Stripe and Square are examples of organizations that handle payments for various enterprises. These firms are pioneers in the industry, which big banks have controlled for a very long time.

Square and Stripe have been widely used as payment processing systems, making them two of the most popular options for growing and small enterprises. Because of their straightforward flat-rate payment processing rates, the services are gaining high-profile backers like Starbucks as their use and promotion of their systems become more widespread due to their increasing popularity. In the fast-evolving payment processing sector, company owners and investors need to have a solid understanding of how these organizations function to be able to make informed choices about their financial futures.

The Workings of a Square

Square was first developed as a mobile payment processor for small companies that operate on the move in 2009. Jack Dorsey co-founded it and is also one of the founders of Twitter. The company's original mission was to simplify the process of making payments. It gained popularity due to several factors, including its affordable flat rate of 2.6% plus a processing fee of $0.10 per transaction.

The payment processing solution Square has been extensively used by both mobile and traditional enterprises. In May 2013, Square introduced a physical product called the Square Stand, which can turn iPads into conventional cash registers. This was done to expand Square's market share within the latter group.

The company has also increased the breadth of its software package to facilitate the management of the sale of several items drawn from a fixed menu or stock. Shortly after, tools for managing money, gift cards, online orders, and appointments were added to the lineup. Gift cards are an extra product we've added.

Square Cash was first introduced as a platform for individual payments in October 2013. Later on, Square Cash was rebranded as the Cash App. The firm completed its initial public offering (IPO) in 2015 and raised 243 million dollars. Shares of the company are now traded on the New York Stock Exchange under the ticker code SQ. In the same year, the company introduced Square Payroll, a solution designed to facilitate processing payrolls for small enterprises. In 2019, Square started providing merchants with an application programming interface (API) that enables them to modify the Square platform to their own needs.

The Workings of a Stripe

Stripe is the leader in online payment processing, taking up where Square left off with mobile payments. Stripe, established in 2010 by two Irish businesspeople, charges 2.9% plus $0.30 for each transaction; however, reductions are available for customers who do a big amount of business with the company. Like Square, Stripe does not charge business owners monthly subscription fees and will only charge them when a payment is successfully received.

Using its application programming interface (API), Stripe, which was developed with the needs of web developers in mind, makes it simple to connect a wide selection of online payment processing tools and plugins. Stripe may be used for various purposes on websites built on popular platforms such as WordPress, Drupal, and Joomla. These websites can utilize Stripe to accept payments for invoices, sell tickets, and sell real items.

Stripe was designed primarily for digital transactions rather than in-person financial exchanges. The increased risk of fraud associated with these types of payments compared to those associated with in-person methods drives Stripe's higher transaction cost. On the other hand, in 2018, company introduced a point-of-sale solution known as Terminal. This solution offers credit and debit card readers that are compatible with Stripe. Stripe raised $600 million in 2021, bringing the company's total worth to $95 billion. Stripe, on the other hand, is a privately held corporation, unlike Square.

Similarities and Differences

How the payment information is obtained is yet another significant distinction between the two payment processors. The primary use for the Square payment system is in-person credit card transactions in which the customer is physically present with their card and may physically swipe it through a card reader. 2015 was the year that the firm first started selling an EMV chip reader. Until the release of Terminal in 2018, majority of Stripe's usage was limited to virtual card transactions, which occur over the internet and don't need the card to be physically present.

Both firms cater to all types of enterprises, particularly those who do not like to pay monthly transaction fees, do not wish to be burdened with costly payment processing equipment, and do not wish to be bound by cumbersome contracts. Since both businesses provide their customers with automatic direct deposits within a few days after completing each transaction, their customers will have quick access to cash following the completion of each payment.