Fintech giant Stripe ventures into credit services

Stripe, the prominent private financial infrastructure company, has unveiled a new charge card program through its commercial card issuing product, Stripe Issuing, according to an exclusive statement from Denise Ho, the head of product for BaaS at Stripe.

Initially introduced in 2018, Stripe's Issuing product has facilitated the issuance of over 100 million cards across the United States, the United Kingdom, and the European Union for companies like Shopify and Ramp. Presently, it stands as one of Stripe's fastest-growing products, supporting an impressive half a million transactions per day. Notably, Stripe claims that fintech companies such as Klarna have built their entire businesses around this offering.

Previously, Stripe-issued cards could only be utilised for spending money from a pre-funded account. However, the recent expansion into charge cards will empower companies to create and distribute virtual or physical charge cards, enabling customers to make purchases on credit rather than relying solely on the funds in their accounts.

Denise Ho expressed her satisfaction with the performance of the Issuing product, stating, "Among our suite of products, Issuing has been doing really, really well and the No. 1 top demand within Issuing has been the ability for Stripe to enable our platforms to offer credit to their users."

Stripe offers the essential elements of a charge card program, including funds flows, network connections, printing services, and integration APIs. In addition, the company aims to streamline compliance, establish bank partnerships, and manage ledgering requirements.

The current users of the charge card program in its beta phase in the United States are Ramp, Emburse, Karat, and Coast. Stripe has plans to launch charge card programs in the European Union and the United Kingdom in the near future.

Denigse Ho explained the intricacies of regulation, stating, "In the U.S., the banks are the ones that have been our sponsor and that's regulated. And because you're letting the small businesses spend, that is a form of lending so that lending compliance has to come from the bank."

Stripe is actively collaborating with startups to guide them through the process, ensuring compliance and risk oversight to prevent any potential pitfalls.

Regarding underwriting, Denise Ho mentioned that Stripe has received feedback indicating that its clients ultimately want to retain ownership of the underwriting decision. She added, "What we do is we help them put together the set of policies and ensure that these policies are actually compliant. So we offer both flexibility and control but with guardrails."

In the future, as Stripe continues to enhance its offerings, Ho mentioned that their clients may desire "more modules" to conduct their own underwriting. Accordingly, Stripe plans to develop such capabilities over time.

Denise Ho emphasised that anyone can sign up for the new program, even if they are not currently a Stripe user.

Stripe's revenue from the program will primarily come from interchange fees. As customers' volume of transactions increases and spending grows, Stripe will earn more. Additionally, there will be compliance fees associated with the program.