Stripe Is Now a $20B Company

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?

The first principles changed. From Elad Gil in First Round Review:

“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...

Also, the fraudsters found the online payments business fairly early on, before there were a lot of real customers. In the late 90s, many merchants had as many fraud attempts as actual transactions, and a few fraudsters working through a box of stolen credit cards could take a small merchant to the cleaners. Now that online payments are so large, and there is a finite number of sophisticated fraudsters, fraud as a percentage is lower.

It makes me wonder if the same dynamic is at work with cryptocurrencies now. Fraudsters found and adopted them early, because if your goal is to commit fraud, having a currency not under the control of the banking system is a pretty critical attribute. But now that the mainstream world is aware of them and people are actively researching what they might be good for, that may not hold true forever.

The difference is that crypto is only good for fraud. So it'll never move past this early stage.