All startups, be they merchants (think Uber or Airbnb) to ecommerce marketplaces (Lyst) to subscription services (SaaS companies like Slack), have one thing in common: the need to process payments.
These need to be wherever the consumer wants to transact, be it web, mobile or in-app, and in a way that is so seamless that conversions are high and basket abandonment rates low.
Before disruptive startups like Stripe, and PayPal before it, any company looking to accept card payments would have to go through the arduous and time consuming task of setting up a merchant account with a bank, which traditionally came with high fees and clunky online interfaces.
Now online payments can be set up overnight if you have the right developers, as companies like Stripe, Braintree, Adyen and Worldpay provide robust APIs and software development kits (SDKs) for digital economy companies to start accepting card payments and subscriptions quickly, and without redirecting customers away from their site.
But which one is best?
The story of Stripe is a fairly well known in Silicon Valley circles, especially since CEO Patrick Collison, who cofounded the company with his brother John, appeared on the cover of Forbes magazine in November 2015 (headline: How John And Patrick Collison Built Stripe Into The PayPal Of The Mobile Era).
Stripe was born out of a common software developer frustration. They kept finding that integrating payments was the most painful part of the process, as they had to deal with complex legacy systems built out by banks and incumbent payments providers.
The solution is the core Stripe API, which is designed by developers for developers, complete with extensive documentation. Once in place, Stripe processes the payment through its own servers - so you don't have to store sensitive data or worry about being PCI compliant - takes a small percentage and checks for fraud. Stripe provides libraries in six programming languages, from Java to Go, as well as a host of community libraries.
James Allgrove, head of UK growth at Stripe told Techworld.com: "The way we think about it is it's a tool kit for developers to be able to build whatever they want with. We give you all of this functionality and you choose what you want to make use of and how you want to use it."
Customers wont be redirected away from your site and the checkout is desktop and mobile optimised. Last year it launched a product called Relay, which allows developers to embed a 'buy' button within third-party apps, including Facebook, Pinterest and Twitter.
Stripe's focus now is around mobile commerce, and eliminating the disconnect between mobile browsing and conversions. Allgrove says: "People spend about 60% of their time on mobile devices but only 15% of all spending happens on mobile devices."
Stripe doesn't disclose its payments volume but it does say it processes billions of pounds a year for tens of thousands of companies, including Deliveroo, Seedrs, Mondo, The Guardian and Boohoo in the UK.
Pricing: Stripe charges 1.4% +20p for European cards and 2.9% + 20p for all others.
Naturally the Forbes headline didn't go down well with the incumbent in the online payments space: PayPal. PayPal responded by saying that it, not Stripe, is the "PayPal of the mobile era."
One of the main gripes with PayPal was how it redirected you off the merchant's site to a PayPal screen, and required you to be a registered user of the service. Merchants don't want this level of friction when it comes to online purchases, especially on mobile.
This goes some way to explaining why PayPal acquired Braintree in 2013. Braintree is a virtually all-in-one solution, providing merchants with an account, payment gateway and the facility to automate recurring payments, including wallet style credit card storage and support for mobile and international payments. It counts huge digital economy players like Uber and Airbnb as customers and facilitated $50 billion in transactions in 2015.
Braintree provides SDKs and fully customisable APIs in six programming languages, as well as pre-built shopping cart solutions. The recent launch of PayPal Commerce means merchants can embed contextual 'buy' buttons into apps like Pinterest and Facebook Messenger, akin to Stripe's Relay feature. All the security, scalability and reporting capabilities come with the API. Braintree also prides itself on its support, with phone-based support available for all customers.
Although the technology and functionality look pretty similar, where Braintree has an advantage over Stripe is when startups look to scale internationally. Braintree can leverage the huge PayPal network and, although it offers basically the same number of currencies for consumers to pay with, it supports more settlement currencies, useful for larger startups that have bank accounts in other countries. Braintree also doesn't charge for foreign exchange.
David Nunn, head of Braintree Europe told Techworld.com: "Our target audience is developers and tech-first businesses at the forefront of commerce innovation." Nunn believes there are only two pure players in the online space because "the toolkit Stripe and Braintree provide is far more extensive for mobile and requires less work for developers to bake in payments in a consistent way."
Pricing: Braintree gives you your first £30,000 in card processing free and then charges 1.9% + £0.20 per transaction. American Express transactions are 2.4% + £0.20. This is quite a lot cheaper than the standard Paypal rate of 3.4% to 1.9% + 20p per transaction.
Worldpay and Adyen
One of the better established payments providers in the UK is Worldpay, processing 26 million transactions a day.
The developer-friendly Worldpay online payments integration comes in the form of an API which can be set up within 24 hours to accept card payments or start collecting subscription fees. Worldpay provides full documentation and support for developers. Once up and running developers can see real time transaction data and order management, with the ability to fulfil refunds in one click.
Being an older company means Worldpay may struggle for the sort of agility a startup is looking for when it comes to a payments provider, especially when it comes to mobile and in-app payments. However it is a trusted name with lots of resource behind it and is making some admirable strides into the online payments world.
Pricing: Worldpay charges 2.75% + 20p per transaction through its payment solution.
Dutch company Adyen is more popular across Europe and provides a similar all-in-one solution for payments, with a robust API for processing card payments, taking subscription fees or powering an ecommerce business either online, in-app or in-store. Adyen claims Uber, Airbnb, Spotify and Netflix as customers.
Pricing: Adyen's pricing model is more complex than the others on this list because it is based on volume and stated in Euros. There is a processing fee of between €0.080 and €0.10, as well as a payment method commission of between 0.48% to 0.60% depending on the payment method.
If you are selling subscriptions to a service then London-based startup GoCardless might work for you. The payments solution focuses on recurring payments (Direct Debits, basically) and claims to charge businesses less than half what PayPal does for the same sort of solution. The pricing is a flat one percent of every transaction, capped at £2, and provides an online portal to keep track of your payments.
Once you have your payments infrastructure up and running you can start thinking about adding consumer-friendly checkout options, such as PayPal, Apple Pay, Masterpass and solutions from other startups like Klarna.
The Swedish startup Klarna launched in the UK in February with a select few merchants and specialises in allowing consumers to pay up to 14 days after delivery.
The startup perspective
The e-commerce startup Lyst recently adopted Klarna for its mobile and desktop payments, on top of Stripe. Lyst prides itself on its 'universal cart' technology, so working with multiple payments partners makes sense as it wants to support as many payment methods as possible, without taking customers away from its site.
Etienne Martin, product manager at Lyst, told Techworld.com: "The main reason we decided [on Klarna] was because it offered us great control over payments and the best option to help us integrate with more partners."
"Klarna is taking extra measures to optimise security and on top of that working with Klarna allows us to integrate all retailers with 3D security enabled which was not possible in the past. This means extra key brands available for our customers in the universal cart."
Martin has some advice for a startup looking to accept customer payments: "There's no need to reinvent the wheel here. I'd advise starting with an established payment partner such as Klarna or Stripe, and work with them to make sure their product suits your business model. The most important thing to remember is that payment needs to be hassle free and as easy as possible - you don't want to take a risk here."
On the surface it looks like there isn't much between the major online payments infrastructure providers. All are optimised for web, mobile and in-app purchases and support the major digital economy business models.
All of them support the major payment methods (Visa, MasterCard and American Express) and integrate seamlessly with popular payment methods like PayPal, Klarna, Apple Pay and Android Pay.
For me it is a straight shot between Stripe and Braintree, with Stripe edging it due to its complete focus on developers, strong leadership from the Collison brothers and price.