the company warranted that $18 million investment. Time will tell how much of the payment processing market Stripe can really capture and successfully sustain. For now. it does look like an exciting alternative to PayPal and others and it will be exciting to watch this start-up become a major contender in the space.

If you are a current or previous Stripe customer, especially if you are a small or mid-size online business, we would be interested in hearing about your experience. If you’re willing to share, leave a comment or contact us directly.

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