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What Is Stripe, and How Does It Work to Accept Payments?

Stripe is a payment service provider that accepts credit cards, digital wallets and many other payment methods.
By Rosalie Murphy
Last updated on January 3, 2023
Edited bySally Lauckner

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What is Stripe?

Stripe is a payment services provider that lets merchants accept credit and debit cards or other payments. Stripe payments are best suited for businesses that make most of their sales online, as most of its unique features are primarily geared toward online sales.

What payments does Stripe take?

As a payment processor, Stripe allows business owners to accept Visa, Mastercard, American Express, Discover, JCB, Diners Club, China UnionPay and debit cards. Businesses can also accept payments from mobile wallets and buy now, pay later services. Stripe supports payments in a variety of currencies. To accept in-person payments, the company offers Stripe Terminal, a point-of-sale system.
Stripe offers lots of additional services, including billing, invoicing and sales tax automation.

How do payments work with Stripe?

Stripe processes payments in six steps.
  1. The customer provides their card information, either online or in person.
  2. Those card details enter Stripe’s payment gateway, which encrypts the data.
  3. Stripe sends that data to the acquirer, which is a bank that will process the transaction on the merchant’s behalf. In this step, Stripe serves as the merchant (with the business owner as a submerchant). This means Stripe users don’t have to set up a merchant account, which can be cumbersome.
  4. The payment passes through a credit card network, such as Visa or Mastercard, to the cardholder’s issuing bank.
  5. The issuing bank approves or denies the transaction.
  6. That signal travels from the issuing bank through the card network to the acquirer, then through the gateway to the customer — who sees a message telling them the payment has been accepted or declined.
Once the cardholder’s issuing bank finalizes its approval, you can transfer funds from Stripe into your business bank account.
  • Stripe customers can receive payouts when transactions have finished processing (usually around two business days).
  • Payouts can also be made on a schedule of your choosing (daily, weekly or monthly).
You’ll pay Stripe for facilitating each transaction.
  • 2.9% plus 30 cents for online transactions.
  • 2.7% plus 5 cents for in-person transactions.
  • 3.4% plus 30 cents for manually keyed transactions.
  • 3.9% plus 30 cents for international cards or currency conversion.

Are Stripe payments safe?

Stripe has been audited and certified as a PCI compliance Level 1 service provider, which means it has to undergo an annual compliance report and routine security scans and tests. Stripe encrypts all customers’ credit card numbers and stores decryption information separately, which means Stripe can’t see credit card numbers without taking extra steps.
Also, Stripe mandates that all online transactions take place over the more secure HTTPS network.

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How to accept payments using Stripe

There are three steps to accept Stripe payments:
  1. Create a Stripe account. You can do this with just your name and email address.
  2. Provide business details. This will include the address and legal structure. Stripe will also request personal information about you, including your full name and date of birth.
  3. Link a bank account. This is where you’ll receive payouts from Stripe.
You won’t be able to collect payouts immediately, however. You generally can’t receive your first payout until seven days after you’ve taken your first payment. In some industries, the waiting period can be as long as 14 days.

See how Stripe stacks up against these other providers:

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