Sometimes the most stunning changes arise from the smallest of ideas. That's the origin story of Stripe, the payments company that's quietly eating the lunch of entrenched competitors in the $1.5 trillion global e-commerce payments industry.
Founded in 2010 by wunderkind brothers John and Patrick Collison--serial entrepreneurs who hail from Limerick, Ireland--Stripe is making the digital payment process for smartphones and websites so pain-free, it's practically invisible.
Like many Silicon Valley luminaries, the Collisons dropped out of college--Harvard and MIT, respectively--to launch their first startup, an auction and marketplace management system for eBay merchants. That business, called Auctomatic, sold for $5 million in 2008 to a Canadian media company, making the Collisons millionaires when they were still teenagers.
With Stripe, the Collisons saw a bigger unfilled need, which was the payments void that customers are still subject to when they buy online.
"The market opportunity for Stripe before Stripe existed was obvious," says John Collison, the company's 24-year-old president. When buying online, people were forced to use outside vendors like PayPal to complete a purchase. That gap is where Stripe fits in, Collison adds.
Stripe lets merchants process credit cards directly from their own websites, simply by inserting a few lines of code. While that may seem incredibly minor, transactions experts say it improves the payment experience by keeping customers at merchants' websites, and by reducing the time it takes to pay. That, in turn, increases the likelihood customers will buy, and come back to buy again.
"You don't have that disjointed experience when you go to PayPal, or wherever else, to input your payment information," says Andy Schmidt, research director at CEB TowerGroup, a research firm focused on the financial services industry.
That small change has plenty of evangelists. Venture capitalist Venky Ganesan, managing director of Menlo Ventures, says the payments industry is ripe for the kind of disruption that Stripe is promising. The company is able to offer lower rates by cutting out some of the middlemen in an industry that had been controlled by the credit card companies, as well as merchant issuing and merchant processing banks, which each take a percentage of transactions.
"Silicon Valley is all about finding the next Mark Zuckerberg, and I know plenty of people who put [the Collisons] on this list," says Ganesan. "They are incredible entrepreneurs."
Ex-PayPalers Elon Musk and Max Levchin, not to mention the ever-prevalent Peter Thiel, have taken notice. So too have prominent VC firms such as Andreessen Horowitz, Khosla Ventures, and Sequoia Capital. Collectively, they've ponied up $190 million, valuing Stripe at around $3.6 billion. Stripe does not release its revenue number, but it's likely to be a fraction of PayPal's, which reported annual revenue of about $7.9 billion for 2014.
Stripe currently supports payments in 138 currencies. And with newly inked deals to process payments for Apple Pay and Alibaba's Alipay, as well as a feature that allows merchants to accept bitcoins for payments, Stripe has positioned itself to become a global payments phenomenon.
"For too long people have looked at the internet with a bricks-and-mortar lens, but that is not what the internet is about," Collison says. "There are new kinds of internet companies with new kinds of business models, and that's the stuff we are interested in enabling."