Anemic adoption of Baas for merchants on online marketplaces
The case of Stripe Treasury
In late July, Amazon announced a new tool called Amazon Seller Wallet for its merchants (thanks to Linas Beliunas monthly newsletter, I didn’t miss it as I was preparing for my August digital detox).
Why does this matter?
The importance of online seller marketplaces is increasing. According to Insider Intelligence `Amazon’s marketplace is expected to generate $251.65 billion in sales in 2022 — over two-thirds of its total.` So an increased focus on serving its sellers would make sense in this environment. The Amazon Seller Wallet is free and for now, could appeal to Amazon merchants with international sales. The Seller Wallet (SW) allows holding funds, viewing, and transferring funds to bank accounts, and managing efficiently currency conversions (which are not free of charge).
To me, the Seller Wallet smells like the Shopify Balance account that is powered by Stripe`s Treasury offering.
The Shopify Balance account is a richer service than the Seller Wallet, but I suggest we compare them 1 or 2 years down the road and see how successful these B2B embedded finance integrations become. The Shopify Balance not only offers Shopify merchants a basic free money management account but also a Shopify Balance card (physical and virtual) with rewards and cashbacks.
Stripe Treasury was expected to be a game changer
I vividly remember the enthusiasm we all had back in late 2020 when Stripe Treasury was announced, and we realized that they had designed a Baas offering without being a Bank and with a first customer as important as Shopify. We all wrote about it but Ben Thompson`s Stratechery post and visual was all the rave. Stripe Treasury and Stripe Capital would allow Stripe to move from a merchant checkout API to a platform of platforms.
At the time, some proclaimed that the sky is the limit and soon Airbnb, Uber, Patreon, and the likes would be taking advantage of Stripe`s Treasury Baas offering and the world of complex platforms and marketplaces would never be the same.
When Stripe talks about their Treasury offering and embedded finance on their youtube channel, they emphasize that it is all One line of code.
We therefore should assume that it took Shopify more than 1 year to launch their Stripe Treasury powered offering — Stripe Balance — because of other Shopify priorities.
The only other platform client that Stripe Treasury has publicized since, is Ambrook a US bookkeeping fintech for farmers and ranchers that helps them easily find and apply for farm assistance. Ambrook integrated Stripe Treasury this June and now offers their customers accounts, faster access to their funds, improved cash flow management. (Announcing Ambrook Wallet & Our Partnership With Stripe Treasury).
The other announcement made also in June, was from ARC a fintech using machine learning to provide revenue-based financing to tech startups and with a mantra `ARC: The future of startup of finance`. Arc Treasury in collaboration with Stripe Treasury will offer a consumer style app for the borrowing needs of software startups. The announcement is full of promise at a time when equity-free capital is in high demand. `Arc Partners With Stripe to Launch Arc Treasury, the First Digitally Native and Vertically Integrated Deposit Account, Enabling Software Startups to Instantly Access and Deploy $300M+ in Arc Advance Funding` .
It has been 20 months since the Stripe Treasury launch.
Canadians were sad that the Shopify Balance account was launched in the US first. If we look behind the scenes, Stripe`s Treasury uses US FDIC-insured bank partners and its money transmitter license is also in the US. It is not easy to export the Stripe Treasury offering.
We all are disappointed that the Stripe Treasury Baas offering has not made strides in the US market to date. There are two main plausible explanations for this: (a) Stripe did not prioritize pushing this offering compared to others (b) The market buy-in from non-financial platform businesses and marketplaces is not there yet, so prospecting and sales cycles are long.
Baas remains predominantly an offering for specialty Fintechs.
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