Some Quick Thoughts on Payments

I wrote this up for a little thingamajig I was doing… thought I’d share. It’s not the sexiest industry but it’s probably one of the most important. PAYMENTS.

Is there a sleeping giant in the payments industry? Since PayPal disrupted the payments industry in 1998, it has become the leader in electronic payments and money transfers. The company now has over 143 million registered accounts and processes $180 billion transactions per year.

Coinbase, a bitcoin wallet and technology platform supporting the digital currency has raised over $31 million in venture funding, the most of any Bitcoin platform. The company recently announced it had created 1 million bitcoin wallets and in just a little under 3 months, Coinbase announced it has supported over $1 million in transactions with partnering website Overstock.com. If Bitcoin technology and its currency are the future of payments, Coinbase is well positioned to be the PayPal of the digital currency era.

WePay and Stripe are two digital payment companies trying to take on PayPal with better APIs and better customer service. Between the two, it seems as though Stripe is winning the battle for market share. Stripe has raised over $120 million in funding, while WePay has raised $34 million. Although Stripe doesn’t announce the number of users it has, they have stated they process billions of dollars of transactions a year. PayPal bought Stripe’s rival Braintree in 2013 for $800 million. Was the Braintree acquisition a sign that PayPal is threatened by the Stripe?

The landscape of the electronic payment industry is changing. Square has created a partnership with Starbucks and Whole Foods Markets to process payments through mobile devices. The firm’s card reader and mobile wallet will support approximately $30 billion in transactions in 2014, up from $1 billion in 2011. Has Square hit its peak in the payments industry? Or is its market share still growing?

eBay’s $1.5 billion acquisition of PayPal in 2002 was the first large payments company buyout, but it won’t be the last. Payment companies like Stripe, Square, and Coinbase have gained a lot of traction and momentum since being introduced, but are any of them the next PayPal?

Full disclosure: I was offered a position at WePay a few years back that I regretfully declined. The people there are awesome.

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