Stripe and Square Face Complexity Abroad; Several challenges await the American payment start-ups Stripe and Square as they pursue international opportunities

FEBRUARY 11, 2014, 9:00 AM

Stripe and Square Face Complexity Abroad


Jeff Chiu/Associated PressWhile new payment start-ups, including Square, which was co-founded by Jack Dorsey, have found success in America, several new challenges await them outside domestic borders.

LONDON – International users now generate the majority of traffic for the social media giants Facebook and Twitter, and fast-growing tech companies like Airbnb, the online property rental service, have expanded rapidly into non-American markets to ward off local competitors.

Now, several American payments start-ups are also looking to expand their European footprint, including Stripe, a company backed by Peter Thiel, a co-founder of PayPal, and Square, a company created by Jack Dorsey, a co-founder of Twitter. But while these services have found some success in America, several new challenges await them outside domestic borders.

Across the ocean, the companies will find a higher level of of regulatory complexity. The European Union’s 28 countries each have different financial and data protection rules, making it difficult to rapidly roll out across the Continent. In addition, consumer habits also vary widely from country to country in Europe, including the use of credit cards and knowledge of online payment services.

And in many European countries, local competitors like the Swedish companies iZettle and Klarna, and the German online payments company Paymill, already offer similar online payment services to those offered by Stripe and Square. The giant payment service PayPal also has extensive operations across Europe.

“In payments, there are a lot of competitors,” said Alston Zecha, co-founder of Payleven, a mobile payments firm based in Berlin with a similar business model to Square that operates in countries including Brazil, France and Germany. “The U.S. is fundamentally a different market. You really need to have local expertise to succeed in Europe.”

Still, the potential for growth is too alluring for Stripe and Square to pass up. Last year, the amount of payments around the world made through cellphones grew 44 percent, to $235 billion, according to theresearch firm Gartner.

Stripe moved into several European countries last year, including Britain and Germany. On Tuesday, the company said that it would now accept payments in more than 130 currencies. But Stripe has already had to tweak its offerings for the vagaries of the European markets, said John Collison, an Irish entrepreneur who co-founded Stripe in 2010 with his brother, Patrick, in San Francisco.

For example, the company has had to learn how to handle a greater number of international transactions in Europe. And the different sales taxes in the countries have also proved a challenge.

“A lot of U.S. companies assume they can translate their website and that’s enough,” John Collison said. “In our business, payments are different country by country.”

American payment firms also must grapple with the differences in how Europeans pay for goods online. Credit card use in Germany, for example, is one of the lowest anywhere in the European Union, despite the country’s place as the Continent’s strongest economy. Many Europeans also rely on so-called chip-and-pin credit and debit cards to make transactions, which involve punching in a personal identification number instead of signing for a purchase.

Square does not yet allow users to use the chip-and-pin function on their cards, and some analysts say European customers could be wary of the service without that feature. Last year, Square expanded into Japan, its first market outside North America, and the company says it has not yet decided on its future global plans.

“The challenge about working across multiple geographies is adapting to consumer habits,” said Hiroki Takeuchi, co-founder of the British financial tech firm GoCardless, whose services are  currently being given trial runs in six other European countries. “Some U.S. payment companies can be taken by surprise by the differences here in Europe.”


About bambooinnovator
Kee Koon Boon (“KB”) is the co-founder and director of HERO Investment Management which provides specialized fund management and investment advisory services to the ARCHEA Asia HERO Innovators Fund (, the only Asian SMID-cap tech-focused fund in the industry. KB is an internationally featured investor rooted in the principles of value investing for over a decade as a fund manager and analyst in the Asian capital markets who started his career at a boutique hedge fund in Singapore where he was with the firm since 2002 and was also part of the core investment committee in significantly outperforming the index in the 10-year-plus-old flagship Asian fund. He was also the portfolio manager for Asia-Pacific equities at Korea’s largest mutual fund company. Prior to setting up the H.E.R.O. Innovators Fund, KB was the Chief Investment Officer & CEO of a Singapore Registered Fund Management Company (RFMC) where he is responsible for listed Asian equity investments. KB had taught accounting at the Singapore Management University (SMU) as a faculty member and also pioneered the 15-week course on Accounting Fraud in Asia as an official module at SMU. KB remains grateful and honored to be invited by Singapore’s financial regulator Monetary Authority of Singapore (MAS) to present to their top management team about implementing a world’s first fact-based forward-looking fraud detection framework to bring about benefits for the capital markets in Singapore and for the public and investment community. KB also served the community in sharing his insights in writing articles about value investing and corporate governance in the media that include Business Times, Straits Times, Jakarta Post, Manual of Ideas, Investopedia, TedXWallStreet. He had also presented in top investment, banking and finance conferences in America, Italy, Sydney, Cape Town, HK, China. He has trained CEOs, entrepreneurs, CFOs, management executives in business strategy & business model innovation in Singapore, HK and China.

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