Payments Startup Stripe Expands to Canada in Challenge to PayPal

Photograph by David Paul Morris/Bloomberg

Patrick Collison is CEO of online payments startup Stripe, which is expanding into Canada.

(Updates with PayPal declining to comment.)

Stripe, an online payments startup backed by Peter Thiel, is expanding into Canada to ramp up competition with EBay’s PayPal and widen its merchant base in a country with few options for transactions over the Internet.

Any individual or business based in Canada can start using Stripe to collect payments starting today, the company said in a statement. Stripe, based in San Francisco, charges customers a flat fee of 2.9 percent plus 30 cents for every transaction and supports major credit cards.

The startup is competing with companies such as PayPal and WePay in an online payments market that may reach $1 trillion worldwide by 2014, according to a report by Research and Markets, a Dublin-based research firm.

Most merchants in Canada currently go through banks to set up online payments, which can be a lengthy process of faxing documents and providing personal information, said Tobias Lutke, chief executive officer of Shopify, an e-commerce company based in Ottawa.

“The credit card gateways in Canada are much more tied to the banking system,” Lutke said in an interview. “It takes literally months to get a payment gateway set up. With Stripe, it takes minutes. It’s a game changer in Canada.”

Stripe has raised about $40 million in funding from investors including Sequoia Capital, Redpoint Ventures and PayPal co-founders Thiel, Max Levchin and Elon Musk, according to Patrick Collison, the company’s 24-year-old chief executive officer. Stripe was started in the U.S. in September 2011 by Collison and his brother, John.

Unlike PayPal, a merchant’s customer doesn’t need a Stripe account before paying and Stripe doesn’t direct the buyer to another website to pay. That makes the transaction process smoother, Lutke said.

Jennifer Hakes, a spokeswoman for PayPal, declined to comment.

Stripe won’t disclose its revenue or number of customers. PayPal has more than 100 million users and reported $4.1 billion in revenue last year.

The startup is working with financial services giants such as Wells Fargo & Co. and American Express Co. to let merchants, from small bookstores to large companies, use its system, Collison said in an interview.

“Payments in Canada was so uniquely bad that this is a really big deal,” he said.

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