Stripe, which enables businesses of all sizes to accept credit-card payments, recently claimed to process payments that add up to 1 percent of global GDP.
This may be a little misleading, as the $1 trillion in payments Stripe processed in 2023 can include multiple legs to related transactions. But, point taken: Stripe’s big.
It’s also growing fast again after the downturn in fintech fortunes after the 2021 peak, when interest rates were at all-time lows. That $1 trillion figure represents 25 percent year-on-year growth, the company says.
This growth has been reflected in its valuation. Stripe has stayed private for a long time, going on 14 years now, which is unusual for a tech company of its size. It achieved a staggering bubble-era valuation of $95 billion, but a subsequent need for funding required it to engage in a downround that more than halved its valuation, to $50 billion.
A more recent funding round, though, designed to secure the money to compensate its staff (who aren’t getting IPO money, at least not yet), has raised the company’s valuation back to $65 billion.
This is notable given the number of fintechs and other startups that went bust, or suffered vicious valuation cuts: Klarna, the Swedish buy-now, pay-later pioneer, saw its valuation crumple from $45.6 billion to $6.7 billion in 2022. Klarna is now looking to go public in the US later this year, aiming for a $20 billion valuation.
Stripe’s founders seem determined to return to its peak valuation levels before attempting an IPO. Maybe they can.
The Asia equation
The question for we in Asia is to what extent that achievement will rest on performance in Asia. The company doesn’t publicize regional attributions to its revenues.
DigFin is left to assume that Asia is a lesser proportion, in line with other global fintech businesses. This could be wrong, but Stripe has businesses in the US that don’t exist in Asia Pacific, notably banking-as-a-service and credit (although as lending businesses, they may not show up in the firm’s payment transaction volumes).
More importantly, Asia is a fragmented group of distinct markets. This makes scale a little tricker, and Stripe is all about scale.
Paul Harapin, Singapore-based managing director, said, “Asia Pacific accounts for 40 percent of global GDP. I can’t share our numbers, but there is opportunity in that fact.”
The word ‘opportunity’ implies future activity rather than current business.
That said, Harapin notes that many Asian countries are ahead of the West or other emerging markets when it comes to digitizing payments. “This is not only true in Singapore or Australia, but in large emerging markets with a large underbanked population.”
Harapin says Stripe’s entire suite of products is available in the Asian markets where it operates, other than its capital and treasury services.
That leaves a long list of areas in which Stripe is active in Asia: one-to-one payments, multi-party payments, platform-based payments, checkout services, helping businesses offer API-based payment links to their customers, fraud detection, billing, invoicing, in-person terminal payments, and corporate card issuance.
It then provides value-added services on top. For example, it manages a platform for Toyota’s car dealers in Japan to help them procure parts and machinery, with Stripe handling the finance and payments behind the scene.
New credit services
The challenges around lending and treasury offerings are typical for Asia Pacific: these are activities that require a financial license, which means a lot of cost and complexity. The fintech company has to deal with compliance and risk management. Such efforts are more obviously worthwhile in a big market such as the US.
Harapin says the company is working to bring these services into some Asian markets. To make it work, the company will rely on its sheer size. Whatever the accuracy of that “1 percent of global GDP” claim, Stripe is processing a huge number of transactions for startups, global tech platforms, and traditional enterprises. It leverages the information it gleans from this activity to be as automated and efficient as possible. It has insights that only the biggest, most global banks could rival.
If it can use its stack and its heft, it can scale licensed businesses across fragmented markets. “Customers use us to support global trade, which means by default most of them operate in Asia.”
Asia’s fragmented nature could also offer Stripe more to do relative to Western markets. For example, cyber security is a big challenge. “The APAC region has a lot of clever criminals,” Harapin said. Stripe’s machine-learning based fraud detection engine may be better at spotting dodgy transactions than can a large but domestic or regional bank. For example, such a bank might not see one of its customers quickly using a credit card in multiple countries.
There are other reasons why Asia will loom large in the Stripe empire. China is the largest cross-border geography in the world, thanks to its vast network of trade and supply chains, as well as its global e-commerce giants such as Shein and Temu.
These revenue opportunities work if the company’s sheer size overcomes the cost and complexity of every local market. The true importance of Asia to Stripe probably won’t be known until the company one day decides to go public. But one indicator will be the extent to which it is ready to bring its BaaS and credit offerings to the region.
