US fintech: earning their Stripe

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Fear is a powerful motivator. When the pandemic made cash seem unhygienic, US shoppers swapped notes and coins for contactless cards and online payments. Fintech middlemen such as Stripe, which takes a cut from digital payments, reaped the benefits. The San Francisco-based group’s next funding round could make it the most valuable VC-backed company in the US. 

A boom in online shopping plus Stripe’s roster of big customers warrant the jump. The company’s fortunes are linked directly to the growth in ecommerce. Before the pandemic these made up just 11 per cent of total spending in the US, according to Federal Reserve economic data. That figure rose to 15 per cent in the second quarter of 2020. Morgan Stanley estimates US ecommerce sales last year will add up to $746bn, up 25 per cent from 2019.

The shift is reflected in the share price moves of listed payment companies. PayPal shares are up 107 per cent in the past 12 months, Dutch payment company Adyen’s 133 per cent and Square’s 251 per cent. Stripe was valued at $35bn in an April funding round. If its valuation doubles or more, it would not look out of line with listed peers.

It is difficult to judge a potential valuation of over $70bn when Stripe provides no sales or profit figures and will only say that it processes hundreds of billions of dollars a year. If that worth was comparable to the trailing sales multiple at which Dutch fintech star Adyen trades, then sales in 2019 might be estimated at more than $3.5bn. 

Such details may remain under wraps for some time. Founded in 2010 by brothers Patrick and John Collison, Stripe is under the same pressure to go public as other late-stage start-ups, with early backers keen to exercise stock options. Hiring General Motors’ chief financial officer Dhivya Suryadevara raised expectations of a listing. But if Stripe raises another large sum in private markets as it easily could, expect it to steer clear of markets for now.

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