Name: Balancing the Ledger: How Stripe is Building A Global Online Payments Infrastructure
Uploaded: 2019-05-06
Duration: 10 min 19 s
Description: Stripe COO Claire Hughes Johnson stops by to talk about the acquisition of Touchtech, going 'under the hood' of international payment methods, and whether or not an IPO is in the near future.

[ MUSIC ] Welcome to BALANCING THE LEDGER, where tech and finance intersect. I'm Robert Hackett. And I'm Jen [ UNKNOWN ]. And today we're here with Clare Hughes Johnson, the chief operating officer of Stripe. Thanks for joining us, Clare. Thanks. Great to be here. So Stripe is the highest valued fin tech unicorn in the US. An earlier this year, it range the whole of money, it's valued at $ 22 and a half billion, what's going on of the company? How you using that money? how you growing? What's next for Stripe? Feels like we're just really at the beginning, I know everyone says this but we really are. Most of our energy right now, it's going to capilarries, one is Global expansion. I mean, were now getting to sort of the harder markets to open. We've got private betas going in like India, Mexico, Brazil, and a lot demand actually users. Some of them there, actually of a lot of them. Because the Latin America in financial structure is challenging and a lot of them from the US and Europe that wanna do business there. So that's exciting. We're also building out what we think of. As our core infrastructure for a payment platform. I think there's a misconception that Stripe is about just payment acceptance, but really we're about funds in, and funds out. So instant payouts, or forms. Of payment, like issuing virtual or actual credit cards to use for your marketplace business, and point of sale acceptance. So it's like building up a network, we think of it as like treasury capabilities in the network. And then the capabilities you need on top of that fraud control with our radar product. A lot of payment optimization, so authorization optimization, making sure you can reduce your declines, working on a lot of interesting things on the dispute side. And I think the goal is that you have this payments and Treasury network available in as many markets as we can get to around the world. Where we're just managing all of your commerce flows for you. And there's software on top of that that's protecting you from fraud. And then also adding billing and subscription products and B and B products. So, we're not sitting around, we are pretty busy building out the core infrastructure that any business, I hope will use to process payments and pay in and pay out. Can you give us a sense of how fast e- commerce is growing globally now and how fast Stripe is growing within that? Well, e- commerci I think of as a more narrow category of retail commerce, maybe that's just my definition of it. So e- commerce I think is growing 5 % globally, and Stripe is growing more quickly than that. But in terms of online commerce, right, any We were just looking at some statistics, I mean, there are just B to B transactions, like billions of transactions a day. And even just currency exchange period on a daily basis is over five trillion, right. So I think we are looking at a secular shift to what you are getting at and maybe anyone interested in Fintech who is watching, of All commerce moving online. And that's been primarily enabled by mobile devices, but I think people would be surprised, actually, at how much B2B is still really paper invoices, cheques, inefficient Ineffective manners of moving money and so that's where our billing products are gonna I think, start to have a real impact. One thing that stuck out to me and Jeff Bezos' annual letter to shareholders this year, he talked about how Amazon is still very small Which is kinda crazy to think about, but his point was that 90 % of retail transactions still occur off line rather than online. Right, now we often cite less than 5 % of commerce occurs online, and people say, but what about Amazon? [ LAUGH ] And Jeff finally did our work for us. [ LAUGH ] And explained, yeah, it's true, it's amazing how little of it happens today Online. So you've just made an acquisition in Europe, tell us a little bit about the strategy there. Yeah, we acquired a company called Touchtech, and I think we really came to the acquisition because of some work we've been doing to Prepare all of Stripe's users for SCA or Strong Customer Authentication regulations happening in Europe. There's a lot of work that many companies went through to comply with GDPR about a year ago. And there's a second part to that, which is the Strong Customer Authentication. Which is really meant to be a consumer protection and a fraud control. But effectively is when there is an Internet transaction, having the purchaser authenticate that it is, in fact, them buying, often with a phone, right? So a text message and verifying, yes, that was me. Which is understandably a good consumer protection but creating a lot of friction. That may slow things down for people. For folks who study consumer behavior and shoppping carts is very scary because it creates a lot of friction. It's also something very hard to comply with because it pauses your transaction and then you have to complete it. And you can't do so in real time, right? So there's an infrastructural element to it for payment implementation that's pretty rough. What our mission is is to take away that complexity and cover all the compliance and the infrastructure you need for payment acceptance and paying out. Touchtech works on the issuer side. They're gonna help, so if you think of it as a two- sided Transaction where we're working with a merchant to make sure that acceptance flow. The issuers also have to play a role. And this is a legitimate card. And as a person authenticates it. And we think that that's going to help reduce that friction that's being created by SCA. We're excited to integrate their technology with stripe. But we have a lot already done. As we need to because it's rolling out in September. Well, all of these different countries that you are going into, they all have their own unique financial infrastructure, their own idiosyncrasies. So what challenges do you face in bringing your product to all these different places. Yeah, well do you have another 40 minutes? [ LAUGH ] I think this is one of the biggest offer that Stripe provides for our users, which is you don't have to do all the work on the market entry front, but it is what we We do, but first of all we partnered with financial partners around the world, to make sure they were integrated in with their rails effectively as we need them. We directly increase them with the current networks put together the chance to roll things out more quickly, but there is still a lot of baking partnership. Then there is a regular [ UNKNOWN ] which is working with local governments in understanding. There are a quite governments in the world where. Their regulatory scheme hasn't contemplated online inasmuch detail as you would hope. And so some of what I hope we're doing for commerce generally, and growing it around the world, is partnering with governments, saying, okay, how do we apply this in a world that is changing pretty rapidly in terms of payments. And then, obviously, making sure we can take all the payment methods that are most in use in the country. And those payment methods all behave incredibly differently than, say, I think in the US we're pretty comfortable with credit cards, but there are a lot of markets around the world that have pretty unique and interesting payment methods. Whether it's [ UNKNOWN ] in Japan or [ UNKNOWN ] in Brazil, you know, you want that coverage if that's how consumers pay. How many currencies do you support now? For over 130 currencies almost is easier, actually, than payment methods. Why is that? With a currency you have foreign exchange, and you have the ability to say, okay, that was this many pesos, it's this many dollars. Whereas with a payment method you are actually under the hood in the banking infrastructure. Some of these payment methods are about Say, accessing the customer's bank account in some cases. Well, you've gotta have that connection to the banks, and there's permissions from the customer in cases where they behave, [ UNKNOWN ] in Brazil is an instalment payment method. So it's effectively a lending product that is a payment method. So there's a regulatory scheme around that, but there's really an infrastructure of, how does that money need to move? In order to satisfy the transaction. That is much more about engineering. You mentioned foreign transaction is relatively less complex than the payment methods, but I know you used to, for a little bit, accept Bitcoin, and then you moved away from that, because of some of the issues there. How are you thinking about cryptocurrency these days and why is that more complicated than you wanna do it? Yeah, and we were the first provider to accept that coin actually, and we also went out with RA pay, and witcher pay pretty early because we believe there is a lot of new ways people gonna pay, and we want to be on the forefront of that For anyone using Stripe. The challenge with BitCoin was really, well there wasn't any demand for it from our merchants first of all, and I think that the reasons are because it's not really acting like a currency. It's acting a little bit more like an asset, and how does that look? It looks like high transaction fees, like as high as $ 50. Earlier this year, really long close times for the transactions so maybe an hour, whereas visa does 24, 000 a circuit. And a kind of volatility in actually the value of that currency. And if you have a long close time and unchanging value you're not sure you're actually getting the payment Price that you ask for, and so we weren't getting demand, we weren't seeing it having very high usage, so we deprecated it. You know, if things change there we could bring it back and, as you know, we invested in Stellar. We're very interested in the space, but it's not where money's moving today. So I think I mentioned that there's ike $ 5 trillion dollars of currency exchange happening every day. In terms of BitCoin I think it's in the billions which sounds like a lot but it's not relative to where money's moving today. And as we also talked about so little money is online even. We gotta tackle that. We gotta build the technology infrastructure the fragility layer Online acceptance and payout before we get to maybe I hope, more modern methods but I think we've got a few steps to go. This is proving to be the year of the big tech IPL, we're seeing Uber, Lyft, Pinterest, we work just filed When can we expect Stripe to go out? We don't have any plans. We're not following that trend. It's exciting to see. Do you think you'd raise another round or go public first? I've no news on that, I'm afraid. Thanks so much for comming on the show, Claire. All right, thank you both. I'm Robert Habit. I'm Jane Viechmo. And for more about From the Ledger, go to ledger. com. See you next time. [ MUSIC ]

Balancing the Ledger: How Stripe is Building A Global Online Payments Infrastructure

Finance

Stripe COO Claire Hughes Johnson stops by to talk about the acquisition of Touchtech, going "under the hood" of international payment methods, and whether or not an IPO is in the near future.