Square vs. Stripe: What’s the Difference?

Square vs. Stripe: An Overview

Square (SQ) and Stripe have become two popular payment processing services for growing small businesses. As the services have become widely used, their simple, flat-rate payment processing fees have attracted big supporters, such as Starbucks (SBUX), to use and promote their systems. For investors and business owners, understanding how these businesses operate is important to making smart financial decisions in the fast-paced payment processing industry.

Key points to remember

  • Stripe and Square are payment processing companies for all types of businesses.
  • Corporations are disruptors in the space, which has long been dominated by big banks.
  • Founded in 2009, Square is known for its adapters that plug into phone jacks on mobile devices.
  • Stripe is primarily used for online debit and credit card transactions, but also has API and business management capabilities
  • While Square raised funds through an initial public offering in 2015, Stripe remains a private company.

How Square Works

Co-founded by Jack Dorsey, one of the founders of Twitter (TWTR), in 2009, Square began as a mobile payment processor for small businesses that operate on the go. The company first sought to make payments easier and became popular with its free, convenient adapters that work through a phone’s headphone jack, a flat rate of 2.6%, plus a zero processing fee. $.10 per transaction and no recurring monthly service fees. .

Square has been widely adopted by mobile and physical businesses. To further expand its reach among the latter, Square launched a physical Square Stand in May 2013 that turns iPads into traditional cash registers.

The company has also developed its software suite to better manage the sales of various products from a menu or a predefined inventory. Later product additions include inventory managementappointment management, analytics, invoicing, online ordering, gift cards and capital management tools.

In October 2013, Square launched Square Cash as a person-to-person payment platform. Square Cash was later renamed Cash App. The company had a initial public offering (IPO) in 2015 and raised $243 million, with the shares trading on the New York Stock Exchange under the symbol SQ. That same year, the firm launched Square Payroll, a tool for small enterprises to process payroll. In 2019, Square began offering an application programming interface (API) to allow merchants to customize the Square platform.

How Stripe Works

What is Square for mobile payment processing, Bandaged concerns the processing of payments on the Internet. Stripe, which was founded in 2010 by two Irish entrepreneurs, charges 2.9%, plus $0.30 per transaction with discounts available for high-volume customers. Like Square, Stripe has no monthly service fees and only charges business owners when a payment is processed.

Stripe, which was designed for online developers, makes it easy to integrate a variety of online payment processing tools and plugins with its APIs. Sites on common platforms such as WordPressDrupal and Joomla can use Stripe for paying bills, selling tickets, and selling physical goods, among other applications.

Stripe was not intended for in-person payments and focused on online transactions. These payments have a higher likelihood of fraud than in-person methods, which explains Stripe’s higher cost per transaction. However, in 2018, the firm launched a point of sale solution called Terminal, which provides credit and debit card readers that work with Stripe.

In 2021, Stripe raised $600 million bringing the company’s valuation to $95 billion. Unlike Square, Stripe is still privately owned.

Similarities and differences

Another major difference between the two payment processors is how payment information is acquired. Square is primarily used for in-person payments where the card is present and can be physically swiped into a card reader. In 2015, the company started offering a EMV chip reader. Prior to the launch of Terminal in 2018, Stripe was primarily used for internet transactions where the card is not physically present.

Both companies target any business that doesn’t want to pay monthly transaction fees and doesn’t want to be burdened with expensive payment processing equipment or complex contracts. Both companies offer similar automated services direct deposits within a few days of each transaction being processed, so that customers have quick access to money after each payment.

The essential

Square and Stripe are major disruptors in traditional payment processing, a space long dominated by big banks. Overturn the traditional monthly merchant account fees and transaction fees allow many more businesses to access credit and debit customers, further shifting the competitive landscape from traditional businesses to startups and growing small and medium-sized businesses.

As these companies continue to innovate, consumers and business owners can expect more changes that will make payment processing easier and more accessible. As cash becomes less prevalent and consumers continue to turn to plastic in droves, we can expect these electronic payment processing companies to grow and more competitors likely to enter the business. space.

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