Earlier this month, San Francisco-based Stripe announced the launch of a new embedded finance service, Stripe Treasury, which allows users of the Stripe platform to offer financial services to its business customers. Initially available on an invite-only basis to users serving business customers in the United States, Stripe Treasury harnesses the banking capabilities of a number of global banking partners, including Goldman Sachs, Evolve Bank & Trust, Citibank, and Barclays, for tasks such as creating accounts, paying bills, and transferring funds between accounts. For Stripe, currently valued at around
$36 billion, this is a giant step into the arena of banking-as-a-service (BaaS). It not only abstracts the complexities of bank account operations behind the Stripe API, which is a big plus for application developers, but it provides users with easy access to the financial services of the banking partners associated with Stripe Treasury.
Take the following example of how Stripe Treasury works:
- A company creates an ecommerce marketplace - known as "Amazify" for the purpose of this example - to allow merchants to sell products to consumers.
- A merchant joins Amazify. Upon joining, the marketplace uses Stripe Treasury to set up an Amazify bank account for the merchant, including ID verification and KYC checks of the merchant.
- The merchant sells products through Amazify, and the sales revenue ends up in their Amazify bank account.
- The merchant buys raw materials for its products, and they use their Amazify bank account to pay bills and invoices to its suppliers.
- The merchant pays for day-to-day expenses, and they use a physical payment card linked to their Amazify bank account.
- The merchant receives interest for the funds held in their Amazify account, as per the interest rate of the banking partner behind the account.
In a similar manner to the example above, one of the first real-world implementations of Stripe Treasury is being undertaken by the team at Shopify with their new service Shopify Balance, which will enable Shopify merchants to have easier access and full control over their finances. This removes the need for merchants to transfer funds out to a separate business account to perform financial operations, and thereby have faster access to their revenue. Merchants may also benefit from any promotions that Shopify are able to offer, such as cashback or discounts on business spending with their Shopify accounts.
Stripe Treasury integrates with other services in the Stripe ecosystem, such as Stripe Capital, which provides access to business financing, and Stripe Payments, which provides services to accept and manage payments.
It is clear that one of the aims of Stripe Treasury is to reduce as much friction as possible when creating business bank accounts for users of its platform. According to recent survey results among 1,000 small to medium-sized businesses in the United States (commissioned by Stripe), 23% of businesses have to send a fax to open an account, 55% of businesses are required to visit a branch in person to open the account, and it takes 7 days on average for an online business to open an account. In addition, business owners in the United States can be faced with monthly maintenance fees if the funds in their amount do not meet a minimum threshold. Using Stripe Treasury will not only bypass some of these bureaucratic obstacles around account creation, but also ensure that monthly maintenance fees will not be incurred, thanks to an agreement between Stripe and their banking partners (as a sweetener in return for Stripe sending a signficant amount of business to their partners).
With Stripe Treasury, Stripe have introduced an attractive service which uses access via APIs to expose financial services of its banking partners to its users. This model isn't far from the open banking model, and the prospect of Stripe entering the arena of open banking would be an interesting one indeed. This would open up further opportunities for Stripe in the realms of both personal and business banking, and certainly strengthen their position as a leader in the field of fintech infrastructure, far beyond the capabilities of what Stripe Treasury currently offers. The future of Stripe remains a compelling one.