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

Stripe is a payment processing company that lets merchants accept credit and debit cards, as well as other payment types. Its payment processing solution, Stripe Payments, is best suited for businesses that make most of their sales online and can take advantage of the platform’s developer tools and customizability. However, Stripe also sells card readers for in-person sales.

U.S. businesses can take almost any type of payment with Stripe. The most notable exception is PayPal (and PayPal products, like Venmo), which is only available to Stripe merchants in some European countries.

Otherwise, businesses can use Stripe to accept major debit and credit cards, mobile wallets and ACH transfers online. It also enables buy now, pay later options, online invoicing and recurring billing. You can embed these checkout options on your existing website or send unique payment links to customers.

Stripe also supports more than 135 currencies — far more than some of its competitors. That is especially useful if your business sells internationally.

While Stripe is best for online payments, it does have card readers for brick-and-mortar locations, like retail shops or gyms. Businesses that want a more customizable in-person payments solution can use Stripe Terminal to integrate the payments platform with their POS system. However, developer experience is typically required.

Still undecided on Stripe?

Explore some popular all-in-one payment processing and POS system alternatives. All of the following are included, among a handful of additional products, in our rundown of the best Stripe competitors.

Square: Best for brick-and-mortar businesses. Square’s product line provides solutions for restaurants, cafes, retail shops and service-based businesses alike. Its processing rates are competitive, and its inexpensive POS software is easy to use. Read our Stripe vs. Square comparison.

Shopify: Best for online storefronts. Shopify’s website templates make it easy to set up a professional-looking online storefront. Its plans can be expensive, but processing rates do decrease as you scale up. Read our Stripe vs. Shopify comparison.

PayPal: Best for payment flexibility. One of PayPal’s strengths is its brand recognition among both businesses and consumers. That means you can use it to accept payment methods that consumers are familiar and comfortable with, like PayPal and Venmo. And, of course, it also lets you accept typical card payments. Read our Stripe vs. PayPal comparison.

Similar to other processors, Stripe processes payments in six main 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 sub-merchant). 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. Direct deposits typically take two business days after the transaction has been processed, and instant payouts are available for an added fee.

» MORE: Best credit card processing companies for small businesses

Most businesses can start accepting payments with Stripe almost instantaneously. Expect to complete these three steps first:

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.

After the signup process, you’ll also want to think about how you’d like to set up your customers’ checkout options. For example, you can embed a checkout module on your existing website, customize your own checkout flow, use invoices, set up recurring billing and/or opt for payment links.

There are no monthly subscription fees associated with Stripe Payments on its own. Most Stripe fees come from payment processing, and they differ depending on the transaction type.

Outside of payment processing, Stripe offers some optional services, like automated tax calculation ($90 per month and up) and custom domains ($10 per month), that do come with their own fees.

» MORE: Credit card processing fees calculator