From: allin
Stripe is a company that has been operating for over 10 years, primarily known for processing payments [00:04:32]. While initially focused on startups, Stripe’s services expanded to include large enterprises like Hertz, Amazon, and Ford, as it became clear that payment systems were “broken for everyone” [00:05:15]. The company processes over $1 trillion annually, representing approximately 1% of global GDP [00:05:35]. Stripe currently employs 10,000 people [00:04:56].
Business Evolution Beyond Payments
While commonly perceived as solely a payments company, payments remain its largest line of business [00:06:10]. Stripe’s broader realization is that all money movement is transitioning from manual to software orchestration [00:06:20]. This has led Stripe to expand its offerings based on customer demand, including:
- Lending [00:06:39]
- Card issuance [00:06:41]
- Treasury and money storage [00:06:42]
- Cross-border money movement [00:06:43]
Embrace of Stablecoins
Stripe has invested in stablecoins, viewing them as a “really useful” development in the financial landscape [00:06:50].
- Past Experience with Bitcoin: Bitcoin was attempted as a payment method on Stripe, but it proved slow, expensive, and lacked dollar denomination, making it less effective for transactions, though good as a store of value [00:07:04].
- Current Stablecoin Strategy: Stripe acquired Bridge, a company building stablecoin infrastructure, which is primarily a set of software APIs [00:12:02]. Stablecoins are now proving effective, especially on platforms like Ethereum L2 or Solana [00:07:22].
- Primary Use Cases: Stablecoins see the most adoption in cross-border contexts, such as corporate treasury management and remittances [00:08:08]. They also allow consumers in other countries, particularly those with less stable or inflationary currencies (e.g., Nigeria), to hold US dollar balances, a service previously inaccessible to them at small scales [00:09:48]. This analogizes to the eurodollar system of the 70s and 80s but without the high barrier to entry [00:10:21].
- Impact on Dollar Supremacy: The ability to regulate US-backed stablecoins like USDC means they must buy treasuries, which contributes to dollar supremacy [00:11:14].
- Challenges to Legacy Payment Networks: Stablecoins primarily impact cross-border transactions, where traditional bank transfers are slow and expensive [00:13:00]. In the US, domestic bank transfers are “fine,” so the immediate need for stablecoins isn’t as pressing [00:12:47]. Visa and Mastercard’s dominance is largely due to interchange fees flowing back to issuing banks and then to consumers as card rewards and credit, making it a complex system to disrupt without affecting consumer benefits [00:09:00].
Tackling B2B Inefficiency
Stripe is also addressing the inefficiency of B2B transactions through products like Stripe Billing, which recently surpassed half a billion in ARR [00:13:50]. Businesses often lose 1-3% of revenue to accounts payable (AP) and accounts receivable (AR) processes due to manual reconciliation and inefficient systems [00:13:23].
Network Effects and Fraud Reduction
A significant value proposition for Stripe is its role as a reputation network across the internet economy [00:18:19].
- Customer Recognition: 93% of the time, Stripe has seen a credit card before when a user makes a purchase from a Stripe merchant, allowing the merchant to trust the end-user [00:18:29]. Unseen email addresses or phone numbers can be suspicious [00:18:42].
- Cost of Fraud: Most businesses lose more money to fraud than to pure transaction costs [00:19:40]. Fraud problems are worsening due to ML, AI, and globalization, leading to indirect costs like hostile consumer experiences (e.g., security checks) [00:20:05]. Stripe’s fraud rates are down 80% due to its network effects [00:20:19].
- Future Fee Reduction: As more counterparties become part of the Stripe network, fees can be reduced, primarily by decreasing fraud through known counterparties [00:14:47].
Economic Sentiment Insights
Stripe holds a large dataset reflecting a significant portion of the global economy [00:15:21]. While they have considered publishing economic sentiment data, it’s tricky because:
- Stripe’s data is biased towards online and innovative companies, not a full cross-section of the economy [00:16:06].
- Stripe’s rapid growth makes it difficult to interpret as representative of the broader economy [00:16:21]. However, they have constructed a reliable “leading indicator” for inflation from their data and intend to share it as a public good [00:16:37].
Approach to Staying Private
Stripe has opted to remain a private company, a decision driven by pragmatism rather than dogma [01:36:05].
Reasons for Remaining Private
- Access to Capital: Historically, public markets were essential for large capital sums and shareholder returns, but “stable private markets exist” today [01:36:35].
- Discipline: The argument that public markets enforce discipline is dismissed; a company requiring a 25-year-old analyst to enforce discipline suggests a fundamental management problem [01:37:01].
- Focus on Intellectual Returns: The leadership believes more value comes from engaging with private investors and customers, rather than being distracted by public market analysts who may have only surface-level knowledge [01:37:31].
- No “Spiritual Status”: Being public is simply a source of cheaper and more liquid capital, not a moral imperative [01:38:02].
- Industry Norms: Many prominent financial services companies, including Bloomberg, Fidelity, Vanguard, and Jane Street, are private [01:38:23]. Even public giants like Goldman and JP Morgan waited 130 and 70 years, respectively, to go public [01:38:37].
- Pro-cyclicality: Financial services companies have a tendency to be pro-cyclical, a temptation that can be managed more carefully in a private setting [01:39:00].
- Employee Compensation: While IPO pops are appealing, employees joining public fintech companies like Square (70% off 2021 peak) or PayPal (80% off 2021 peak) in 2021 experienced significant losses, suggesting that private liquidity events (like SpaceX’s yearly liquidity) might offer smoother returns [01:39:48].
- Long-Term Focus: Stripe prioritizes long-term compounding over a 10-year horizon, aiming to build the best products for customers [01:40:26].
- Founders’ Commitment: The founders view Stripe as their “life’s work” and intend to run it for many years to come [01:40:47]. They need to stay ahead in a competitive world, and avoiding the distractions of a public listing helps [01:41:02].
- Profitability: Stripe is profitable on a fully loaded GAAP net income basis [01:39:27].
Counter-Arguments and Nuance
While Stripe’s founders are disciplined, for many other founders, public markets serve as a “forcing function” to keep them on track and thinking long-term [01:41:13].