Stripe’s bullish on UK fintech. The $5bn San Francisco payments firm now powers many of London’s most prominent fintech companies from TransferWise and Nutmeg to Seedrs and it’s only going to keep growing its presence in the UK, which is now its second biggest market globally after the US. Backed by the likes of Sequoia and Andreessen Horowitz, the firm is moving to new offices in Old Street with space for 100 people and will expand its UK team to 40 this year. Globally it plans to grow from 400 to 1,000 employees this year.
Now processing “billions” of pounds annually for “hundreds of thousands” of companies globally Stripe continues to try and galvanise the way money moves round the world – recently launching a new product suite called Atlas to help startups get off the ground faster. Here, head of UK growth James Allgrove talks UK fintech and what’s ahead in 2016.
There’s a lot of hype around London fintech, but it can’t be all good. What do you identify as the unfriendliest parts about the city for fintech companies right now?
Innovation in fintech generally favours the little guy – it’s bringing tools to the upstarts to transact globally, and entrepreneurs are eventually in a position to compete on the merit of their product rather than their size. This makes for a highly competitive environment in London fintech — so, any fintech startup risks losing ground to the next entrepreneur if they don’t innovate quickly enough or build on the right infrastructure to scale internationally.
Our founders John and Patrick Collison built Stripe in San Francisco where the tight-knit developer community made it easy to establish a strong feedback loop with our early users. In particular, Y-Combinator offered a useful early network with a good level of trust. Enthusiasm in the community spread quickly by word of mouth and this was a big catalyst in Stripe’s early traction.
As the UK fintech ecosystem begins to mature, we’re seeing quite a few similarities between what’s happening here and what happened in Silicon Valley in the early days of Stripe. A strong pool of developer talent combined with the proximity to a global financial hub and a rich network of fintech accelerators is producing a stream of successful fintech startups. The numbers don’t lie: UK fintech generated approximately £6.6 billion in revenue in 2015, so it’s been a real coming of age for London. What’s most exciting for us at Stripe is that we see it first-hand in our work with growth-stage fintech companies like Nutmeg, iwoca and LendInvest, as well as our involvement at accelerators like Techstars and Seedcamp.
What are the challenges for fintech startups as they scale quickly?
The big challenge for European fintech entrepreneurs, versus those in the US, is the relatively smaller size of the domestic markets here. If you want to scale in the UK, it’s important to think early on about putting the foundations in place to expand internationally. That means building on the right infrastructure to sell across borders online, manage different currencies and optimise for a variety of consumer payment preferences overseas.
All that is stuff that should be easy. The internet has connected the world in a way that has broken down lots of the traditional barriers — I can send an email anywhere in the world in an instant, but the infrastructure to move money around in the same way has been missing.
We’re focused on building this infrastructure and removing the artificial barriers to transacting with one another online – helping European fintech startups take payments in currencies from all over the world from day one. That’s not just restricted to fintech — all sorts of companies, from ClassPass to Lostmyname, are using our platform to expand internationally and accept more than 130 currencies.
Stripe’s position must give it a pretty unique overview of changing ways in the way people use and spend money online – what are the interesting trends you’re seeing?
The big challenge businesses are facing today is how to keep pace with consumers who increasingly buy on mobile and in apps. In the UK, where online spend per capita is higher than anywhere else in the world, that challenge is particularly acute.
Even businesses with long-standing and successful desktop sites are being forced to think carefully about how to capture sales and boost conversions by providing a great mobile offering. We’ve worked with Lush and Missguided to do exactly that with their mobile apps. The rise of mobile is also creating entirely new business models. Consider Bloom & Wild, for example, a mobile-first florist using Apple Pay to sell to customers via their app. In fact, more people use its mobile app to buy flowers with a tap of their thumbprint than on its website.
Another trend we’re seeing is the proliferation of mobile marketplaces reshaping ecommerce, and innovation in payments has been a central driver there. In the past, entrepreneurs building marketplaces had to contend with a lot of complexity: building a system that can receive money from buyers globally; paying out to sellers in any currency and take commission; all while handling compliance and fraud detection. We’ve wanted to fix this for some time, which is the rationale behind Stripe Connect, which is powering businesses like Shopify and Lyst.
What categories of businesses drive biggest revenues for Stripe?
The businesses which scale particularly quickly on Stripe tend to be the most sophisticated internet businesses, such as sharing economy services, mobile marketplaces, fintech startups, on-demand services and ecommerce platforms.
Stripe is betting big on fast-growth startups but many of these, by their nature, will not survive or sustain growth in the number of payments they take – how does the firm make sure it sustains consistent growth in its transactions volumes?
Stripe is an instant-setup, developer-focused platform, so we’re a natural fit for startups and this certainly was a catalyst for our early growth. Similar to AWS, our platform is built for scale too, so our users tend to stick with us as they grow, and list even in Shopify’s case. Today, our user portfolio is more diverse as large, established businesses increasingly turn to us to compete on mobile and in the social commerce space. Best Buy, Adidas, Saks Fifth Avenue, for example, use our Relay product to sell via ‘buy buttons’ on social media.
Stripe plans to more than double its workforce this year – what’s ahead in 2016?
London fintech is a huge market opportunity for Stripe. What we’re excited about in particular is how fintech innovation is enjoying a kind of virtuous cycle: fintech startups are building on top of each other to create increasingly sophisticated products and scale quicker than ever before. Of course, we’re also working with businesses across a diverse range of sectors, such as the sharing economy, on-demand services and ticketing.
Because of that, we’ll be growing our team quite a bit this year, hopefully to around 40 people by the end of 2016, and moving to a new office to fit everyone in, right on Silicon Roundabout, in a few months.
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