Dev

Stripe now does payroll processing for marketplaces like Exec, Lyft

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Stripe, the developer-friendly payment-processing service, is branching into new territory today with a payouts feature, already in use by marketplace companies like Lyft, Exec, and Postmates.

Stripe already lets devs accept payments from online customers for products in one-off purchases. Now, it can also let developers issue payments en masse — an especially handy feature for marketplaces.

“The shared economy is a very fast-growing segment,” said Stripe co-founder John Collison in a recent phone chat with VentureBeat. However, he noted, the process of paying out vendors in virtual marketplaces is “laborious” at best.

Imagine you set up an online babysitting agency. Your sitters are certified, know CPR, and have tons of online references from real-world clients. You’ve built a stellar booking system, and babysitting appointments are booming. Then, the first month of business comes to a close, and you have to pay all your sitters.

Normally, you’d have to sit down with some serious accounting software and cut checks to each sitter. But that only works when you’re dealing with a handful of sitters at a time. Once your business really takes off, you’re in big trouble.

“Marketplaces by their nature tend to grow faster than most other companies,” said Collison. “And if the marketplace has to do a whole bunch of manual work to make it run, then that will really limit the growth. … [Most businesses] accrue all these funds, but that’s only half the battle. There’s a separate problem of getting money to your sellers, which most businesses don’t have.”

And you can’t use traditional payroll software to solve your problem, because the sitters are just contractors.

“In all these cases, if you’re selling through a marketplace, you’re not an employee,” said Collison. “You’re trading through a marketplace, so it doesn’t make sense to use a payroll system. Usually, you get a check through the mail.”

A handful of startup marketplaces have been beta testing the service, including apps like Sidecar, Exec, Lyft, and Postmates.

“There’s no cumbersome work for them to pay out vendors; they can transfer it directly into those people’s bank accounts,” Collison said. “It helps marketplaces grow faster and easier.”

He says Stripe for payouts, itself comprising just a few lines of code, is also less error-prone simply because all the transactions are going through the same system.

Marketplace sites are an incredibly explosive portion of the startup economy right now. “This is a really hot area for entrepreneurs,” Collison pointed out. “It helps people start up a business much easier.

“One of the really fascinating areas is marketplaces that take advantage of mobile devices. Ridesharing is the obvious example, but that’s just the start of it, of selling goods and services with lightweight mobile apps.”

Stripe’s 28-person team is headquartered in San Francisco. The startup has taken a total of $40 million in venture funding so far.

Image credit: Lyft


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