How Do Stripe Payments Work?

Stripe is a popular payment processing platform that enables businesses to accept payments online from customers across the globe. With its user-friendly interface, robust security features, and a wide range of supported payment methods, Stripe has become a preferred choice for many eCommerce websites and applications. In this article, we will provide a detailed explanation of how Stripe payments work, from creating an account to managing transactions and understanding the fees involved.

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how do stripe payments work

Getting Started with Stripe

Creating a Stripe Account

To start using Stripe, you need to create an account on the platform. Visit the Stripe website and sign up for a free account. You will be required to provide some basic information, including your name, email address, password, and business details. Once you have completed the registration process, Stripe will send a confirmation email. Click on the link provided to activate your account.

Account Verification

After activating your account, you will need to verify your identity and business details to comply with financial regulations. Stripe will ask for your personal identification details, such as your date of birth, address, and Social Security Number (SSN) or Taxpayer Identification Number (TIN). Additionally, you must provide information about your business, such as the type of products or services you offer, the company’s legal structure, and tax information.

Setting Up Your Payment System

Once your account is verified, you can start setting up your payment system. Stripe provides various integration options, including pre-built plugins for popular eCommerce platforms like Shopify, WooCommerce, and Magento, as well as APIs for custom integration.

If your website is running on WordPress, the easiest way to accept Stripe payments is to install the WordPress Stripe Checkout plugin. Choose the method that best suits your needs and follow the instructions provided by Stripe to complete the setup.

Processing Payments with Stripe

Supported Payment Methods

Stripe supports a wide range of payment methods, including credit and debit cards, digital wallets, and local payment options. Some of the most popular payment methods supported by Stripe are Visa, Mastercard, American Express, Discover, Apple Pay, Google Pay, and Alipay.

By offering multiple payment options, you can cater to a broader audience and increase your chances of converting potential customers into paying clients.

Secure Payment Processing

Stripe takes security very seriously and employs advanced fraud detection mechanisms to protect both businesses and customers. The platform uses machine learning algorithms to analyze transactions in real-time and identify potential fraud.

Additionally, Stripe is PCI-DSS compliant, which means it follows strict security standards established by the payment card industry. With Stripe’s secure payment processing, you can accept payments with confidence and ensure your customers’ sensitive information remains protected.

Handling Transactions

When a customer makes a payment on your website or application using Stripe, the transaction details are encrypted and sent to Stripe for processing. Stripe verifies the payment details and checks for any fraud indicators.

If the payment is approved, the funds are transferred from the customer’s account to your Stripe account. Transactions can be viewed and managed from your Stripe dashboard, where you can issue refunds, capture payments, or manage disputes.

Stripe Fees and Payouts

Understanding Stripe Fees

Stripe charges fees for processing payments on your behalf. The fee structure is straightforward and transparent, with a per-transaction fee and a percentage of the transaction amount. The standard fee for processing a payment is 2.9% + $0.30 per transaction.

The fees may vary depending on the payment method and country of the transaction. You can find the complete fee structure on the Stripe pricing page.

Receiving Payouts

Stripe automatically transfers the funds from your Stripe account to your linked bank account on a predefined payout schedule. By default, the payout schedule is set to daily, with a two-day rolling basis for businesses in the United States.

This means that funds from successful transactions will be transferred to your bank account two days after they are received. You can customize your payout schedule from your Stripe dashboard to better suit your business needs, such as opting for weekly or monthly payouts.

Currency Conversions

Stripe supports over 135 different currencies, allowing you to accept payments from customers around the world. If you receive payments in a currency other than your default currency, Stripe will automatically convert the funds before transferring them to your bank account.

Keep in mind that currency conversion may incur additional fees, which are typically around 1% of the transaction amount. You can find more information on currency conversion fees on the Stripe pricing page.

Managing Disputes and Chargebacks

Handling Disputes

A dispute occurs when a customer questions a charge on their card statement with their bank or card issuer. When a dispute is filed, Stripe will notify you via email and provide details about the disputed transaction.

It’s essential to respond promptly to disputes and provide the necessary evidence to support your case. Stripe offers a guided process for submitting evidence through the dashboard, making it easy to manage disputes and minimize the chances of chargebacks.

Chargebacks and Their Impact

A chargeback happens when a dispute is resolved in favor of the customer, and the funds are returned to them. Chargebacks can negatively impact your business, as they may result in lost revenue and additional fees.

Stripe charges a chargeback fee of $15 per incident. To minimize the risk of chargebacks, ensure that your payment descriptions are clear, provide excellent customer service, and adhere to best practices for securely handling transactions. Optionally you can opt-in for the Stripe chargeback protection which costs just 0.4% per transaction.

Advanced Features and Customization

Stripe Billing and Subscriptions

Stripe offers a comprehensive billing and subscription management solution that enables businesses to create and manage recurring payments. With Stripe Billing, you can create customizable pricing plans, offer promotional discounts, and manage invoicing with ease. It also provides tools for handling failed payments and automating retries to improve revenue recovery.

Stripe Connect for Marketplaces and Platforms

Stripe Connect is a powerful solution designed for businesses that operate marketplaces, platforms, or need to process payments on behalf of other users. With Stripe Connect, you can securely accept payments, automate payouts, and manage compliance for multiple sellers or service providers.

The platform also offers customizable onboarding and verification processes for your users, ensuring a seamless experience for all parties involved.


Stripe has become a leading payment processing platform due to its ease of use, extensive feature set, and robust security measures. By understanding how Stripe payments work, you can confidently integrate the platform into your business and provide a seamless payment experience for your customers. With its support for multiple payment methods, customizable solutions, and transparent fee structure, Stripe offers a reliable and scalable option for businesses of all sizes.

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