It seems more valid than asking someone to code on a whiteboard. It least here they get to evaluate the candidate on something relevant.
It's probably closer to whiteboard coding than relevant work. Designers need support and can't work in a vacuum. Without a deep understanding of the specific requirements designers will make generic (though perhaps beautiful) work.
All business / design plan competitions or hackathons: submit your work, maybe we'll hire you instead of getting someone internally to do it or outsourcing it to a foreign country.
The more I see about Stripe the less I like them.
Agreed, this is going to anger the design community