Stripe, the payments giant valued at $95 billion a year ago and now reportedly one step closer to an IPO, today announced a new product that fills in some significant gaps in its game to be the layer of financial services for merchants and other businesses whose models are based on enabling transactions. It takes over from Financial Connections, which will allow Stripe customers to connect directly to their customers’ bank accounts, to access financial data to expedite or execute certain types of transactions.
These include account verification for payments and payouts; check balances before a payment is made to ensure there is enough money; to confirm account ownership. Details like these can in turn be used to help underwrite the risk of loans; to track spending habits and automatically pay bills; and more, in other words, financial data useful or necessary to execute financial transactions on other Stripe services such as Stripe Connect, ACH payments or loans powered by Stripe Capital.
From customers of Stripe’s customers, when asked, they will enter their bank details and get specific information about how it will be used, Stripe said. (Note: It will be interesting to see if US consumers are happy to share this information in situations where it hasn’t been before.)
The service will first go live in the United States, where Stripe said it will work with more than 90% of all bank accounts. It will be billed per use – bank account verifications and account information will cost $1.50 per API call; account balance retrieval is 10 cents per API call; transaction jumpers haven’t launched yet, so pricing is TBA – and large customers can buy on an enterprise contract.
We asked, but Stripe declined to say when and if Financial Connections would expand to other markets, which perhaps comes as no surprise given how much banking systems differ from country to country. ‘other.
Financial Connections comes at an interesting time in the world of digital payments. E-commerce has definitely created a market to facilitate online payments. And while that has opened the door to digital wallets like PayPal and some direct payments from banks in some countries, much of the spoils of that growth have been passed on to services based on the card payment rails.
But as the space has evolved, we’ve seen an ever-increasing proliferation of technology, services, regulations, and consumer appetite for more. Digital banking, investing, cryptocurrency trading, new approaches to getting loans, managing expenses – all of this and more are examples of how digital services have become more sophisticated, and the demands we have of them. part are also. (And e-commerce hasn’t stopped either: buy services now, pay later, and many others have also entered this world to create more flexible services that allow more transactions to be carried out in a competitive environment. tighter and thinner margins.)
There are more popping up all the time. Just yesterday I wrote about an interesting startup called Kevin (ok, kevin.) that’s building a whole new set of payment rails and APIs for account-to-account payments that connect directly to accounts banking, bypassing card rails and legacy account-to-account payment methods that are more difficult to implement.
In this context, Financial Connections is a timely tool for the launch of Stripe. It’s part of the wave of new services (like Kevin) that are creating a more programmatic approach to digital transactions and related financial services. Whereas companies could have obtained, for example, transaction data from a bank before, it can now be processed in a faster and more automated way.
“Businesses have been asking us for an easy and secure way to connect and verify their customers’ bank accounts,” Clara Liang, sales manager at Stripe, said in a statement. “Stripe Financial Connections offers exactly that.”
Indeed, it meets the needs of its current customers; but most importantly for Stripe, it creates a tighter ecosystem of services around products they already use, a one-stop-shop so they don’t need to rely on other parties to integrate this functionality. Stripe has made a number of acquisitions to bring additional functionality to its platform to fill in some of the gaps – for example, almost exactly a year ago it acquired TaxJar to help calculate sales tax automatically and provide related tools to its customers – but it looks like Financial Connections was built in-house.
Stripe’s selling point for these tools, beyond more seamless integration with its other products, is that it helps its customers complete more transactions. He claims that Connect customers who have previously worked with the service have reduced failed payments by 75%; Early adopters of Capital see 55% greater loan offers due to the additional data they use to inform their decisions.
All of this means more transactions on Stripe’s platform itself. Margins can be slim on any digital payment – one reason why even a company that seems to be growing and doing a lot of business can still fail: the numbers have to be huge to work in its favor – but that’s why many payment companies operate at scale, and why integrating a number of additional value-added services in the hope that they will be picked up by customers (and customers’ customers), as Stripe does here, is a smart business, a way he hopes to sustain for the long haul (and probably public).