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Product Management Trade-off Question: Shopify payment processing build vs. partner strategy decision

Is it better for Shopify to invest in developing our own payment processing system or continue partnering with third-party providers for a faster go-to-market strategy?

Product Trade-Off Hard Member-only
Strategic Decision Making Financial Analysis Product Roadmap Planning E-commerce Fintech SaaS
Product Strategy E-Commerce Fintech Payment Processing Build Vs. Partner

Introduction

The key trade-off we're examining is whether Shopify should invest in developing our own payment processing system or continue partnering with third-party providers for a faster go-to-market strategy. This decision involves balancing long-term control and potential revenue against short-term speed and resource allocation. I'll analyze this trade-off through multiple lenses, considering business impact, user experience, technical feasibility, and strategic alignment.

Analysis Approach

I'd like to start by asking a few clarifying questions to ensure we're aligned on the context and key considerations for this decision. Then, I'll walk through a structured analysis framework to evaluate our options and provide a recommendation.

Step 1

Clarifying Questions (3 minutes)

  • Based on our current market position, I'm thinking payment processing might be a critical revenue stream. Could you share how significant payment processing fees are to our overall revenue model?

Why it matters: Helps quantify the potential financial impact of bringing processing in-house Expected answer: 20-30% of revenue comes from payment processing fees Impact on approach: Higher percentage would justify larger investment in custom solution

  • Considering our user base, I'm assuming we serve a diverse range of merchants from small businesses to large enterprises. Can you confirm our primary merchant segments and their specific payment needs?

Why it matters: Different merchant segments may have varying requirements for payment processing Expected answer: Mix of small (60%), medium (30%), and large (10%) businesses with increasing complexity in payment needs Impact on approach: Would influence feature prioritization and scalability requirements

  • From a technical standpoint, I'm thinking about the complexity of building a robust, secure payment system. What's our current engineering team's expertise in fintech and payment systems?

Why it matters: Determines feasibility and potential timeline for in-house development Expected answer: Limited expertise, would require significant hiring or upskilling Impact on approach: Longer timeline and higher costs for in-house solution

  • Regarding our strategic priorities, I'm curious about how this aligns with our product roadmap. Are there any upcoming features or integrations that would be significantly impacted by this decision?

Why it matters: Ensures alignment with broader product strategy Expected answer: Plans for expanded international presence and cryptocurrency support Impact on approach: In-house system might offer more flexibility for custom features

  • Considering the competitive landscape, I'm wondering about the differentiation our current payment partners provide. How satisfied are our merchants with the existing third-party solutions?

Why it matters: Helps assess the urgency and potential impact of changing our payment strategy Expected answer: Generally satisfied, but some issues with fees and international transactions Impact on approach: Would influence prioritization and focus areas for potential in-house solution

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