Must There Be A Payment Platform?
Shouldn't Stripe and Adyen Be Figures Of Controversy?
Welcome to Money In Transit, the newsletter for startup founders who find themselves dragged into payment technology.
The ultimate question for any engineer designing payment applications is “why don’t you integrate with Stripe and call it a day?”. There are many dangerous assumptions behind that question, and this post addresses their problematic consequences head on.
Consider sharing this post with a founder who is considering which provider to “partner with” to acquire payments.
Social media is one of the most toxic elements of our personal lives. Facebook has been with us since 2004, and it’s clear now how it has slowly forced itself into our interactions with other people, degrading friendship into content consumption.
Those designing social media platforms must have deduced that it pays off to optimize for addictiveness, to auction our data, and to sacrifice everything on the altars of growth.
I know. You’re going to say “privacy isn’t a super high concern to me”, or “people don’t care”. Few consumers would be willing to pay the price of true privacy. They might pay a subscription to remove ads from their feeds, but that’s about it.
However, imagine that you could go back to a startup’s very early days, just when they’re about to accept payments on their site. And be able to tell their founders that the platform they’re going to integrate with is going to collect a disturbing amount of fees from them, learn everything about what makes them successful, and oversee their finances beyond their most terrifying nightmares.
Do you think they would have signed up for it?
Information Asymmetries Turn Into Knowledge Monopolies
When a payment provider is small, it begins a relationship with its early adopters that is highly trustworthy, white-gloved and proximal. As the provider matures, the relationship turns more transactional, and by the time the laggards show up, it will have turned into a platform, with a few intermediaries that spring up to provide niche services on top of it.
That is the story of Stripe and Adyen.
Stripe started the way most startups do: scratching a personal itch. Its founders often complained about the difficulty of accepting payments online. So, they built an app for it. Adyen’s approach was much more commercial: it zeroed in on rebooting payments for big merchants, envisioning an Enterprise Gateway that would allow their customers to keep up with fintech innovation and not drown in the process.
For small businesses, payments are a nuisance; for corporations, a perennial project. But crucially, merchants of all sizes share a disdain towards payment applications, as if they were still handling cash, and we weren’t deep into the Internet era.
Engineers choose Stripe because it makes their job easier. Executives choose Adyen for the same reason their mentors chose IBM: it won’t get them fired.
Technical Debt As Competitive Advantage
Despite their differences, Stripe and Adyen exploit the same underlying dynamics: by integrating with their APIs, it makes switching away from them harder over time. As merchants grow, their increasingly sophisticated payment operations demand specialized expertise. Payment platforms accumulate power over their customers by courting them into an ecosystem from which they can’t escape, with walls built with proprietary systems and inaccessible talent.
By integrating with payment platforms, startups mindlessly walk into a prison they cannot smell, taste, or touch. Startups’ technical debt becomes the provider’s competitive advantage. Founders may complain, but will always abide by the platform’s rules, whatever those may be.
Having payment platforms engaging with their customers this way should give us all pause. Many founders believe that payments are “outside their startup’s core competency”, and therefore must be outsourced. However, as the economy is progressively moving online, providing a reliable payment experience becomes the most critical part of the customer’s journey.
Payment providers are meant to support the startup’s business strategy, not challenge its sense of priority. Startups must resist the tantalizing seven lines of code with which Stripe allows you to power payments, or the siren songs from Amsterdam’s payments juggernaut. They win by eroding your revenue the way Facebook has eroded the concept of friendship.
I wouldn’t be surprised if a few years from now, the CEO of Stripe will be testifying in the Capitol, and a senile senator might ask them how Stripe can afford to offer to integrate with their platform for free.
And then, Stripe’s CEO will confidently pause for a moment, throw a knowing smirk, and assert “senator, they can’t leave!”.