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Payments Grow More Competitive With Stripe's New Credit Card Offering

Payments Grow More Competitive With Stripe's New Credit Card Offering
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Thursday, 02 August 2018 11:44 AM Current | Bio | Archive

The world of payments just grew more competitive.

Online payment company Stripe Inc.—mostly known for enabling vendors to accept payments online—will begin helping businesses create their own credit cards. The cards are expected to allow companies to control payments and expenses to a higher degree.

The move will add another layer of competition to the already competitive payments industry. Stripe's new venture will be called Stripe Issuing, according to a company press release. The platform would allow companies to create their own credit cards, both virtual and physical. Stripe's move would lower the barrier of entry that's required for companies to issue their own credit cards and would further expand competition in the payment space. Stripe says its new payment system would work with Apple Pay and Google Pay, with virtual Stripe-based cards functioning with mobile wallets as well.

Just last year, a Federal Reserve report showed that total payments made through cards continue to rise at healthy rates. Credit cards specifically made the largest moves, with a 10% increase over the course of a year.

Why might Stripe's offering impact the mobile payment field?

Research firm eMarketer expects the total number of mobile-payment users to grow this year to some 82.5 million people across the U.S. While that shows just how far-reaching mobile payments have become, it still leaves plenty of room for growth, as some 60% of smartphone users still don't use these functionalities.

Stripe Issuing is creating more than credit cards. It's also supporting a platform for the creation and distribution of mobile payments. Because creating cards is typically an endeavor that requires a long development process and hefty sums of money, a successful foray into this field could drastically change the landscape of both mobile and physical payments. The move comes just shortly after Stripe announced 24-7 chat support for small businesses, suggesting that the company is looking to offer a one-stop shop for business expenses and payments.

The impact of credit card and mobile payments on business

So, why should this matter to small businesses? A recent survey conducted by Visa demonstrated that businesses that can get customers to use cards might expect them to pay more. Some 65% of small businesses surveyed agreed that customers who pay with cards tend to pay more than those with cash. Meanwhile, 78% of customers ranked cards and mobile devices as their top-preferred options, further emphasizing their popularity with consumers.

Stripe credit cards will be compatible with Apple Pay and Google Pay for its mobile payments, so it should help businesses merge seamlessly with expanding customer preferences. This will reduce the barrier to entry for businesses issuing their own credit cards and allow a wider range of companies—both physical and online—to distribute payment methods to their own customers.

Less room for specialty mobile payments?

While Stripe is increasing the potential for businesses to create credit cards capable of handling mobile payments, not every company is succeeding in the field. In fact, Snapchat recently announced that it would be shutting down its peer-to-peer mobile payments service, first established in 2014 as part of a partnership with Square. Facing heavy competition from mobile payment apps like Venmo and Square Cash, Snapcash could not sustain itself in the payments field despite the advantage of a wide user base.

Meanwhile, other companies rush in to fill the void, especially on an international basis. SoftBank recently announced that it would partner with Yahoo Japan to launch its own mobile payment app, aimed at competing directly with Apple, Samsung, Alibaba and even popular Japanese messaging app, Line. The move suggests that companies like SoftBank and Yahoo see plenty of room to grow. With Stripe moving in on credit cards and mobile payments on behalf of businesses and a greater influx of mobile apps pushing for international dominance, the trendline only points up for electronic payment solutions.

Joe Resendiz is a Research Analyst at ValuePenguin, where he focuses on personal finance and credit research to assist consumers. Previously, Joe specialized on public sector and infrastructure financing at Goldman Sachs. He graduated from the University of Texas at Austin with a BBA in Finance.

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Online payment company Stripe Inc.—mostly known for enabling vendors to accept payments online—will begin helping businesses create their own credit cards. The cards are expected to allow companies to control payments and expenses to a higher degree.
payments, stripe, credit, card
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2018-44-02
Thursday, 02 August 2018 11:44 AM
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