Case Detail

Case Summary

Stripe: Helping Money Move on the Internet

Case Number: 5-416-756, Year Published: 2017

HBS Number: KE1042

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Authors: Sarit Markovich; Nilima Achwal; Eric Queathem

Key Concepts

Competition, Competitive Strategy, Decision Making, Global Strategy, Growth Strategy, Innovation, Market Analysis, Pricing Strategy, R&D, Risk Management, Strategic Alliances

Abstract

This case features Stripe, a startup that enables merchants to accept payments from customers on the web, on mobile devices, and at the point of sale (POS). Stripe was launched in 2011 by the Collison brothers and quickly gained traction with e-commerce startups, particularly software and platform developers who needed help building their payment processing infrastructures. Stripe incurred high fixed costs in developing its platform and had low margins per transaction, so the company needed to reach high processing volumes (i.e., scale) to survive. This was challenging, as Stripe competed with large payment processors and traditional banks that had high processing volumes and were able to offer merchants significantly lower rates than Stripe. Still, merchants valued Stripe's solution because it was simple and versatile. Students assume the role of the Collisons to think about possible strategies Stripe could pursue to process higher volumes of transactions. Students are challenged to think about the potential response of the incumbents to Stripe's different growth alternatives. The teaching note presents the Value Net framework and discusses the importance of considering complementors and their effect on a firm's strategy. Finally, a discussion about Stripe's potential entry into the Indian market allows students to apply the concepts they learned in the discussion of a new market.

Learning Objectives

Students will learn of the risks/challenges new entrants face when entering a market with economies of scale and large incumbents and formulate growth strategies for such entrants; recognize the challenge intermediaries face in a market where competing intermediaries are vertically integrated and it is relatively easy for some suppliers to vertically integrate into the intermediary's market; and use the Value Net framework to evaluate the sustainability of the business model of young startups.

Number of Pages: 12

Extended Case Information

Teaching Areas: Strategy

Teaching Note Available: Yes

Geographic: Global

Industry: Mobile payments

Organization Name: Stripe

Organization Size: Medium

Year of Case: 2016