Business of Fintech, Payments

Stripe hits the golden $1 trillion payment volume benchmark

  • It seems like $1 trillion is the new hot number. Recently Zelle said that it is on track to reach the $1 trillion payment volume mark this year, and now Stripe says that it too has crossed the payment volume benchmark.
  • Stripe's annual letter shows that the company had a good year, from its payment volume rising by 25% to its success with startups through its Atlas product.

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Stripe hits the golden $1 trillion payment volume benchmark

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It seems like $1 trillion is the new hot number. Recently Zelle said that it is on track to reach the $1 trillion payment volume mark this year, and now Stripe is  stating that it too has crossed the $1 trillion in payment volume benchmark.

Stripe’s annual letter also states that its payment volume rose by 25% in 2023.

Stripe’s  performance numbers seem like a testament to a good year at Stripe. 

Two thing stuck out though: 

1) Fragmentation in payments: Despite the overall growth and resilience the payments sector has shown, the sheer size of the pie and the many players trying to cut out a piece for themselves leads to fragmentation. “Over the last year alone, we’ve added support for more than 50 new payment methods, taking the total supported to over 100,” the letter read. 

Although the annual letter doesn’t really dive into what this fragmentation means for Stripe: is it an operational or a business opportunity? The letter does seem to lean towards suggesting that adding support for payment methods enables use by more customers – a generally positive, if broad, comment that oddly contrasts with the word “fragmentation”. 

But negative sentiments about fragmentation in the payments space have been echoed elsewhere. 

“There are a number of options available but it’s still a very fragmented marketplace,” said Kelli Svymbersky, vice president of payment at CCC, a fintech and insurtech solutions provider. The concern is that the increasing number of payment methods makes it difficult for the merchant to choose the right payment methods to offer its customers. 

The Director of the Monetary and Capital Markets Department at the International Monetary Fund (IMF), Adrian Tobias has similarly warned that “we could end up in a fragmented world,” when discussing the changing landscape of cross-border payments. 

2) The startups are alright: According to Stripe, startup formation has continued to rise and remained resilient, despite VC funding dropping to new lows in 2023. It saw the biggest rise in startups going live in the US, followed by the Netherlands, Sweden, and Canada. 

A bar graph and trend line showing VC funding levels from 2019 to 2023 and the number of Startups going live on Stripe. Despite VC funding decreasing dramatically from 2021, startup numbers going live on stripe have continued their upwards trend.

Possibly due to the difficult VC environment, startups are renewing their focus on “monetizing faster and enabling profitable growth as soon as possible,” said the letter. Stripe’s data shows startups which started out in 2022 are 60% more likely to start collecting revenue in the first year of their operations compared to those who started out in 2019. One in six new startups in Delaware are setting up shop using Stripe Atlas to set up shop by generating relevant documents, hiring a registered agent, and getting a US Tax ID. So far 50,000 companies have used Stripe Atlas and the company reports that they are on track to earn $ 5 billion in revenue collectively. 

Even though the annual letter paints a rosy picture for Stripe, the tight VC environment is not only affecting the startups that use Stripe, it is affecting Stripe, as well. Recent news by the company indicates that it may be delaying its IPO plans at least as far as 2025. Stripe is now allowing its investors to buy its current and former employees’ shares and this deal will put its valuation up to $65 billion. Goldman Sachs’s growth equity fund and Sequoia Capital will both be participating in the deal. 

The deal is a result of the founders promising annual liquidity to their current and former employees. Stripe did something similar last year, where investors like Temasek and Andreessen Horowitz bought more than $6.5 billion of the company’s stock. 

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