Welcome back to The Interchange! If you want this in your inbox, sign up here. While there is always a lot going on in the world of fintech, this week felt a little subdued overall — at least when it came to funding rounds. But there was definitely still other fintech news to cover, and we’ll dive into it here.
Stripe has been busy
Stripe made headlines more than once this week as it acquired a (non-fintech!) startup and announced an expansion of its issuing product into credit.
In each case, I covered the news exclusively, which helped give me some insight into the fintech giant’s motivations behind each move.
Let’s start with the acquisition. Stripe picked up Okay, a startup that developed a low-code analytics software to help engineering leaders better understand how their teams are performing. Okay is a small startup, with just seven employees, that over time had raised $6.6 million from investors such as Sequoia Capital and Kleiner Perkins after graduating from Y Combinator’s Winter 2020 cohort. I didn’t talk to Stripe directly about the deal but Okay’s co-founder and CEO Antoine Boulanger told me that “by increasing engineering effectiveness, Stripe will be better positioned to attract and retain talented engineers.” It also presumably will be in a better position to compete in an increasingly crowded space.
In other words, Stripe deciding to acquire a startup that helps engineering leaders build performance dashboards to gauge how their teams are doing feels like the company is very serious about making sure its own engineering team is working effectively enough to not only move faster, but also be more productive. I found it interesting that one of Okay’s customers is Stripe competitor Plaid. Or I should say was. Of course, now Okay will be folded into Stripe’s engineering team and will no longer serve outside customers.
Stripe also announced this week its plans to give companies the ability to create and distribute virtual or physical charge cards that allow their customers to spend on credit rather than using the funds in their accounts.
“Among our suite of products, Issuing [which it launched in 2018] has been doing really, really well,” Denise Ho, Stripe’s head of product for BaaS, told TechCrunch. “And the No. 1 top demand within Issuing has been the ability for Stripe to enable our platforms to offer credit to their users.”
This has a twofold benefit for Stripe — giving it a new revenue stream as well as the option to offer new financing capabilities to their customers “with little additional operational cost,” Stripe touts. It also gives companies like Ramp and Karat, among others, the ability to give their clients access to credit at a time when credit may not be as easy to come by.
Ho also told me that Stripe has worked hard to make sure all its products work well together. For example, she said, its Issuing product is built on top of its Connect offering so customers “don’t have to KYC every single [one] of the thousands of businesses on their platform.”
“And when these businesses need to pay you back for, say, the couple [grand] they spent last month, they can use Stripe Invoicing and Stripe payments. And then we have the ability to move the money from the payments balance into issuing.” One Twitter user speculated that the expansion might mean that Stripe “is going towards becoming a bank.” While we don’t know about that, we can say that Stripe’s efforts to become a one-stop-shop for its customers appear to be advancing.
Stripe, which is one of the world’s highest-valued private companies, has had some struggles as the payments space in which it operates only continues to get more competitive and the IPO market has dried up. In the past year alone, companies such as Plaid and Finix have released competing products, for example. And Stripe, which has yet to go public via a long-awaited IPO, earlier this year raised $6.5 billion at a $50 billion valuation after being valued at $95 billion in March of 2021. Stripe’s latest raise took place months after the company laid off about 1,120 workers, or 14% of its workforce, in November of 2022 after saying it had “overhired for the world we’re in.”
On that note, CB Insights pointed out in an email this past week that despite laying off 14% of its staff last year, Stripe still has nearly 2x the employees of Adyen while its valuation ($50 billion as of March 2023) is essentially equivalent to Adyen’s market cap. — Mary Ann
Spend management update
Another week, another spend management company providing milestones.
This past week, two players in the space provided us with some business updates worth noting.
For one, Brex shared that two of its products — Empower, Brex’s spend management platform, and Brex business accounts — “have each achieved $100 million in ARR.”
When TC+ editor and my Equity podcast co-host Alex Wilhelm and I pressed Brex on what this meant exactly, a spokesperson told us the following via email:
- ARR in this case means annual recurring revenue.
- To clarify, it’s revenue that is contracted on Empower, which includes software and interchange from committed spend.
- The revenue in regards to Brex business accounts is from its deposits where the company is “paid by banks and asset managers for providing funding / assets under management. That is highly recurring as customers rarely move their funds.”
The company added that since launching Empower last year, Brex has signed on companies such as Coinbase, Indeed, SeatGeek, Lemonade and DoorDash, among others. It also said that its business accounts, which it describes as cash management accounts with a suite of money movement tools across ACH, wires and checks, have seen “rapid growth due to the ease of use and up to $6M in FDIC insurance coverage.”
You may recall that Brex also recently announced it was going global.
It’s not the only one.
Mesh Payments this past week also announced an expansion to support global multinational businesses operating in Europe, the United Kingdom and Asia in local currencies. The company believes that by doing so, it can work to solve “a major pain point companies encounter when managing spend for remote workforces and across multiple entities.”
I hopped on a call with Mesh co-founder and CEO Oded Zehavi, who shared that the expansion comes during a period in which the fintech company saw its payments volume (and revenue as a result) climb by 3x compared to the first half of 2022. He was candid about the fact that while that volume came both from existing and new customers, the company could definitely see a decline in spending from existing clients — but was making up for that by continuing to sign on new ones, including an unnamed Fortune 100 company.
Mesh aims to serve mid-market and enterprise companies, and Zehavi said the expansion into Europe, the U.K. and Asia is just the beginning as the company continues to explore other territories. Acknowledging that it is challenging to serve global customers, he said that in some cases Mesh partners with local banks and with other fintechs that serve multiple territories.
He was also adamant about the fact that disruption of this space still has a long way to go.
“We just came from a Gartner event and I will not exaggerate and say that more than 90% of the companies that attended this event are using Concur, and don’t use any one of the new players in this space,” Zehavi said. “So it means that the space is still far from being disrupted.”
City Spotlight: Atlanta
On June 7, TechCrunch is going to (virtually) be in Atlanta. We have a slate of amazing programming planned, including the mayor himself, Andre Dickens. If you are an early-stage Atlanta-based founder, apply to pitch to our panel of guest investors/judges for our live pitching competition. The winner gets a free booth at TechCrunch Disrupt this year to exhibit their company in our startup alley. Register here to tune in to the event.
TC+ editor Alex Wilhelm did a couple of fintech-related deep dives this week, including his unique take on Klarna’s first-quarter earnings that led him to conclude that while “a few good quarters do not make for a comeback…there’s lots to like about the company best known for its buy now, pay later services.” He also dug into U.K.-based neobank Monzo’s fiscal 2023 results and “what its recent profitability tells us about its performance this past year (spoiler alert: good things).” Alex also took that opportunity to make some other observations on other neobanks worth $1 billion or more. As he put it, “We are compiling an IPO list in our heads, after all.”
This week, Mary Ann caught up with personal finance guru Suze Orman, who made her debut into the startup world about a year ago with SecureSave, a company that enables employers to offer employees sponsored emergency savings accounts. Mary Ann and Suze discussed a number of hard-hitting topics, including why SecureSave isn’t like its competitors (it doesn’t try to go after all your money) and how Americans aren’t saving enough (people like to spend — spoiler!). Oh, and we found out her weapon for success. There was more fintech talk on Friday’s episode of the Equity podcast as well. Check it out here.
As Ivan Mehta reports, Amazon may have gotten out of the food delivery business in India but recognizes that dining is big business. The company is now testing dine-in payments at select restaurants. Read more.
Affirm has a partnership with FIS’ Worldpay that enables Worldpay merchants to offer Affirm’s Adaptive Checkout product. Eligible consumers can, in a few clicks, sign up for biweekly and monthly payment options. Check out TechCrunch’s coverage of Affirm, including what happened with Affirm’s earnings earlier this year and the buy now, pay later boom.
Speaking of FIS, rumor has it that the company is acquiring BaaS platform Bond, according to fellow fintech enthusiast Jason Mikula.
JPMorgan debuts payments partner marketplace
How a $13 billion fintech that angered Jamie Dimon won over banks
Kasisto launches KAI-GPT, the first banking industry-specific large language model
Adyen launches payout services to provide faster global payments
Fundings and M&A
Seen on TechCrunch
Revolut alums raise millions for Vault, a startup offering banking services to Canadian SMBs
Olé Life wants to make buying life insurance for Latin Americans easier
Vartana lands a $20M investment to scale its sales closing platform
NomuPay, formed from pieces of failed fintech Wirecard, says it’s raised $53.6M for cross-border payments
Hostaway unlocks $175M to expand its vacation rental management platform
Qflow raises $9.1M to track construction receipts, making it easier to de-carbonize
Taxfix, the $1B German accounting startup, slashes 120 jobs amid funding crunch
Mexican fintech unicorn Stori secures $50M in debt capital
Fintech startup from JPMorgan alum raises $23.5M
Brazilian health insurance company Sami secures $18M
ICYMI fintech funding round-up: Ballerine, Trébol & more
RealBlocks raises additional $10M in extension of Series A financing
SVB alum raises $7M for new cash management startup