Exclusive: Shopify Capital Quietly Expands to Europe

Hi embedded finance friend

On Friday, we are hosting our very first curated virtual event. We will discuss the opportunities and challenges faced by retailers in the Embedded Finance Sector.

The event will be hosted in a debate, and I would like to extend a special thanks to Paul Staples and Borut Hrobat for being the first debaters. In addition to the debate, we will do random 1:1 chats in breakout rooms. All of this will be hosted on a regular Zoom call. I hope you can see I am trying my best to avoid making this another boring webinar ;-)

Again, non-subscribers must answer a few questions to be accepted into the event. As a subscriber, you still have to answer the questions, but mention that you are a subscriber, and you will be admitted regardless.

You can register for our very first virtual event here.

Hope to see you on Friday!

And now let’s dive in 👇

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All details about our first virtual event can be found in the text above, and you can register here.

Exclusive: Shopify Capital Expands to UK and Germany via YouLend Partnership

What happened: E-commerce platform provider Shopify has expanded its popular financing solution from the US to the UK and Germany. The product has not been formally announced yet, but details are available on the local Shopify pages (Shopify UK; Shopify Germany). Shopify partners with YouLend in the UK and Germany.

My comment: Didn’t I mention that Embedded Lending is on fire in the last newsletter edition? I am not going to say that Shopify was the first company to offer an Embedded Lending product, but it’s easily one of the top global players in this space. I always remember an interview with Shopify’s VP of Merchant Services, Kaz Nejatian (now Shopify’s COO), from a few years ago, in which he described how Shopify had never wanted to get into lending. Still, they realised it’s the most often mentioned reason by the majority of their clients that they are not growing faster (I cannot link the article as the publication was liquidated and taken offline). Shopify does not list revenues from Shopify Capital directly and adds all Embedded Finance activities into the Merchant Services category. But the numbers they report are astonishing: By the end of 2022, Shopify Capital had funded $4.7 billion in cumulative capital since its launch in 2016. And in Q4 2022 alone, Shopify Capital funded $392.2 million, a 21% increase from the prior year (Shopify).

In the US, Shopify partners with WebBank for Shopify Capital, which also serves as the banking partner for established brands like PayPal and Yamaha. For its European launch, Shopify selected YouLend, likely valuing their established presence and expertise in the UK and German markets.

And a big thank you to my subscriber, friend, and Shopify customer, Shivam Parikh, for bringing the product launch to my attention!

Banxware Transitions to Forward Flow Model with €10M UniCredit Investment

What happened: German Embedded Lending provider Banxware has received € 10 million in funding from UniCredit. In addition, it partners with Aion Bank and Vodeno (owned by UniCredit), which enables them to switch to a forward flow model (The Paypers).

My comment: To explain what the forward flow model entails, let’s stay in the world of e-commerce. Shopify’s German competitor, ikas, has partnered with Banxware to offer ikas Capital, similar to Shopify Capital. Banxware had set up a structured warehouse facility, which provided the money for every loan that e-commerce merchants received from ikas. With the forward flow model, Banxware no longer relies on a warehouse facility, and its bank partners assume the risk.

As with everything in life, there are pros and cons for each approach. However, with the forward flow model, Banxware can avoid managing the credit book itself and can focus purely on the technology. I would expect it's not easy to find bank partners for the forward flow model, but Banxware’s partnership with UniCredit already includes a previous investment and product partnership. On the other hand, not having a warehouse facility and relying solely on one bank partner for the forward flow model might also create a strong dependency; however, other bank partners may be added in the future.

Shuttel Introduces Visa Fleet BIN-Powered Card for Business Mobility

What happened: Shuttel, a Dutch provider of mobility-focused expense management and employee benefit solutions backed by Volkswagen Financial Services, has launched a mobility card built for sustainable business travel across the Netherlands (The Paypers). Shuttel partnered with Finnish infrastructure provider Enfuce, which provides the technical platform, regulatory coverage and access to Visa Fleet BINs.

My comment: Shuttle’s mobility card product can be described as a regular expense management card that is tailored for mobility purchases. But a card is a card? Yes, but the differentiation factor likely comes from Visa’s new Fleet BINs, which provide several advantages, such as advanced spend controls and additional purchasing details (e.g., the type of fuel and the quantity for a gas station payment). These features enable Shuttel to tailor the card product for mobility expense management.

In other Embedded Finance news

• TransactPay, a provider of BIN sponsorship and card issuing services in the UK and EU, has partnered with Griffin, a UK bank specialising in fintech companies and platforms. TransactPay leverages Griffin’s safeguarding, operational accounts, payments and savings offerings (Finextra).

• Embedded lending provider Liberis has launched a proprietary AI-powered underwriting agent designed to enhance accuracy and reduce decision times (Finextra).

• OCBC Indonesia has teamed up with digital payment and financial technology provider Ant International to offer embedded financial services to Indonesian SMEs (The Paypers).

Event Calendar

• June 25th, Frankfurt: TechQuartier Digital Finance Accelerator - I will be hosting a Masterclass [More details]