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How Stripe is using data to differentiate

Small merchants have tons of questions about their business, and Stripe hopes improvements in data flow will improve the payment company’s position to provide dozens of other services.   

Stripe introduced several new products last week to build on its core payment acceptance technology, including a data pipeline that streamlines how merchants receive and analyze information.  

“Merchants have questions like ‘What is our current cash status? And how does cash flow change based on seasonality?'” said Vladi Shuntorov, product lead for Stripe’s data pipeline.  “[Or] Which product bundles generate the most revenue? What customer segments and product/price selections drive the highest voluntary churn? And what are the most popular subscription plans per segment?”

The pipeline syncs Stripe data with merchant information that’s stored in Amazon Redshift or Snowflake Data Cloud. Merchants can access the consolidated data in a single location and combine it with other information to determine cash positions or inform business decisions. 

The pipeline comes shortly after the debut of an account aggregation product and alongside other merchant services. Each of these developments plays a role in Stripe’s increasing competition with traditional and new payment companies. 

Stripe is in an expanding rivalry with Plaid, a data aggregator that is building an ecosystem of partners to support Plaid’s expansion into payments. Mastercard’s Finicity, Visa’s Tink, Yodlee and MX also offer account aggregation and data services for merchants.  

Stripe is additionally competing with payment fintechs such as Block and PayPal, as well as traditional payment firms like Fiserv and FIS, which have made acquisitions and product updates that serve card issuance, payment processing and data management. 

Shuntorov did not directly reference other fintechs, but said the easy connection to a data pipeline and a data warehouse would be a differentiator for Stripe. The lack of such a combination would require merchants to invest in or build an application programming interface connection themselves. 

“[That] could introduce data latencies, inaccuracies and potential security and data governance risks, especially as companies grow,” Shuntorov said.  Fast-growing companies can have information spread across thousands of different sources, and this complicates comprehensive data analysis and reporting, he said.

“As companies grow, they need to pull more in-depth insights that reveal revenue growth opportunities,” Shuntorov said. “There is also a general trend towards users needing better data freshness to meet their business needs.”

The data pipeline is designed to address several departments or business functions. Finance and data analysis teams can use the pipeline to reconcile payment data faster since all of the data is consolidated in a single place. Security and fraud teams can combine a delivery platform’s fraud risk score, for example, with other business data to determine fraud trends at restaurants. The data can also inform revenue management decisions and add intel to marketing and sales campaigns. 

Stripe draws data from consumer payment transactions, subscription payments, accounts receivable, acceptance rates, fraud metrics and the utilization of different payment methods. The data pipeline is one of several products Stripe has released recently that are designed to build services on top of Stripe’s digital payment APIs.

Stripe also released Stripe Apps last week and launched an app marketplace to centralize how businesses build or locate third party tools that accompany payment acceptance. For example, a small business may use Stripe to process payments, but other tools to send refund confirmation or manage customer support tickets. By combining those tools in a marketplace and offering a data pipeline, Stripe is attempting to gain a larger share of small business functions.

One early participant in the app marketplace is Fundbox, which will embed its working capital product into Stripe’s marketplace to provide credit for small businesses. That would allow Stripe to offer lending to counter merchant capital products that PayPal and Block have offered for years. Another firm, Signifyd, will make its chargeback recovery product available through the Stripe marketplace. 

There are two potential scenarios where the app marketplace can be of use, according to Tim Sloane, vice president of payments innovation and director of the emerging technologies advisory service at Mercator. 

A service provider may have a large customer base that already uses Stripe, and the provider wants to integrate its product for existing customers. In a second scenario, the provider wants to market its product to the Stripe community. 

“Assuming there is good alignment between the Stripe community demographics and the provider’s solution, then the solution provider must investigate the API functions to determine how effectively its solution can be integrated into the Stripe technical environment,” Sloane said. 

In another move, Stripe collaborated with cryptocurrency firm OpenNode to allow businesses to accept payments through an app that converts incoming payments into bitcoin. It’s an acceleration of Stripe’s renewed support for cryptocurrencies after a hiatus of about three years and positions Stripe to compete with the card brands and fintechs as cryptocurrency payments become more mainstream.

These new products will all produce a variety of payments and business data, which will be added to the data pipeline, Shuntorov said.  

The most successful merchants rely on increasingly more data to manage their business, from real-time transaction monitoring to dashboards and analytics to identify performance improvement opportunities, said Zil Bareisis, head of Celent’s retail banking practice. 

“As they work with more providers, having data at disparate locations can present significant challenges, so many are looking to bring their data to one place in the cloud,” Bareisis said. “Solutions like Stripe’s Data Pipeline makes it easy to accomplish that task without heavy investment into expert technical resources.”

 

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