Etsy, other e-commerce companies feel squeeze of US bank collapse

NEW YORK – Etsy on Monday resumed payments to merchants with Silicon Valley Bank (SVB) accounts after the e-commerce platform paused their payouts over the weekend following the

US government shutdown of the bank last week.

Shopify, which provides websites and apps to stores, also halted payments to online sellers with SVB accounts, telling merchants that they must switch bank accounts to receive funds, according to the company’s website.

Etsy and Shopify each work with 5.4 million and 1.75 million online merchants respectively worldwide, mostly small to medium-sized businesses.

Switching accounts can pose a problem for online sellers whose sole business account was with SVB. The payment halts have forced thousands of marketplace sellers and mom-and-pop shops to scramble to switch bank accounts and scurry to get access to funds for new product inventory.

Approximately 0.5 per cent of Etsy’s active sellers, or around 2,700 merchants, had their payments delayed on Friday related to SVB’s collapse, according to the online marketplace.

“We are working to pay these sellers today, and we have already started processing payments via another payment partner this morning,” an Etsy spokesman told Reuters on Monday.

The payments that the sellers received are unrelated to the United States Federal Reserve’s Sunday announcement, which ensured that SVB’s customers would have access to their funds on Monday.

Some Etsy sellers decided to put their stores on vacation mode, pausing customer purchases in an effort to minimise their financial losses, while others say they have received their payments on schedule.

Mr Moshe Steinberg, 31, said that he received a payment from Etsy on Monday morning, but is still waiting for it to clear with his bank.

“It was a nail-biting situation until I checked my bank account this morning,” the seller of 3D-prints said, adding that Etsy is currently his only source of income.

Etsy said it communicated with any seller who was impacted on Friday directly via e-mail and posted an update in its forums on Saturday.

Shopify chief executive Tobi Lutke said in a tweet on Saturday that the company was seeing “very minor impact” from the SVB collapse.

“We use SVB as one of 12 or so banks spread over mostly Canada and the US,” Mr Lutke said.

“A small portion of our US operational fund flows is tied up in SVB, but we are working around it and it should be business as usual,” he added.

Shopify has temporarily paused payments to merchants who receive payments to SVB accounts. These online sellers must update their bank accounts, with no connections to SVB, to resume getting payments.

Shopify Capital, an arm of Shopify that provides loans and cash advances to its merchants, has been impacted by SVB’s closure, according to the company’s website. Merchants are not able to view their loan offers or see their loan repayments as of now.

“Shopify expects to resume all operations for Shopify Capital in the United States within the next few days,” the company said on its website.

Shopify is also opening interest-free balance accounts for merchants, with the funds equal to the amount of payroll, so that the merchants can pay their employees, according to a Shopify spokesman.

Block’s Square payment platform, which processes credit card payments for online and bricks-and-mortar businesses, on Friday began pausing payments to their merchants’ SVB accounts and required them to update their banking information, according to a person familiar with the matter. REUTERS