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Talk of embedded finance—the marrying of financial services with unrelated applications for businesses—is in the air, and most recently was a dominant theme at the big Money 20/20 conference in October in Las Vegas. The discussion comes as fintechs and financial institutions devise initiatives that extend beyond simple credit and debit card acceptance.
Among the latest examples of trend is Shopify Finance, a new service from Shopify Inc., the e-commerce and point-of-sale platform. Shopify Finance is a unified tool for various financial services, such as its credit card, working-capital funding, bill payments, and tax assistance. It’s accessed via the administrative section of the Shopify portal. Shopify announced the service separately from Money 20/20.
“Unfortunately, a lot of our merchants are stuck with conventional banks and their complex processes to manage their money,” says Vikram Anreddy, Shopify head of product for financial services. Anreddy says the consolidated access in Shopify Finance makes it easier for merchants to use financial products, calling traditional methods “fragmented. We think the entrepreneur deserves better.”
One piece of Shopify Finance enables eligible merchants to receive as much 4.43% in annual percentage yield on funds held in Shopify Balance and next-business-payouts.
“We want to help stretch their cash flows,” Anreddy says, “and help with access to the money they need to grow their businesses.”
In a related development, the big processor Fiserv Inc. announced last month it would build financial services into a digital platform for drivers affiliated with DoorDash, the delivery service. Dubbed the DoorDash Crimson Program, it offers drivers access to a debit card and rewards program. Bismarck, N.D.-based Starion Bank is the sponsor bank for the DoorDash Crimson accounts.
This program gives DoorDash drivers access to a formal banking product, says Sunil Sachdev, Fiserv head of embedded finance. “Historically they’ve only had access to prepaid cards,” Sachdev says.
In the program, users have the ability to move money in and out of their accounts, Sachdev says. “We’ve taken a bank that’s on the Fiserv platform and taken a gig-economy platform and brought them together. It’s something we hope we can accelerate for other institutions [and] that works for us as well.”
Embedded finance is top-of-mind even for large payments companies affiliated with banks. “When I think about payments, it’s about how do I get it as fast as I can,” says Ron Karpovich, J.P. Morgan Payments managing director, head of client solutioning for embedded finance and solutions. “To me, embedded finance is how do I get them a stored value that is valuable to [merchants].”
Merchants need a reason to want to use an embedded-finance service, Karpovich says. “That reason may be I can help with the sales tax or discount on a purchase. The stored value is useless if there isn’t a reason to use it.”
