What Is Stripe and How Does It Work? Quick Guide for Small Businesses

What's up, Mavericks?

If you've ever bought something online, there's a good chance Stripe was behind the transaction.

Stripe is one of the most powerful payment platforms out there, but what exactly makes it so popular?

Today at Merchant Maverick, we're gonna walk you through everything you need to know about Stripe, how it works, why it's used, and whether it's the right fit for your business, so stick around.

Stripe isn't just your average payment processor.

It's a technology company that's been around since 2,010.

Founded by two brothers, Patrick and John Collison, from the start, they had one mission, to simplify how businesses accept payments online, and they've done exactly that by building a platform that's flexible, developer friendly, and scalable.

Now Stripe is used by businesses of all sizes, whether you're a small eCommerce store or a massive tech company like Shopify or Lyft.

Stripe offers more than just the ability to accept credit cards.

It's an entire suite of financial tools that make managing your business easier.

So what does Stripe actually offer?

Beyond the basic payment processing, Stripe has expanded into areas like recurring billing for subscriptions, in person payments, banking as a service, issuing of credit cards, fraud prevention tools, and even business loans.

And if you're running an online marketplace, Stripe has you covered there too with its connect feature, which allows you to split payments between multiple parties.

Now let's get into how Stripe actually works.

One of the biggest reasons Stripe has become so popular is because it's designed to be incredibly developer friendly.

What that means is businesses can fully customize how they accept payments on their website or app down to the smallest detail.

This customization is possible because of Stripe's powerful API.

An API is basically a set of tools that developers use to connect their website or app to Stripe's payment system.

Instead of using a one size fits all solution, businesses can tailor the payment experience to fit their brand and needs.

Here's a simple breakdown of how Stripe works behind the scenes.

When a customer buys something on your website, they enter their payment details just like they would any other payment processor.

But here's where Stripe steps in.

It encrypts and securely sends that payment information to the banks or payment networks, like Visa or Mastercard.

Once the payment is approved, Stripe transfers the funds into your business bank account.

It's a seamless process, and what really sets Stripe apart is how much control it gives businesses over the payment flow.

Whether you want to handle payments for a subscription service, a marketplace, or even issue virtual cards, Stripe's infrastructure can support it.

Like any platform, Stripe has its pros and cons, so let's start with the advantages.

One of the biggest pros of Stripe is its developer friendly nature.

If you've got a technical team or even just one solid developer, you'll be able to build a custom payment system that perfectly fits your business.

This customization is rare with other payment processors, which tend to offer more rigid out of the box solutions.

Another huge pro is global reach.

Stripe is available in over 40 countries and supports more than a 135 currencies.

So if your business operates internationally, Stripe makes it easy to accept payments from customers around the world without having to worry about currency conversions or international payment methods.

And finally, Stripe is known for its advanced features.

Beyond payments, they offer tools for fraud prevention, subscription billing, and even the ability to create virtual or physical cards through their Stripe issuing service.

However, Stripe isn't perfect.

Let's talk about the downsides.

The biggest con is that Stripe can be overly complex for nontechnical users.

If you don't have a developer on your team, you might find it difficult to unlock Stripe's full potential.

Sure, there are plug and play options available, but the real value of Stripe comes from its customization, and that requires some technical know how.

Another downside is that customer support can be hit or miss.

Stripe has a reputation for slow responses when it comes to resolving urgent issues, which can be frustrating if you're dealing with something like a payment freeze or an account hold.

And finally, if your business processes a high volume of transactions, Stripe's fees can add up quickly.

Their pricing is transparent, typically between 2.9% plus 30¢ per transaction.

But for businesses with large scale sales, those fees can start to eat into your profits.

So why should your business use Stripe?

The short answer, customization and flexibility.

If your business needs a payment solution that can be tailored to your exact locations, Stripe is one of the best platforms on the market.

It's also a great choice for businesses that operate internationally as Stripe makes it easy to accept payments in multiple currencies without any additional work on your part.

If you're a business that uses subscriptions or recurring billing, Stripe's tools are built to handle that easily.

And if you need fraud protection or wanna offer financing options to your customers, Stripe has solutions for that as well.

Stripe works best for businesses that are tech savvy and have a need for customized payment solutions.

Ecommerce stores, subscription services, and even marketplaces are ideal for Stripe because they can take full advantage of its flexible API.

But Stripe isn't for everyone.

If your business has high transaction volumes, Stripe's fees might become too expensive, especially compared to other payment processors that offer lower rates for large scale operations.

If you are high volume and need a good recommendation for a payment processor, check out our description below for a good option.

And if you're in a high risk industry like travel or adult entertainment, Stripe might put your account on hold or freeze your funds due to increased risk.

We also have great options for high risk businesses, so check out our description below for that as well.

Speaking of holds and freezes, one issue you might run into with Stripe, especially if you're in a high risk industry or have frequent chargebacks, as account holds.

Stripe has strict compliance policies, and if they detect unusual activity such as a sudden spike in chargebacks or transactions, they might place a hold on your account or even freeze it.

This can be frustrating, but it's their way of protecting both businesses and customers from fraud.

To avoid this, it's important to monitor your transactions closely and respond quickly to any disputes.

If you're running a high risk business, I'd recommend being proactive, communicate with Stripe, provide documentation, and make sure you're fully compliant with their policies.

In summary, Stripe is one of the most flexible and powerful payment platforms out there.

If your business needs a customizable solution with advanced features and global reach, Stripe is a great option.

But it's not a one size fits all platform, and it might not be the best fit for businesses that need simplicity or lower fees.

If you wanna get started with Stripe, click the link in our description below.

And for more details on Stripe and other payment processors, check out our full reviews over at merchantmaverick.com.

We're here to help you make the best choice for your business.

Thanks for watching.

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And if you've used Stripe or have any questions, drop a comment below.

We'd love to hear from you.

We'll see you next time, Mavericks.