In Depth

Stripe Is Supersized, Swipe Fee Fist Fights Reign Eternal And Bitcoin’s Being Bitcoin

It’s Monday and time for the weekly data dive — a recap of all the data doings last week that will prep you for what’s likely to happen this week. Starting with …

Stripe Supersizes It

Though Stripe’s founders started their lives in Ireland, they have clearly adapted well to the customs of their adopted homeland in the U.S. As last week demonstrated, this is particularly true when it comes to the uniquely American tradition of supersizing it, the value of which Stripe spent most of last week embodying.

Things kicked off with the announcement that Stripe has tacked $1.5 billion onto its valuation in just six months’ time. Stripe announced the completion of a new funding round for an as of yet unspecified amount last week that included some pretty big names, including Visa and American Express. According to Stripe CEO Patrick Collison, the amount raised is “less than $100 million.”

Stripe’s previous investment round, just six months ago, raised $70 million and valued the California-based tech outfit at $3.5 billion. Stripe, as a payments gateway, gets its top line from charging a small percentage per transaction conducted using its technology, which includes, through its credit card reader, the ability to complete online mobile payments and, more recently, the enablement of “buy buttons” on sites like Facebook, Twitter and Pinterest. The company is looking to expand its footprint among small and mid-sized businesses that still are unable to accept credit card payments.

American Express’ involvement furthers the developing relationship between Stripe and Amex. Just last month, the firms jointly released a “PayPal-like buy button,” as a feature available to online merchants earlier in July. That feature comes on top of the recent introduction of Stripe Connect (for smaller merchants and also acting in concert with Facebook and Twitter “buy buttons”) and a one-click platform that enables payments across mobile devices and PCs.

But why have one big partnership when you can have two?

Following the funding announcement, news broke that Visa is aligning with Stripe — both as an investor and as a strategic partner.

For those keeping score at home, Stripe counts among its investors two of the “big three” credit card networks. MasterCard CEO Ajay Banga was quick to point out in MasterCard’s earnings call last week that a company didn’t have to invest to do commercial relationships with players like Stripe, a company MasterCard has a commercial relationship with.

Stripe’s partnership with Visa will fuel its international expansion, especially in emerging markets. Access to Visa’s issuing and acquiring partners provides fast scale and access to Visa security offerings such as tokenization. The two firms will focus jointly on eCommerce, with features including “buy buttons” and other developments yet unnamed. So it’s likely we’ll start seeing technology announcements down the road.

“Stripe is particularly strong in creating great tools for developers to onboard merchants instantly and easily. This partnership gives Stripe the ability to connect to Visa’s network capabilities via APIs and SDKs for their developer community to access our payment and risk management services,” Visa’s EVP of Innovation and Strategic Partnerships Jim McCarthy told PYMNTS in an email interview.

“Visa seeks to invest in organizations that are focused on merchant top line goals, such as growing sales and customer loyalty, which are consistent with Visa’s goal of changing the dialogue with our merchant partners.”

As of yet, Visa has not disclosed the precise amount of its investment in Stripe. What is clear after Stripe’s big week is that the emerging firm is readying for a big push.

Scandal And The Swipe Fee Settlement

Some stories never die and instead survive by becoming continually stranger.

Such is the case with what appears to be yet another chapter in the eternal struggle between merchants and card networks over swipe fees.

According to reports last week, attorneys representing about 100 large merchants — among them marquee names ranging from Walmart to 7-Eleven — are looking to officially scuttle the $6 billion deal, struck and approved by a federal judge three years ago. While not directly involved, the outcome here could have some repercussions for American Express and the $79 million settlement it also made with retailers.

The main issue here seems to be dissemination of information. Specifically, attorneys for the retailers allege that opposing counsel exchanged information that was supposed to be confidential via email. If this dispute moves forward, those details could potentially unravel the case that first began about a decade ago in 2005.

The lawyers representing the merchants are hoping that the lawyers’ reported conduct warrants the pact approved by that federal judge to be tossed out.

The communication under dispute stems back to emails that were allegedly sent between Keila Ravelo, an attorney who represented MasterCard while she was partner at Willkie Farr & Gallagher LLP, and attorney Gary Friedman, who was the attorney for the merchants in the antitrust case. The merchants and their attorneys argue that Ravelo and Friedman shared confidential information that affected the outcome of the case.

Ravelo and Friedman had worked together previously at another firm and on a pro bono case representing Melvin Feliz, who went on to marry Keila Ravelo.

These emails were surfaced as part of an independent investigation of Keila Ravelo, who resigned from Willkie Farr & Gallagher after the antitrust case and now faces charges of wire fraud and conspiracy to import cocaine with her husband. The drug trafficking and wire fraud charges remain unconnected to the swipe fee case.

During MasterCard’s second quarter earnings call, MasterCard CEO Ajay Banga took the time to share the company’s position on the legal proceedings, suggesting that the lawyer’s behavior shouldn’t play a role in the case’s outcome.

“We’ve been aware of the article. We are aware of the underlying issues. If those allegations are true, clearly these lawyers have displayed conduct that’s pretty disappointing. But to be clear, they were not the principals only involved in that whole settlement,” Banga said. “There were lots of regulatory people involved. There was great close involvement by the judge at that time. I don’t think that the behavior of two lawyers disrupts all that. But you know what, the court is going to decide that. We’re pretty confident the settlement will stand. We’ll see how it goes. But we’ve been aware of this for a little while now.”

Bitcoin Is The Future Of Currency — No For Reals This Time

It’s amazing what a little stability will do.

With prices hovering around the $300 mark, Brian Armstrong, CEO and founder of Coinbase — the world’s largest bitcoin wallet provider — appears to be extra bullish about bitcoin’s future.

Armstrong went as far as saying that “bitcoin could surpass the dollar as reserve currency within 10–15 years,” International Business Times reported.

Bitcoin has made big headlines lately, particularly on the global stage with big banking players, such as France’s BNP Paribas announcing that it is examining bitcoin as an option within its currency funds. The bank said it has been testing the digital currency and plans to report the results of its tests soon.

Volatility has been the typical response to those who claim the future of reserve currency is in digitally backed protocols that are designed to be inflation proof. After climbing to spectacular highs in late 2013, bitcoin spent much of 2014 crashing back to Earth with prices bouncing all over the place (but consistently down), mining costs becoming unsustainable without currency speculation, major exchanges crashing and burning (often with stacks of irretrievable bitcoins going up with them) and the successful prosecution of the Dread Pirate Roberts — proprietor of the Internet’s foremost portal for bringing criminals together, Silk Road.

But Armstrong thinks the volatility is passing into bitcoin’s rearview mirror. The year 2015 has been a relatively stable year for bitcoin’s prices, and insofar as there are price variations, the trend has seen the digital currency’s price moving up, not down.

“Volatility is a self-correcting problem, and we’ve seen that it’s dropped in the last three years, year on year,” Armstrong noted. “I foresee it continuing to do that over the next few years.”

When compared to how the U.S. dollar has been as a reserve currency, there’s been a bit of decline in recent years.

“We are seeing the beginnings of a change,” banking consultant Patrick Barron told International Business Times. “[The U.S. Federal Reserve] has been inflating the dollar massively, reducing its purchasing power in relation to other commodities, causing many of the world’s great trading nations to use other monies upon occasion.”

However, as with all bitcoin pronouncements, particularly from bitcoin enthusiasts, this should be taken with the appropriate grain of salt, as bitcoin’s ascension over fiat currency has been widely predicted since 2011. So far, fiat currency continues to look strong.

Bitcoin also still has the basic PR problem it has always had — criminals really like it — and unfortunately “4 out of 5 cybercriminals/drug cartels/arms dealers/child pornographers approve” remains a terrible marketing campaign for literally anything.

Finally, though volatility has leveled out, volatility is not a viral infection, like measles or chickenpox, that a commodity can contract once and be forever immunized against in the future. Volatility can return and usually does as more people take interest and the benefits of playing press your luck with a marketplace return.

So what did we learn about the future this week? Stripe wants to be everywhere (and has partnered with the largest payments player in the world to try to get it there), the swipe fee case is officially becoming the payments ecosystem’s resident zombie (dead but never buried) and bitcoin is … well … just being bitcoin.


New PYMNTS Report: The CFO’s Guide To Digitizing B2B Payments – August 2020 

The CFO’s Guide To Digitizing B2B Payments, a PYMNTS and Comdata collaboration, examines how companies are updating their AP approaches to protect their cash flows, support their vendors and enable their financial departments to operate remotely.

Click to comment