Strippayment giant worth $95 billion a year ago and now reportedly approaching an IPO, today announced a new product that fills some significant gaps in its role to be a financial services layer for merchants and other businesses whose models are based on transaction permission. He takes off the wrappers Financial connectionswhich will allow Stripe customers to directly connect to their customers’ bank accounts to access financial data to speed up or complete certain types of transactions.
These include checking invoices for payments and disbursements; check the balance before paying to make sure there is enough money; to verify account ownership. Such details, in turn, can be used to insure credit risks; track the structure of expenses and automatically pay bills; and more—in other words, financial data that is useful or necessary to complete financial transactions through other Stripe services, such as Stripe Connect, ACH payments, or Stripe Capital-based loans.
From the customer side of Stripe customers, when asked, they will enter their bank account details and receive specific information about how they will be used, Stripe said. (Note: It will be interesting to see if American consumers are happy with sharing this information in situations where it hasn’t been before.)
The service will first launch in the US, where Stripe says it will work with more than 90% of all bank accounts. You’ll be charged as you go – bank account verification and account information will cost $1.50 per API call; account balance recovery – 10 cents per API call; transactional requests have not yet been launched, so prices are being finalized, and larger customers can buy under a corporate contract.
We asked, but Stripe declined to comment on when and if the financial ties will expand to other markets, which is perhaps not surprising given how banking systems differ across countries.
Financial Connections is coming to an interesting moment in the world of digital payments. E-commerce has definitely created a market for facilitating online payments. And while this has opened the door to digital wallets like PayPal and some direct payments from banks in some countries, much of the mining of this growth has gone to card-based services.
But as the space has evolved, we’ve seen more proliferation of technology, services, regulations, and consumer appetite for something more. Digital banking, investing, trading cryptocurrencies, new approaches to obtaining loans, managing expenses – all this and more are examples of how digital services have become more sophisticated, and the demands we place on them, too. (And e-commerce hasn’t stood still either: buy-now-pay-later services and many others have also entered the world to create more flexible services to increase transactions in a face of stiffer competition and thinner margins.)
There are more of them all the time. Just yesterday I wrote about an interesting startup called Kevin (OK, Kevin.) This creates a whole new set of payment systems and APIs for cross-account payments that are directly linked to bank accounts, bypassing card rails and legacy account-to-account payment methods that are harder to implement.
In this context, Financial Connections is a timely tool to launch Stripe. This is part of a wave of new services (like Kevin) that are creating a more programmatic approach to digital transactions and related financial services. If earlier companies could receive, say, transaction data from a bank, now this can be done in a faster and more automated way.
“Companies are asking us to provide an easy and secure way to connect and verify their customers’ bank accounts,” said Clara Liang, business leader at Stripe. “Stripe Financial Connections provides just that.”
Indeed, it speaks to the needs of his current clients; but what’s important for Stripe is that it creates a denser ecosystem of services around the products they already use, a one-stop shop, so they don’t have to involve other parties to integrate that functionality. Stripe has made a number of acquisitions to add additional functionality to its platform to close some gaps – for example, almost exactly a year ago, it purchased TaxJar to help calculate sales tax automatically and provide the appropriate tools to their clients, but it looks like Financial Connections was built in-house.
The benefit of Stripe for these tools, in addition to easier integration with other products, is that they help their customers complete more transactions. It claims that Connect customers who have already used the service have reduced the number of failed payouts by 75%; Early adopters of Capital see loan offers up to 55% higher due to the additional data they use to make decisions.
All this means more transactions on the Stripe platform itself. The markup on any digital payments can be low, one of the reasons why even a company that looks like it’s growing and running a big business can still fail: the numbers have to be huge to work for their profits, but that’s why so many payment companies operate on a huge scale and why creating a range of value-added value-added services in the hopes of being picked up by customers (and customer customers), as Stripe does here, is a smart business, one of the ways it hopes to support itself over the long (and likely public) journey.
Credit: techcrunch.com /