Member Exclusive, Payments

‘The nice thing about our model is everyone wins’: Plastiq allows consumers to use credit cards at businesses that don’t accept them

  • Digital payments are good options for everyday-type transactions.
  • Many merchants still don't accept credit cards because they don't need to.
close

Email a Friend

‘The nice thing about our model is everyone wins’: Plastiq allows consumers to use credit cards at businesses that don’t accept them

Eliot Buchanan dreamed up the idea of Plastiq seven years ago as an undergrad. A Canadian in the U.S., he got frustrated by how hard it was to transact paying for his tuition. His firm Plastiq enables individuals and businesses to pay for virtually any expense with a credit card — even if a merchant doesn’t take cards.

Since then, the firm has serviced over 1 million consumers and businesses and processed over $2 billion, as of last year. Buchanan joins us today on the Tearsheet Podcast. He has big ideas for the firm and we talk about the pain points of making a large transaction and how Plastiq addresses them. We talk about other products in the pipeline and where the firm is headed in the future.

SubscribeApple Podcasts I SoundCloud I Spotify I Google Podcasts
The following excerpts were edited for clarity.

When Eliot Buchanan was at Harvard seven years ago, he faced a tricky problem when it came for paying his tuition. As a Canadian without a credit score, the only type of credit card he could get was a cash secured card from a local bank. After scrambling to find one, he was faced with another problem: his college didn't accept credit cards.

"It just felt so disempowering," he said. "I began questioning why you couldn't pay for big ticket items like tuition with a credit card."

That was the genesis for Plastiq, the company he founded as an undergrad. It turns out that there are a lot of industries that are still cash-based and don't accept credit cards, preferring instead to use wires, ACH and checks.

"Square and Stripe are both fantastic companies but they have been solving the last mile of payment, those everyday transactions at the local cafe or the online equivalent," said Buchanan.

SPONSORED

Plastiq works with consumers and businesses that aren't set up to take credit cards. Buyers use their existing credit cards to pay Plastiq and the fintech firm pays the merchant in whatever way it's already set up to receive payments, requiring no behavior change of any party.

For the first use case for Plastiq, Buchanan turned to family and friends who had children in private schools and were willing to introduce him and his firm to their CFOs. These parents used Plastiq to pay for tuition, using their existing credit cards to get rewards for these large purchases and to enjoy the float associated with monthly pay cycles of credit cards. This first cohort of customers came back to Plastiq and asked if they could use the firm to pay for other things, like paying taxes.

At that moment, Buchanan realized the use case wasn't really about tuition. It was about household bill pay. "We really started in one vertical and now, there are probably 100 industries we support," he said.

Plastiq's business model turns the traditional credit card transaction on its head. Where merchants normally pay interchange fees when they accept credit cards, Plastiq charges the payer between one and three percent. In large transactions, Buchanan has found that consumers -- whether individuals or small businesses -- prefer using the convenience of a card and are willing to pay extra for it.

"Turns out, consumers are willing to pay for convenience, rewards, and security," he said. "But then we saw new users emerge: small and medium businesses, which now account for 90% of our customer base."

Over the years, the initial Plastiq product that was intended to pay tuition by credit card evolved. The company also enables consumers to pay all their household bills through a single app. But the biggest change came when Buchanan realized that SMBs can use Plastiq to run their accounts payable.

These business customers have receivables to accept, but a lot of them don't take credit cards, similar to the vendor side of the Plastiq network. "We wanted to bring the other half of the equation into the same sort of experience. A customer on our platform can run its payables using a credit card, but also send out invoices," Buchanan said.

Visibility into a company's revenues and spending puts Plastiq in an influential position. There's data there to be mined and insights to be gleaned. Over time, the company plans to rollout functionality that tracks a business's financial health.

"Tracking a business's inflows and outflows means naturally you can offer that business data and insights into its performance. Are they doing well as a business owner? What can they do to do better? Or, should they slow down some payments or spend more or less with the same vendors and move to different suppliers or vendors?" he said.

Because Plastiq isn't steering business away from the credit card companies or banks, the market doesn't necessarily see it as a competitor. Plastiq charges payers, leaving credit card firms and member banks to continue to receive their interchange fees. Customers bring in new business clients they want to pay and vice versa. Plastiq also gets referrals from banks and credit card companies.

"The nice thing about our model is that everyone wins," he said. "We're this layer on top of the existing network and so as a result, a lot of our acquisition comes from the ecosystem because every transaction is net new. So, Visa or MasterCard or Amex, they're all incentivized to make that happen."

0 comments on “‘The nice thing about our model is everyone wins’: Plastiq allows consumers to use credit cards at businesses that don’t accept them”

Outlier OpinionsMakers

Payments

TikTok and payments, a match made on social media

  • Gen Z’s popular haunt TikTok is abuzz with payments activity, surpassing $1 billion in global consumer spending through in-app purchases in Q1 2023.
  • TikTok is looking to make a name for itself in the retail space in America as well, as it battles with the White House over concerns about its Chinese origins.
Rabab Ahsan | September 20, 2023
Banking, Payments

Banks can offer speed and convenience as Wise and Swift integrate cross-border payment networks

  • Swift and Wise partner for streamlined cross-border payments, benefiting banks and their customers.
  • The Wise Platform will utilize Swift's capabilities, including cloud and API connectivity, enhancing international payments for FIs with features like payment status tracking and end-to-end visibility.
Zachary Miller | September 20, 2023
Payments

Digital shopping can benefit from the creator economy

  • Despite the proliferation of online shopping, 65% consumers still prefer to shop in brick-and-mortar stores.
  • For consumers one of the major reasons to stick to in-person shopping is their ability to try on products and test them.
Rabab Ahsan | September 19, 2023
Partner, Payments

The opportunities and evolution of the consumerization of B2B payments

  • B2B payments are slowly but surely following in the footsteps of consumer payments, becoming faster and more secure.
  • Visa, with solutions like Visa B2B Connect, is leading the way in streamlining cross-border transactions and improving efficiency, enhancing the business payment experience.
Darren Parslow, Visa | September 18, 2023
Payments

Payment data security requirements are set to change and organizations aren’t ready

  • Requirements concerning payment data security are set to change in 2024.
  • But companies in the payments ecosystem are not prepared to handle the overhaul these new mandates require.
Rabab Ahsan | September 15, 2023
More Articles