Dive Brief:

• As anticipated, payments startup Stripe has garnered “less than $100 million” in new funds that value the five-year-old company at $5 billion. 

• Investors include Visa, American Express, and Sequoia Capital. The company provides digital payments services to smaller merchants, competing with PayPal’s Braintree. 

• In an even more startling announcement, the company also said it’s partnering with Visa to develop web “buy buttons” that could compete with PayPal.

Dive Insight:

Stripe certainly seems to be gaining traction these days. In addition to a healthy round of funding, the company has caught the attention of one of the world’s largest credit-card companies. Visa is working with this small San Francisco-based startup rather than PayPal because Visa is concerned that PayPal would dominate in the “buy button” space and shift consumer activity away from Visa and credit-card transactions.

That could give PayPal a run for its money, just as it’s out of the gate as a company separate from former parent eBay. Digital payments are growing and look increasingly to be the future, especially since any slow adoption of EMV in the U.S. could move more transactions online, to the web, mobile, and contactless payments. 

Visa is apparently hoping to have more muscle in its relationship with Stripe than it could with PayPal. If Stripe had ambitions to be the next PayPal, that Visa muscle could hold it back. But, then, PayPal is content to work in the background in its Braintree operations, where Uber riders and others don’t even know that it’s PayPal taking their money.

Still, Stripe appears to be comfortable sharing the path with the card companies and seems more interested in making a big play while we’re still in the dawn of digital payments, at least in the U.S. This Visa partnership could really help move things forward.

“Stripe is not competing with the card networks,” said Michael Moritz, a Stripe board member and partner at Sequoia Capital, told the New York Times. “The fact that Visa has chosen to invest in Stripe, not in PayPal, is of absolutely huge significance.”