Photo of Bas Ruiter, J.P. Morgan and Esther Schmit, Etsy.
Esther Schmit
Senior Manager Treasury & Risk
USA Etsy, an American e-commerce company operating a two-sided online marketplace for handmade or vintage items from independent global sellers, also owns Depop Limited, a fashion resale marketplace acquired in 2021. As of 31st December 2024, the Etsy marketplaces had over 100 million items and the marketplaces connected approximately 8 million sellers with 95 million buyers, and employed over 2,000 people.
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The challenge
Etsy’s global reach presents unique challenges, especially for its international treasury team.
Etsy’s marketplace model involves a complex flow of funds in over 22 currencies. Buyers pay in their local currency while sellers might want to receive funds in another currency. The treasury team must manage cash across 12 core currencies daily, with long and short positions constantly shifting. Historically, treasury managed this flow through manual processes, completing 16 to 20 cross-currency wire transfers twice weekly between J.P. Morgan accounts and Etsy’s outsourced Payment Service Providers (PSPs) with manual FX conversions when shortfalls occurred.
As Etsy continued to successfully grow its international marketplace activity, the currency challenge intensified. Etsy was therefore looking for ways to automate this process and make it more efficient.
Further, challenges associated with outsourcing seller payments to PSPs were mounting as cross-border volumes grew. Etsy missed out on yield while excess balances sat with service providers.
Etsy established a Payments Institution – Etsy Payments Ireland Limited (EPIL) – under the European Economic Area’s (EEA) PSD2 regulatory framework. This allowed Etsy to enhance compliant payout and disbursement services as well as strengthen safeguarding of seller funds. While the new framework presented opportunities to gain greater control over balances and payments, it also introduced a hurdle: funds within this structure were classified as third-party funds. Typically, J.P. Morgan had a policy that third-party funds cannot be included in any of the liquidity solutions that Etsy was looking for, most notably a traditional notional pooling solution.
Without the operational flexibility and currency exchangeability provided by a notional pool, Etsy would face extended settlement times for FX transactions; increased operational risk from manual processing; higher costs from more frequent, smaller FX conversions; and challenges with cash positioning that could delay seller payments. For Etsy’s sellers, many of whom are micro-entrepreneurs relying on the platform for their livelihood, timely payments are critical. The company needed a solution that could maintain payment reliability while streamlining treasury operations.
The solution
Working with J.P. Morgan, Etsy workshopped and implemented a new-in-market notional pooling solution for EPIL that complies with PSD2 regulations. The company uses a surety bond to safeguard third-party funds, which provides the necessary protection for seller funds while allowing the funds to be included in the notional pool. The structure went live in July 2024. With this first-of-its-kind solution, Etsy can support its global community of sellers with greater efficiency and reduced risk while establishing a blueprint for marketplace treasury operations in regulated environments.
Etsy’s solution represents a novel use of a notional pooling structure within a regulated payment institution and the value of exploring alternative methods of safeguarding, such as a surety bond. The innovation lies not in the pooling technology itself but in the novel way that Etsy applied existing mechanisms to overcome constraints. This required creative problem-solving around a fundamental challenge.
In collaboration with J.P. Morgan, Etsy developed a solution that uses surety bonds to safeguard third-party funds. Both companies’ legal and compliance teams worked closely to establish that the surety bond provided sufficient protection to meet regulatory obligations while allowing the pooling structure to operate. After going live in 2024, the pool has successfully streamlined Etsy’s liquidity position. Transaction settlement times decreased from days to minutes, and there are no FX settlement delays.
Key benefits
Cost savings.
Process efficiencies.
Increased automation.
Risk mitigated.
Errors reduced.
Manual intervention reduced.
“Collectively, we make billions of payments every month to millions of micro-entrepreneurs around the world. It’s our job to make sure that the cash is always available, and our sellers are paid on time so they can keep growing their creative businesses and sharing their special items with buyers,” says Esther Schmit, Senior Treasury Manager.
Bas Ruiter
EMEA Subsidiary Banker, J.P. Morgan Payments
One of the unique and special aspects of our relationship with Etsy is that the team is willing to iterate and innovate with us. Etsy is not afraid to bring us new ideas and challenge the status quo. Esther and the Etsy team’s innovative thinking around this notional pool has led to a solution that can have a significant impact on the marketplace industry across Europe and globally. This could not have been achieved without the innovative and forward-thinking attitude of Etsy. Congratulations to Esther and Etsy on winning this well-deserved award from all of us at J.P. Morgan.
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The Adam Smith Awards are the industry benchmark for best practice and innovation in corporate treasury. The 2025 awards attracted 454 nominations. To find out more please visit treasurytoday.com/adam-smith-awards
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