Why Divvy, Brex, Ramp, and card startups are booming and what it means for fintech
Over the past several years, major companies released their own cards along with their core products - Venmo, Uber, Apple, and Amazon are a few examples of companies offering cards as an alternative paying experience.
Recently, a myriad of hyper-growth fintech startups are creating movement in the payments and fintech industry. One of the biggest examples right now is Brex, a fintech company that provides a suite of financial management solutions but is most notable for corporate cards.
The key benefit of a corporate card is centralized expense management capabilities, giving insight and visibility into every purchase in one place. What made Brex incredibly popular was its high limits with no personal guarantees - access to a corporate card without ties to the account holder’s personal assets.
Since 2017, the company reached an astonishing $7.4 billion valuation with its recent Series D funding in April 2021.This is only a glimpse into the corporate card startup industry. Ramp, another corporate card and expense management platform, is valued at $1.6 billion with its recent Series B funding in April 2021.
Beyond the SMB and corporate verticals, another rising star is Greenlight, a debit card for kids. The kid-focused debit card gives parents control and visibility over their children’s finances while giving children the power to make their own transactions and teaching them fiscal responsibility. Since releasing its card in 2017, the company is valued at a soaring $2.3 billion with its recent Series D funding in April 2021.
Shifts in the Card Industry
The recent boom in card startups is a reflection of the growing need to simplify expense management and to make it easy for companies to understand, pay, and manage their finances.
Card companies are evolving into one-stop expense management platforms, competing for the centralized finance space.
The Ramp platform is already tackling the area of expense management and centralized finance outside of its signature card. In December 2020, Ramp introduced a new feature - Ramp Reimbursements - where employees can be reimbursed for expenses via direct deposits that weren’t paid on a Ramp card. In addition, Pedro Franceschi, Founder and Co-CEO of Brex, announced in their Medium post regarding their Series D funding that reimbursements will soon be coming to the Brex platform.
Long-standing financial services companies are also feeling the pressure to be the ultimate expense management platform. Just last week, bill pay leader Bill.com announced its acquisition of Divvy, another leading card startup that touts its expense management capabilities, for a lofty estimated $2.5 billion. This transaction signals the recognition of industry incumbents that centralized finance platforms are the way forward.
What makes this deal particularly interesting is Bill.com’s existing solutions and what it means for competitors. Bill.com is a leading accounts payable (AP) platform, meaning it’s a platform that lets businesses pay bills + invoices and manage their vendors. These are key functions for every business operation, and Ramp doesn’t offer solutions to these critical needs.
Brex has bill pay, but it’s only available for premium users. With the acquisition of Divvy, Bill.com is one step ahead in becoming the ultimate centralized finance platform, and businesses could find them as the more attractive option.
The amount of recent funding in card startups is incredible and speaks to the growing need for companies to handle money in streamlined ways. It will be exciting to see more fintech startups expand into more verticals with cards as existing companies like Bill.com compete in the coming era of expense management.
