Stripe Is the New PayPal

Commercially, of course a big customer is more valuable in isolation than a little customer, and while it's unfortunate if you're the little guy, it's understandable that a business might prioritise supporting its larger customers first.

But even if a little customer is only running a microbusiness on the side -- and as we learned during the EU VAT discussions a few months ago, there are very many such businesses on-line -- it's still going to be a big problem for them if a payment service kicks them off for a 1% chargeback rate. That literally means a single chargeback within several years in the example given, and given the randomness of the chargeback process at the best of times, that could easily result from an accident and not be corrected because the customer's bank doesn't handle it well.

Similarly, the little business might only be doing a few thousand a year in revenues, but if a service is failing to collect 10-20% of their transactions every month for unspecified reasons (and, for subscription business models, probably terminating the entire subscription in practice as a result) then that's still a huge level of attrition as a proportion of their modest income.

I suspect the danger for Stripe lies not in losing the odd small customer, or even necessarily in the cumulative damage if they lose a few small customers the same way before fixing a problem, but in the damage to their reputation that any individual case may cause even if the customer does not go posting about it on HN, Twitter, #stripe, etc.

For example, today I only have one business that is taking money on-line via this kind of payment service, and it's a relatively small one. Losing us as a customer wouldn't exactly show up as a footnote in the payment service's next financial statement.

On the other hand, I have another business that develops systems for clients who may need payment processing in some cases, and often a client will follow your lead if you recommend a service for something and they don't know any better or have other preferences. Similarly, I know a lot of other local business people through work and socially, and through a chance discussion over a drink I once helped a business several orders of magnitude larger to find and ultimately switch to a different payment service.

I'm always happy to recognise good service and positive experiences. Usually everybody involved wins from such discussions, and I imagine that word-of-mouth advocacy is quite a big factor in the early growth of many on-line services. The downside is that presumably someone in a similar position who hadn't enjoyed the same positive outcomes that I have seen would not have made those same recommendations, and that would have cost one payment service a very noticeable amount of revenue in cases like the one I mentioned above.

So I guess it's inherently a tricky thing to balance support and management overheads between larger and smaller customers if you're in the kind of business where your main target audience is knowledgeable and probably technical people. Big customers generate revenues right now, but small customers might not only become big customers themselves but also refer other potential customers, and you probably have a lot more small customers who can make or break your reputation than large ones who don't really care about your reputation anyway.

I'm guessing a service like Stripe has plenty of customers in B2C markets, where selling something for $10 is hardly unusual. At that price, they are only making a few cents on the transaction in revenues (not profits).

Obviously on a $100 transaction the figures work out much better for them.

I think Stripe also still charge the same rate for all card types, but behind the scenes they are probably paying significantly higher rates to some card networks than others.