Richard Bucker

Payments are pretty simple

Posted at — Feb 6, 2012

I’m amazed that a company like Stripe is making such a big splash and looking at the headshots I’m further amazed that a company this young and median employee age is still expanding. And finally if you’ve ever been a merchant or a merchant processor then you know that there is always a line in the sand and Stripe is not even talking about it. They have done everything they can to remove the friction from your payment process.I have been soliciting my friends and connections in order to build an open source issuer or acquirer system. One of the reasons is because it’s just outright simple. Moving a transaction from a merchant-based API to ISO8583 is pretty simple and parsing an 8583 message and processing a debit or credit transaction is even easier. The hardest part of the issuing side is the HSM which is also the most expensive component next to the software delivery. With the PCI audit, colocation, networking, and network minimums a close 3rd or 4th.At the end of the day it’s just a simple data-in / data-out problem with a tiny bit of math and encryption.As for how Stripe accomplished the task; that is anyone’s guess. Mine, however: keeping the friction means less code and less hassles for the merchant. keeping the fees down will attract more merchants keeping salaries and expenses down reduces the desire to raise prices at some point in the process the code starts to pay an annuity and requires less maintenance or enhancement. In order to keep the cost down (KYC) they must be assuming some of the risk themselves, however, many of the (new) banking regulations must be in their favor.I’m sure there are some insider reasons why Stripe is successful but for my money these gotta be the biggies. But if you compare Stripe to the likes of First Data Corporation it’s all about the overhead or lack thereof.This stuff is simple and as new companies enter into the vertical market or defining new vertical markets it’s going to be about the lower barrier of entry.