Small and medium-sized businesses (SMBs), which play a crucial role in powering the U.S. economy, are facing increasing difficulties in accessing working capital and other financing.
In fact, according to the 2023 PYMNTS report titled “Main Street Health Q2 2023: Credit’s Key Role in SMBs’ Plans,” 40% of SMBs still expressed heightened apprehension about inflation compared to the previous year. Additionally, 15% of SMBs reported a growing concern over declining revenues.
Given these findings, access to finance emerges as a crucial factor for businesses to consider. To solve for this, SMBs often resort to using personal credit cards since traditional business credit fails to meet their needs.
In an interview with PYMNTS, Shopify’s Director of Product Management Vikram Anreddy discussed how Shopify aims to address the challenge of acquiring funds for businesses with its latest initiative, Shopify Credit.
“We’re in the business of making commerce better for everyone. And we really try to arm our merchants with solutions that reduce the complexity of running a commerce business, so that they can really focus on building the best products for their customers and growing the business,” Anreddy said.
With the latest launch, Shopify endeavors to tackle the obstacles encountered by merchants, providing them with accessible credit that caters to their unique business requirements. At the same time, it ensures a clear demarcation between personal and business finances.
Anreddy said Shopify Credit assesses credit limits and eligibility based on the merchant’s business performance rather than their personal credit scores. Consequently, no credit checks are necessary, and the merchant’s credit history remains intact. The credit card is designed to evolve alongside the merchant’s business, adjusting the credit limit to accommodate business growth. Moreover, acquiring Shopify Credit is meant to be straightforward.
Similar to Shopify Capital, another Shopify product that Anreddy said has already provided over $4.5 billion in funding, Shopify Credit will adopt a comparable approach by using over 70 million data points to determine funding eligibility and the suitable amount. Moreover, Anreddy said the Shopify team has drawn on the insights gained from Shopify Capital, applying those lessons to Shopify Credit
All merchants eligible for Shopify Credit will receive a direct offer within the Shopify admin platform and can activate the credit card in a matter of minutes.
Anreddy underscored Shopify’s approach to personalizing the credit card they’ve developed, ensuring it suits the needs of its merchants. Through the card, merchants get cash-back rewards, with the potential to earn up to 3 times cash back in the categories where they make the most purchases and 1% cash back on the next two highest spending categories. The cash back is automatically applied to their statement credit in the following month, requiring no effort on the part of the merchant.
Additionally, Anreddy points out that Shopify generates a statement at the end of each month to summarize the merchant’s spending activity. To give merchants ample time to manage their credit card payments, Shopify provides an extra 25-day period beyond the month’s end. Once the credit card balance is paid off, the credit limit is promptly restored, enabling merchants to use it for future expenses.
One other significant feature of the card Anreddy said is an extended grace period.
“We understand the volatility that merchants face in their business. We’ve designed the card to help for that by extending that grace period and giving 56 days of free float,” Anreddy said.
Moreover, Shopify refrains from imposing late fees or similar charges.
The credit card has been designed with SMBs in mind, featuring credit limits ranging from $1,000 to $100,000 per month at its launch. “We will continue to evolve the product and expand it to go further and serve larger merchants as well,” Anreddy said.
In addition to Shopify Credit, the eCommerce giant has also launched an artificial intelligence (AI) assistant for merchants called Sidekick.
Read more: Shopify to Debut AI Chatbot Merchant Assistant ‘Sidekick’
Sidekick’s primary function is to guide and support merchants and entrepreneurs in making informed decisions to drive the growth and expansion of their businesses. To do this, Anreddy said Sidekick can analyze various data points, including trends within a merchant’s business and the larger macroeconomic landscape. Based on these insights, the assistant can provide recommendations, such as anticipating inventory needs ahead of time.
The introduction of Sidekick is expected to unlock higher productivity levels for merchants, streamlining their decision-making processes and fostering efficiency.
Anreddy noted that Shopify considers AI as a valuable tool for guiding and educating merchants, providing insights and recommendations. Nevertheless, Shopify believes that merchants should make their own decisions when it comes to their business matters. Shopify recognizes that merchants understand their businesses. While AI can serve as a valuable supportive resource, Shopify believes that the ultimate responsibility for critical decisions should remain with the merchants themselves.
Anreddy says Shopify is interested in obtaining insights into the use of their credit card and the specific areas where merchants allocate their spending. Anreddy said Shopify’s goal is to establish a personalized reward system, tailored to the needs of individual merchants on their platform.
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