Shopify was founded in 2006 and is enabling any person to launch an online shop with minimal effort. Shopify's founder Tobias Luetke was building an online shop to sell snowboard gear when he realised that none of the existing providers were offering a great product. Fast forward, Shopify is one of the most successful technology companies out of Canada in the past decades and extended its service offering in many ways.
The Canadian tech provider launched Shopify Payments in 2013 to make it easier for merchants to accept payments. The service is available in 22 countries and it was Shopify's first step towards 'Embedded Finance'. In 2016, a lending product called Shopify Capital followed, which is now available in 4 countries. The most recent addition to their Financial Service offering was Shopify Balance, a banking product consisting of a bank account and debit card for Shopify's merchant to manage their daily financial activities.
Shopify is often used as an example when it comes to Embedded Finance. Why? Shopify might be known as a SaaS provider for e-commerce solutions, but the majority of their revenue comes from "merchant solutions". This is the revenue they generate from ancillary services like offering Financial Service products (but also other products like fulfilment services).
Three interesting facts about Shopify's Embedded Finance story:
- Not just the majority of revenue comes from 'merchant solutions' but this segment is also growing much faster than their SaaS product: 29% vs. 8% (Q4 2022 Financial Report)
- Shopify says they never wanted to offer lending or banking products. Banks often did not serve their customers, and thus, Shopify decided to offer financial products themselves. (Interview)
- Shopify didn't launch the banking product Shopify Balance to generate additional revenue, but to use it as a basis to introduce and centralise more financial products (Annual Report 2022)
