Stripe's Instant Payouts & the importance of 'instant'

Stripe's Instant Payouts & the importance of 'instant'

We recently ran a panel event in London on the topic of marketplaces. We discussed with participants from Yplan, Paddle8 and JustPark the difficulty in ‘squaring the circle’; that is getting sufficient supply to meet demand and vice versa. One of the stumbling blocks to securing supply mentioned was the ability to create trust for a new marketplace. Suppliers want to be assured that they are going to get paid before they participate in a market. That’s why we believe that Stripe’s release of the Instant Payouts feature is a significant step forward in overcoming that trust gap for existing and emerging marketplaces. That’s because ‘instant’ for the supplier and the buyer is an overlooked means of creating trust. 

The importance of ‘instant’ in creating trust in marketplaces

We often throw the word ‘instant’ around as as a fairly casual attribute of a product or app we produce. In reality however, it is a critical component of creating trust. When ordering a cab for instance, that ability to reliably confirm ‘instantly’ that your order has been taken and that a car is en route, is critical in building consumer confidence that this provider of an app can be trusted. Hailo and Uber have done a great job of ensuring that the experience of hailing a cab via an app is reassuringly instant. Any player trying to create a competitive marketplace needs to ensure the same instant experience is there in order to successfully compete. 

Beneath the surface: do operations support the instant promise? 

Seemingly simple things like how quickly a page or an app loads, the feedback a user receives on selecting an option and the wording used to confirm orders are all valuable in creating this trusted space. From an operations point of view though there needs to be critical infrastructure in place to ensure that this experience is not purely on the surface.

Stripe’s Instant Payouts ensures the supplier gets paid when they choose. For larger more established marketplaces, like Lyft and Uber, it is more of a convenience or a competitive advantage to be able to offer this facility rather than a builder of trust. For newer marketplaces, however, it de-risks the experience for the supplier and radically shortens the time required to create trust. This can be a huge boon when creating a new supplier/buyer network. 

Added risk needs to be managed

Operating in real-time does open up risk for the marketplace itself, however. If I confirm an order instantly that substantially reduces the time available to verify whether the person placing an order is a good actor or not. On the supplier side, if I have relatively open marketplace with instant payout, what steps can I take to ensure that the supplier is legitimate and acting properly?  These issues can be tackled with the addition of time. A marketplace can get someone to review the order and make an assessment of the risk. This approach though is at the cost of instant - a high price to pay.

Alternatively marketplaces can choose to look to machine learning, pattern analysis and graphing networks (like Ravelin’s) to see behavioural anomalies and suspect connections in people accessing their network from either the supply or buy side. These anomalies and connections indicate fraud and are massively more accurate than manual approaches. But as importantly, they deliver fraud decisions instantly (as close as they are able to, at 300ms or so). This allows marketplaces to continually add new features like Stripe Instant Payouts without adding to their risk profile. 


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