LONDON – International users now generate the majority of traffic for the social media giants Facebook and Twitter,
and fast-growing tech companies like Airbnb, the online property rental
service, have expanded rapidly into non-American markets to ward off
local competitors.
Now, several American payments start-ups are also looking to expand their European footprint, including Stripe, a company backed by Peter Thiel, a co-founder of PayPal, and Square,
a company created by Jack Dorsey, a co-founder of Twitter. But while
these services have found some success in America, several new
challenges await them outside domestic borders.
Across the ocean, the companies will find a higher level of of regulatory complexity. The European Union’s
28 countries each have different financial and data protection rules,
making it difficult to rapidly roll out across the Continent. In
addition, consumer habits also vary widely from country to country in
Europe, including the use of credit cards and knowledge of online
payment services.
And in many European countries, local competitors like the Swedish companies iZettle and Klarna, and the German online payments company Paymill,
already offer similar online payment services to those offered by
Stripe and Square. The giant payment service PayPal also has extensive
operations across Europe.
“In payments, there are a lot of competitors,” said Alston Zecha, co-founder of Payleven,
a mobile payments firm based in Berlin with a similar business model to
Square that operates in countries including Brazil, France and Germany.
“The U.S. is fundamentally a different market. You really need to have
local expertise to succeed in Europe.”
Still, the potential for growth is too
alluring for Stripe and Square to pass up. Last year, the amount of
payments around the world made through cellphones grew 44 percent, to
$235 billion, according to the research firm Gartner.
Stripe moved into several European countries
last year, including Britain and Germany. On Tuesday, the company said
that it would now accept payments in more than 130 currencies. But
Stripe has already had to tweak its offerings for the vagaries of the
European markets, said John Collison, an Irish entrepreneur who
co-founded Stripe in 2010 with his brother, Patrick, in San Francisco.
For example, the company has had to learn how
to handle a greater number of international transactions in Europe. And
the different sales taxes in the countries have also proved a
challenge.
“A lot of U.S. companies assume they can
translate their website and that’s enough,” John Collison said. “In our
business, payments are different country by country.”
American payment firms also must grapple with
the differences in how Europeans pay for goods online. Credit card use
in Germany, for example, is one of the lowest anywhere in the European
Union, despite the country’s place as the Continent’s strongest economy.
Many Europeans also rely on so-called chip-and-pin credit and debit
cards to make transactions, which involve punching in a personal
identification number instead of signing for a purchase.
Square does not yet allow users to use the
chip-and-pin function on their cards, and some analysts say European
customers could be wary of the service without that feature. Last year,
Square expanded into Japan, its first market outside North America, and
the company says it has not yet decided on its future global plans.
“The challenge about working across multiple
geographies is adapting to consumer habits,” said Hiroki Takeuchi,
co-founder of the British financial tech firm GoCardless,
whose services are currently being given trial runs in six other
European countries. “Some U.S. payment companies can be taken by
surprise by the differences here in Europe.”