What is a Stripe Account
A stripe account is an E-commerce merchants payment gateway and credit card processing solution with 3rd party applications for small businesseses.
What does Stripe do?
Stripe is one of the biggest providers in the online payment processing industry. They assist small business merchants with accepting credit cards via their payment processing platform.
With over 100 million users and available in more than 44 countries (Stripe Atlas), this popular E-Commerce payment service provider (PSP) has grown in leaps and bounds since it was first launched in 2009 by entrepreneur brothers John and Patrick Collison.
Stripe Merchant Account
A Stripe merchant account is a payment solution provided by an American company that helps people and businesses accept payments online.
A Stripe merchant account works like a typical merchant account and assists small businesses in accepting and processing credit cards, debit cards and ACH payments via a website through an E-commerce payment gateway.
The credit card processing solution allows merchants to collect payments in different currencies.
The money is converted into the merchant’s default currency and then transferred from the Stripe account to the merchant’s business banking account.
Stripe payments is a payment solution that does not rely on the services of several companies to fulfill its obligations.
This specific PSP has an impressive clientele roster of some of the world’s biggest brands.
These international companies include:
- Spotify
- Uber
- Amazon
- Nasdaq
- Shopify
- Booking (.com)
- Wish
- Udemy
- Lyft
- The Guardian
- Accenture
- Instacart
- Under Armour
- Blue Apron
- National Geographic
- Target
- Stack
- DoorDash
- Coursera
- Kavak
- Fitbit
- Dribble
- Foursquare
Understanding How a PayFac Works
Every single online transaction requires a payment gateway and a payment processor. Secure payment gateways safely capture and transfer customer information to a processor.
After this is done, the processor processes the transaction by routing the funds from the customer’s bank to the merchant’s bank account.
A Stripe merchant account is not only an E-commerce payment gateway, it also doubles as a payment processor.
Stripe offers third-party account services by integrating payments for users that are looking for one-stop payment processing convenience.
There are no hidden fees to worry about on Stripe and users can close their accounts at a moment’s notice without having to pay a cancelation fee.
Merchants are expected to review terms and conditions to understand whether Stripe’s services really suit their business needs before signing up.
It is important to point out that Stripe does not provide direct merchant accounts for businesses; instead what they do is provide sub-merchant accounts and an E-commerce gateway under their own master merchant account profile.
This is the reason why business owners enjoy a faster setup process and are able to leverage various account features that other service providers struggle to offer.
Businesses Not Allowed to Use Stripe Merchant Accounts
As a general rule of thumb, Stripe does not do business with high risk merchants.
Stripe only offers sub-merchant accounts and not direct merchant accounts. They simply cannot afford the elevated liability a high-risk business model will bring.
A single unaudited sub-merchant account in their portfolio of low-risk merchants can create havoc with compliance and underwriting. Once the account is audited, the high-risk sub merchant account will most definitely be terminated.
Additionally, there is no consistent definition of what a high risk industry or business type is, and this adds to the confusion when applying for a credit card processing solution.
This is the main reason a Stripe merchant account can be approved and then shut down as soon as it begins to process payments online.
Below is a list of businesses restricted from using Stripe payment processing services and their E-commerce payment gateway.
- Gambling
- Adult content entertainment and other services
- Credit and Investment Services
- Multi-level (MLM) marketing and businesses
- Social media activity
- Unauthorized or counterfeit goods
- Legal and Money Services
- Illegal and regulated products and services
- Get rich with fast schemes
- Zero value added services
A complete list of non-eligible businesses can be found on Stripe’s website.
Why a Stripe Merchant Account is Safe
According to a TransUnion report, online fraud went up in the first 4 months of 2021 by 25% after being compared to the last 4 months of 2020.
The report confirmed financial services companies like banks and investment houses were among the hardest hit.
Reason being, people were simply doing more of their transactions online because of the pandemic, a development online criminals and fraudsters easily took advantage of.
TransUnion identified attempts to steal personal information from social media networks and infect mobile devices with malware as the main schemes criminals were using.
Stripe merchant accounts come with a wide array of simple, effective and innovative security features.
All accounts come with 3 basic security features:
- CVV/CVV2 checks
- HTTPS using SSL (TLS) encryption
- Address Verification Service (AVS)
All payment information used on Stripe by customers and cardholders is under the stiffest and safest standards.
Additionally, Stripe is a Level 1 PCI Service Provider This is the highest safety and security certificate available by the PCI Security Standards Council.
Stripe also offers a cutting-edge fraud detection and prevention service called Stripe Radar.
The service predicts the possibility of a fraudulent transaction by using advanced machine learning to glean information from billions of online payments from over 200 countries.
Stripe Radar comes at no extra cost with accounts that pay the standard Stripe payment processing fee of 2.9% + 0.30 per transaction or $0.05 per transaction on customized pricing plans.
Even with these protective measures in place, Stripe still promotes a program for hackers to identify vulnerabilities in their system and get rewarded.
Chargeback Protection prevents losses and shields merchants from dodgy disputes. Whether the dispute is legitimate or not, Stripe covers the disputed amount as well as any fees that may occur. To enjoy Chargeback Protection, merchants must agree to 0.04% per transaction fee.
Why a Payment Aggregator Account Might be Right for Your Business
Stripe merchant accounts are best suited for low risk small businesses that use an E-commerce business model and tend to process lower monthly sales volumes.
Stripe offers some of the best security platforms in the industry. They also allow merchants to integrate Stripe and also do business internationally.
If you are a programmer or have someone with expertise on your team, you can use Stripe’s developer tools to integrate more features into your ecommerce website.
Stripe accepts debit cards, credit cards, Microsoft Pay, Google Pay, ACH transfers as well as a plethora of other local payment methods across the world.
Check the Stripe website for an updated list of supported methods of payment.
Payment processing for businesses in the U.S. takes 2 business days.
Stripe automatically deposits funds into merchant’s bank accounts; however merchants can switch off automatic payouts from the dashboard and manually transfer funds whenever they want.
