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Stripe: a Born Global Payment Processor

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DOI: 10.13140/RG.2.2.20193.81769

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 Stripe:
a born global payment processor

Acauan Matias Bellucci – 629267

Academic Year: 2017/18

December 21, 2017

Course: 151030010 | International Marketing 1: the Environment

Term 1 Essay - Assignment n.1

Word Count: 2695

Prof. Ibrahim Abosag

TABLE OF CONTENTS

Abstract ..................................................................................................................................................................... 2

Born Global Firms ................................................................................................................................................. 2

The Cloud ............................................................................................................................................................. 3

The facilitators ................................................................................................................................................... 5

Stripe, the firm ....................................................................................................................................................... 6

Stripe’s Internal and External drivers of Internationalization ............................................................ 6

Marketing resources to succeed internationally ...................................................................................... 8

Stripe’s winning Marketing Strategy .......................................................................................................... 10

Stripe’s Marketing activities .......................................................................................................................... 11

Stripe’s Competitiveness ................................................................................................................................. 13

References ............................................................................................................................................................ 15

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ABSTRACT

This paper analyses the marketing determinants that drove Stripe’s early

internationalization under the model of born global firm.

The first section introduces Born Global firms and explains some of the main

characteristics, with attention to tech-oriented companies.

The second part presents the firm, with brief historic facts, telling how it was founded

and with which purposes. It collocates Stripe inside the born global framework.

The following sections span through the marketing characteristics that helped the

firm to rapidly internationalize and define its presence in the market, with a brief

analysis of the current competitiveness and some obstacles that may arise.

BORN GLOBAL FIRMS

To define born global firms (BGs), we can rely on Cavusgil and Knight, proficient

researchers over BGs’ field. In their 2009 book they find that BGs’ push to grow is so

massive that the domestic market isn’t enough to nurture their scope, thus they’re

seeking comparative advantages on the global market, mostly within 2 years from

foundation.

Rennie (1993) recognises that BGs, even if small-in-size and typically SMEs, are

important because are increasingly and aggressively more competitive with big,

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 established MNEs. Moreover, they showed to be handling lucrative, booming global

business in ways unimaginable two or one decade ago.

To give a temporal dimension, they suggest that exporting of products should start

within 3 or fewer years from founding. Taven (2012) argues that this criterium

includes also some become-global companies, thus suggest defining BGs as firms

which management purses FDI since its inception, incapsulating it in the business

plan. Even with such purpose, the firm must actually internationalize within 6 years

from founding and 3 from the launch of a public product (Gleason et al., 2006).

BGs are primarily found in small-domesticity countries, but recently boomed in all

the economies and in all the industries, even declining ones (Knight and Cavusgil,

2004), (Rennie, 1993).

Other peculiar advantage to the tech-based BGs is the technological medium

evolution. It is believed that the cloud architecture is playing a key role in defining

their success. It entails the leverage of advanced Technological and Communication

systems that characterizes BGs, agreeing to Cavusgil and Knight (2009) and Tanev

(2012).

The Cloud

The technological advance is paramount to the rapid expansion of the BGs (Rennie,

1993). Rennie believes that big MNE had a competitive advantage when the access to

the tech was slow and costly, allowing just few wealthy firms to access it. Using the

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 latest telecommunications and computer technology, however, enables firms of any

size to manage business systems that extend beyond their own boundaries

Modern telecommunications and information systems enable any firm to develop

business much farther from its domestic boundary.

While the fax machine “was paramount” in allowing firms to carry fast relationships

and sales abroad (Rennie, 1993), now the cloud offers the edge in IT architecture that

allows distributed system to be in place at a fraction of cost.

While different authors, including Cavusgil and Knight (2009), see the intangibility of

the assets a key feature of most BGs, the cloud becomes the home of those intangible

assets. Software firms are perfect candidates to be BGs as they can widely exploit to

the cloud infrastructure to cheaply deliver their products.

In an article (Kashyap, 2016), Janakiram MSV, cloud computing expert, explains why

cloud computing strictly pairs with start-ups. Among the others, the two main are

versatility and cheap pricing, very customizable and scalable to fit the needs of the

BGs.

Essentially, “In these cases, start-ups can focus on their core-competency while still

accessing a supercomputer that only Fortune 100s could build and operate before”

(McKendrick, 2011).

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The facilitators

The importance of the BGs in driving the growth of entire countries, is also tangible

looking at the ecosystem of “facilitators” that boomed with the rise of BGs, which is of

non-treasurable importance (Haar, 2012).

It enlists tech-VCs firms, Start-up Incubators, Accelerators, and Governmental

Institutions dedicated to ease the development and decrease the cost of grasping the

opportunity inherent to the start-up idea.

On one hand, private sector’s firms bet big on start-up following the BGs model, given

the higher growth rate and market capitalization value compared to non-BGs

(Gleason et al., 2006). They provide education camps that condense in few-months

courses the internationalization knowledge that is taught to BGs’ CEO and founders.

They offer seed and angel capital, and all the support the firm may need (Hathaway,

2016).

On the other hand, Rennie (1993) highlights that BGs are lately the major drive of

single countries exporting growth by MNEs, which has been recognized and

supported by national Chambers of Commerce around the world.

Institutions strive to facilitate and invite local SME to internationalize, seen as main

opportunity of growth in a global economy (Gov.uk, 2017).

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STRIPE, THE FIRM

Stripe is an internet payment facility provider, founded by the Collison brothers in

2009, with product launch in 2011, after an extensive private beta. It expanded to

Canada in 2012, just one year after product launch and three after foundation (Weisul,

2014).

It is based in SoMa, San Francisco, and now has 900+ employees. Had raised a total of

450M$ in funding and is currently valued 9.5B$

It provides the software to embed in client firm’s IT (SaaS) via APIs that enable to

collect payment over the internet, linking the clients’ virtual commerce to their actual

bank accounts.

It operates a B2B model. It actually serves more than 100 thousand business over 25

countries (Stripe.com, 2017).

STRIPE’S INTERNAL AND EXTERNAL DRIVERS OF INTERNATIONALIZATION

As internal distinctive factors, on the guidelines of Cavusgil and Knight (2009), surely

the main would be the strong and global leadership that the company had from the

Collison brothers.

The two brothers, born and grown in Ireland to educated parents, shown early sign

of entrepreneurship, which got them admission to top notch US Universities (MIT and

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 Harvard). They notoriously founded their first start-up, Auctomation, when the older

brother Patrick was only 19, for a value of 5M$. They have always seen the world as

their marketplace because the solutions they engineered where there for the problem

of a whole sector, not only a local niche (Vance, 2017).

The development of a high tech but simply usable product posed Stripe to a pull to

export its services. The competitive advantage of its technology pushed Stripe to the

top of its industry, shouldering the giants. The superior quality of the product is a

distinctive feature of the BGs subset (Cavusgil and Knight, 2009).

The firm has mostly intangible assets, that is the cloud infrastructure that powers the

payment platform. It thrives in small margins (currently captures 2.9% of all

payments processed) and must rely on economy of scale to reach handsome upkeeps.

Its financial precariousness is shared with most of the other BGs, that need some time

to reach profitability and reduce the debt gearing. This risk acceptance is paramount

to be able to rapidly enter internationalization (Cavusgil and Knight, 2009).

An important external factor that poses Stripe as a global player is the nature of its

industry. It processes payments, a need that sees no boundaries. It is arguable that

the way of which every country approaches payment is different (possibly reflecting

different stages of money-tech evolution). An example is the wide spread among cash

and cashless transactions operated in Asia. It also suffers from different banking

frameworks and legislations (Russell, 2016). Here the firms must find way to work-

around and exploit different business environments, herald the case of Uber

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 accepting cash in India. Although the payment industry is far to be homogeneous, the

need for accepting payments is vertical to any business, giving to it the breadth of a

global market. This global demand pulls the exports and forces the firm to engage

early FDI.

MARKETING RESOURCES TO SUCCEED INTERNATIONALLY

Arguably, marketing is the projection to the values and the vision inherent in the firm.

To effectively communicate with costumers and market own products, a firm should

first identify what its purpose is and what is the value to be passed onto the clients.

Following this logic, the success of marketing is sourced from a clear vision and

mission, normally developed, and maintained by senior management.

The founder brothers, respectively director and CEO of Stripe, have a clear idea of

what Stripe wanted to be since its launch (Carr, 2012). They wanted to be a sleek

payment platform that could accommodate horizontally any business need, offering

a clear plan and straightforward pricing. Re-iterating their essence, they developed a

very effective and reliable system that does exactly what it says (Carr, 2012) (Vance,

2017).

Stripe can highlight some big companies in its portfolio, including many from the

Fortune 500 (Stripe.com, 2017). Its funding by the likes of Visa, Y Combinator,

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 Sequoia Capital, and the trust given by clients as Lyft, Kickstarter and Amazon build

their credibility and competency on the eyes of the potential customers (Vance, 2017).

Stripe poses itself as a direct competitor to payment giant of the like of PayPal and

Google Checkout, but their Apple-like approach, “simplify currently complicated

things”, gives them a sustained advantage over the difficult-to-digest systems of the

competitors. It took away from its competitors the customers tired of receiving an

out-of-date and obscure service for a so core process.

Stripe benefits both from B2B and B2C ecosystems, as grasping profits in the dense

transactions that occurs among those entities (mobile payments accounts for 1.4B$ a

day)(Vance, 2017).

The use of the cloud architecture enabled Stripe not only to benefit to the advantages

intrinsic, but more importantly the firm turned itself in a core provider of a key service

of such cloud ecosystem. It is the cloud payment service of choice for startups (it

serves two thirds of venture-backed business in Singapore; see Russell, 2016). Stripe

poses itself as industry standard for payments, as Google Analytics, Dropbox and

Quickbooks are paramount for analysis, storage and accounting contracted services

on the cloud (McKendrick, 2011).

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STRIPE’S WINNING MARKETING STRATEGY

Stripes offer a very differentiated product, covering a very specific process of a much

bigger business. The Collison brothers wrote only seven lines of code that enables

developers to capture payments from the customers (Vance, 2017).

Patrick Collison, CEO, says: “Any website is ultimately built by a developer” so that’s

why their focus is differentiation to cover the (not small at all) “niche” of web-

developers.

Their marketing is totally oriented to the costumer, where they listen to the client and

strive to build the product that most simply addresses and robustly solves the

problem. Rumors (Vance, 2017) suggest that Amazon is pondering to use Stripe as its

payment backbone; this fact inherently avails the success that Stripe achieved in

marketing its product towards tech savvy users.

Stripe does offer a global product highly standardized, but it still has to localize the

marketing and the product features to accommodate different markets. Though the

online payment process is almost universal, the banking and taxation systems across

the globe differ and some extent of customization is necessary. One example, in Brazil

the culture of interest-free installments is predominant (Pearson, 2013). Interest free

installments account for up to 68% of the credit-card purchases (PagBrasil, 2017).

The success in this market is subordinate to the ability to meet this consumers’ habit

of segmented credit purchases.

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STRIPE’S MARKETING ACTIVITIES

The success of the firm is achieved through attentive actuation of marketing practices.

Firstly, Stripe built a strong brand, behind which consumers see ease of payment

processing. It is very recognizable and the communication of it goes with nurture of

the existing customers, willing to become Stripe ambassadors.

Secondly, it adapts its marketing mix to pursue its global strategy.

It is possible to describe this using the Four-P framework (McCarthy, 1960). The

product offer is very clear: a simple, elegant, and sleek way of accepting payments on

any online medium. The simplicity is in the installation process, where the account

signup takes minutes, ant the facility is straightaway operative (Andersen, 2011).

Although very simple, it is tailored to developers (the first name for the service was

/dev/payments, which says much about the target).

This kind of users are also willing and enabled to personalize and enhance Stripe’s

code. It is perfectly possible via an ad-hoc API library.

The product is also very secure, where a window of seven days delays the income of

the collected money to make sure the transactions are made with no irregularity. This

timeframe is vital to perform the security checks. The company recently released the

Radar service (free-of-charge) that uses AI and machine learning to detect with

efficacy fraud patterns (Vance, 2017). The customer is paramount, and everything is

made to gain his trust.

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 The pricing strategy is very clear as well, 2.9% of the gross income from payments

proceeds as the system’s fee. The target is to offer the more value possible out of this

cut, but is mandatory to scrap any additional or hidden fee. By example, refused

transaction don’t incur in any charge, because Stripe wants to be sure to “make money

just when you [the customer] make money” (Andersen, 2011).

The place has no physical boundaries because powered by the cloud-achitecture,

which enables to distribute the product wherever the internet is. However, to be able

to collect the revenues from Stripe, the client has to control a bank account in one of

the 25 countries currently supported (Stripe.com, 2017). It is actually to overcome

this limitation that Stripe has launched Atlas, an incorporation platform that allows

anybody from any country to launch a start-up residing in the Delaware State. It’s a

one-off shopping point where the start-up founder can overcome the bureaucratic

burden of opening the financial and legal entity of its limited liability company. It

provides a US Bank account, accounting, and financial aid.

Atlas is the projection and continuation of the one-off approach that Stripes purposes

itself for its customers.

The promotion started mostly by word-of-mouth. There were many of the

companies within the Y Combinator network that really were fed up by PayPal and

similar, they were simply excited and impatient to try any valid alternative that

“didn’t suck” (Brown, 2017). Stripe exploited the momentum, and incentivized what

developers do best: gather in communities and share the actual improvements that

at the end of the day make their difficult job easier. Stripe sent gadget packs to the

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 customers, and organized gathering and hackathons. The swag has been proudly

shared on social media and pulled the awareness’ growth.

Making the life easy to its customers, Stripe secured their loyalty. It has revolutionized

the approach to online payments, and the developers just must stick with the most

efficient system around (Brown, 2017).

As mentioned before, the powerful partnerships with top-level companies also fuels

the propagation of the firm’s brand. Seeing Stripe along the brands of the likes of

Amazon, Visa, Kickstarter, Lyft could just increase the prestige and the market

position.

STRIPE’S COMPETITIVENESS

Stripe still accounts for 10% of the mobile payments market share, being second only

to PayPal, which boast 71% (Datanyze.com, 2017). Even being this significant gap,

Stripe is recently stripping clients away from PayPal itself, which has seen a decline

in customers numbers (Maruti Techlabs, 2017).

Analyzing the competitiveness of Stripe under Barney’s framework (1991), is

possible to observe that its sustained competitive advantage resides firstly in the

technology used. Although the technology is of high value, and at this stage quite rare,

it suffers from an exposure to imitation or substitution.

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 Besides its exceptional relationship with the costumers and its state-of-art software,

the payment processing isn’t carrying any big functional breakthrough per se.

That’s why to keep its innovating position is believed that Stripe should keep

generating highly efficient code that enhances its whole customers’ environment. An

example is the roll-out of Atlas and Radar, bringing never-heard functionalities

available to the user base and appealing to new customers.

The actual big sustained advantage of many BGs is its user base, which has to be

nurtured and taken care of, anticipating their needs, and offering solutions to their

problems as they come.

It is not hard to imagine that, given that Stripe keeps its customer values, it will be a

significant player in the industry, probably the most influential, which could justify

the gigantic 9.5B$ evaluation.

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