I have heard for years people criticizing the payments industry as a low margin commodity biz. What has changed? Or they just got it wrong?
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“In the tech world, particularly after PayPal was sold to eBay, the dogma for many years was ‘Don't ever do payments, it's too hard and fraud will blow up and destroy you.’ And during the first internet wave, that was true. It was a challenge to get the type of data and information you needed to really deal with fraud at scale,” he says. “But fast forward to today and take a look at companies such as Stripe and Affirm. It seems that the fraud problems weren’t as bad as we thought and we’ve since developed systems, processes and data science tools that just didn’t exist back then. So if you’d applied first principles thinking five or 10 years ago, asking if those assumptions were still true and digging into whether it was still too hard, then maybe you would have come to a very different conclusion about starting a payments company and gotten ahead of the curve.”
http://firstround.com/review/future-founders-heres-how-to-sp...
Until we see Stripe's financials I would not assume anything about healthy margins. Square also had a lot of hype in the early days but turns out their processing margins were really low and most of their current valuation is from expanding into other products like business loans.
Stripe's valuation is similarly based on a hypey "grand vision" to offer other services that actually make money, not by magically making businesses pay more for commodity services.