Stripe announced at its Sessions developer event this week that it will issue a credit card in 45 countries. This comes one week after the related launch of Stripe Capital. Altogether, it brings the company from payments gateway to lender and, more notably, a step closer to being a one-stop-shop for SMB fintech.
It will be a Visa card with an undisclosed bank as the issuer. Oddly, there will be no late fees, as Stripe will derive revenue instead through per-transaction interchange fees. The company is basing this plan on the belief that won’t need to establish a deterrent for late payments from cardholders.
“We’re not freezing cards based on late or no payments,” Stripe’s Cristina Cordova told TechCrunch. “A pretty common reason for non-payment is that a person switched bank accounts and forgot to update the information. But we think we’ll have fewer problems because we have banking information for accepting revenue, by way of our payments business.”
Count us a bit skeptical that cardholders will play ball and pay on time without the threat of penalty. But it does ring true that Stripe is in a good position to manage risk and do the necessary actuarial work by using reams of SMB financial data at its fingertips. This makes the extension to lender a logical one.
Beyond capability, this move is also driven by standard revenue diversification as Stripe’s core business line matures. In a completely different sector, this was a key theme at Apple’s event yesterday. We see others like Square making similar diversification moves, including its own recent foray into lending.
But an even bigger reason for Stripe’s expansion is, as mentioned, is to create more of a one-stop-shop for SMB fintech. Going a bit deeper on that point, Stripe and others can create a “whole is greater than the sum of its parts,” dynamic with interlocking financial services that feed into each other.
With the addition of lending and a physical credit card, Stripe’s total arsenal now includes its core API for online payments functionality (Stripe Connect), Billing and invoicing, in-person payment (Terminal), fraud prevention (Radar), company incorporation (Atlas), and other analytics products.
This breadth of services can aid retention, which is the lifeblood of subscription-services and SMB Saas. A more diabolical way to look at that is the fact that it creates a locked-in customer that has a high switching cost for core business functionality like accepting payments or access to capital.
Moreover, SMBs like a breadth of offerings. LSA’s Modern Commerce Monitor (MCM) indicates that SMBs prefer single vendors rather than a patchwork of services from several. The mismatch between that aspirational sentiment (79%) and SMBs that actually use 1-2 vendors (38%) signals opportunity.
Beyond the question of one-stop-shop versus patchwork, it’s also notable when talking about SMB fintech that it’s the biggest mover among SMB cloud services. Specifically, SMB cloud adoption of financial services grew 157 percent year-over-year in the MCM survey, fielded by Thrive Analytics.
All of these factors mean we can expect more product rollouts from Stripe. And it’s positioned well to devise that roadmap with precision. The same financial data referenced above can inform the company of its current subscribers’ activities in the aggregate, and the adjacent services that are best to add.
So look out for more product rollouts or integrations with financial software like Quickbooks. We could even see some acquisitions to accelerate capability. And the same could happen with others like Square and (increasingly) Brex as the sector matures, competition intensifies, and as feature wars ratchet up.
Speaking of competition, Stripe is living up to the instant gratification of modern cards such as Apple Card. Similar to Neal Polachek’s recent Apple Card activation, if you get approved for Stripe’s card, you can download it to your Apple Wallet instantly while waiting for the plastic to reach your mailbox.
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