Stripe Connect Explained Simply
The documentation explains Stripe Connect far better than I ever could, but I have a mental model of Connect that I use to explain the concept in 5 minutes or less.
https://docs.stripe.com/connect
Stripe is financial infrastructure. What does that actually mean? Let’s use the example of a road. A road is normal infrastructure. The ultimate goal of a road is to facilitate movement from point A to point B. Stripe does this but for money. Stripe, in its simplest form, facilitates money movement from point A to point B.
A road has many means of being traversed, with many services that affect its function. There are speed bumps, road signs, and different ways of driving (left side drive in the UK, for example). They can also be used by pedestrians, cars, trains, trams, etc.
Stripe does this for money movement for different businesses, from mom and pop shops to enterprises. There are also payment methods availability, currencies, currency conversion, local regulations, taxes, reporting, analytics and many more things to think about.
Then there’s the use case that requires the usage of Stripe Connect: Moving money between multiple parties, From point A to Point B, or from point A to point B, C, D, etc. Sometimes you aren’t being paid directly for a solution, you’re a small fee on the receipt. You have to facilitate money movement between multiple parties. This is where Stripe Connect would come into play.
Following on from our road analogy, I view this as you taking part in providing infrastructure and making it your own. You choose how that money is routed, and you can implement different means of routing that money between point A and point B. In this example, you are now also the road—with an accompanying toll gate ;) . As money moves from point A to point B, you can take a little bit for your service, a road tax (Disclaimer: connect platform fees are not a tax).
This is most simply illustrated with two examples.
A platform: You want to create a Lyft-like platform, Lyft but for flower delivery. You build the platform and develop the service, but you want to move money from your customers to your delivery drivers.
A marketplace: You want an Amazon-like marketplace, but for flower delivery. A recipient can take money from multiple flower sellers into one basket. That money then needs to be moved from the customer to all the flower sellers.
So, all in all, Stripe is financial infrastructure. Stripe Connect is financial infrastructure for businesses to develop platform and marketplace solutions. Stripe Connect allows you to navigate the road bumps (haha), associated with money movement. That brings us to the question of what Connect integration solutions are available to your business and what do you need to consider.