Stripe becomes an open-banking player with Stripe Financial Connections

Stripe has announced the launch of a new product called Financial Connections which completes its offer and allows its customers, thanks to a set of APIs, to consult their financial information directly from their Stripe account. This new service, which brings the payments giant into the open-banking market, represents a strategic advance for the group but is already causing problems for its (new) competitors just a few days after its presentation.

FACTS

• Stripe's new service, Financial Connections, is primarily designed to help Stripe's business customers connect to their end customers' bank accounts.

• Why?

  • To help them check their account balance,

  • to view their transaction history,

  • to limit the risk of fraud by verifying the bank account holder,

  • to set up direct debits.

• How do I do this? Stripe customers simply enter their banking credentials online and select the account they wish to associate.

• Business model: The service billing system is based on its usage rate. Financial Connections customers will be charged $1.50 per API call for account checks or 10 cents for balance checks, for example.

• The information exchanged between Stripe's business customers and their end customers remains encrypted and secure.

• Stripe Financial Connections will only be offered in the US, at least initially.

ISSUES

• A new solution that is already proving its worth: According to Stripe's initial evidence, companies using its Financial Connections solution reduce their risk of default by 75%.

• Accelerating trade: Stripe points to two concrete examples to justify the relevance of its new offering. By linking accounts, Financial Connections makes it easier to authorise new transactions such as loans (by quickly ensuring borrowing capacity) or donations (by directly linking the accounts of associations to those of their donors).

MARKET PERSPECTIVE

• Stripe is valued at nearly $95 billion. The company has become an undisputed reference in the payment market and is now preparing its IPO. The launch of its new service also enables it to extend its offer to the coveted Open Banking market.

• The launch of Stripe Financial Connections was heavily criticised by financial services giant Plaid, which accused Stripe of taking advantage of their collaboration to develop its new service and of using confidential information.

• The accusations were made because Stripe was previously a partner of Plaid. However, the payments company has now decided to go it alone in the open banking market, thus establishing itself as a potential competitor to Plaid.