Brex is one of the fastest growing fintech startups in history — it may be the fastest growing startup in history. The company, founded by two Brazilian Stanford students, began with a straightforward premise: to launch a corporate credit card that accelerates entrepreneurs and scaling businesses.
From there, Brex moved into rewards and travel programs tailored to specific industries. And recently, the firm launched Brex Cash, a business cash management account that helps companies simplify their financial operations and grow their businesses.
Brex co-founder and co-CEO Henrique Dubugras joins me on the podcast to talk about the evolution of the company’s product portfolio and the company’s plans for the near future. From there, he shares his views on where the payments industry is headed in 2020 and beyond.
My co-founder Pedro and I were both originally from Brazil. We started coding pretty young during our teenage years. In our last year of high school in 2013, we started a payments business in Brazil called Pagarme. It did payment processing in Brazil like Stripe or Paypal.
We sold the business in September 2016. We had some scale: 150 employees and $1.5 billion in transaction volume. We moved to the U.S. to go to college. After a few months, we dropped out of college to start Brex. We started Brex because we saw that startups and other SMBs had a hard time getting financial services. So, we decided to basically build financial services for companies. Our first product was a corporate card for startups.
Launching Brex Cash
When speaking with our customers, we asked them what part sucks the most of their financial experience. They all said their banks. We’re not a bank and we can’t build a bank account, but we built something better.
Companies pay too much in fees, so we have no fees for wires or ACH or even international wires. Companies aren’t getting yield on their money, so we gave them top-of-market yield. We also give rewards when our customers pay. So, instead of charing for wires or ACH, we actually give points. That’s the value proposition of Brex Cash.
We’re still on waitlist with this product. Feedback has been overwhelmingly positive. We still have a lot of people on the waitlist because we only onboarded a couple hundred companies. We are aiming for a more general rollout in Q1 2020.
Interestingly, we’re doing sort of an inverse co-branded card where Brex is the issuer, underwriter and funding of the card. Bank of the West is the brand on the card, helping with distribution. In the past, banks were co-branding for companies — this is the opposite model.
We’re very selective with partners. We believe they should have complementary user bases and product sets. We’re not necessarily looking to expand co-branded relationships too much but we’re definitely open to it.
Supporting our customers
A lot of our startup customers are growing. We’re looking to build out stuff to support companies reaching scale. We’ll launch in new verticals, too. It’s not that I can’t announce it — we don’t actually know the next verticals we’ll launch.
Our thesis is that these businesses — startups and ecommerce — aren’t the same. What that means is that we’ve created customized rewards, functionality and distribution channels for each of these verticals. We try not to put a one-size-fits-all product out there. If we have super strong product market fit for a vertical, then we’ll roll out a new vertical.
Payment and fintech trends in 2020
We think there are a few trends set to expand next year.
The first is payments meets loans. As people realize that it’s much easier to lend if you already have a relationship with a customer over a product than to try and create a relationship with a customer for the first time through lending. Square and Stripe are already lending — we think all the other payment companies will start rolling into lending.
We also believe lending companies will roll into payments and other higher engagement products. SoFi launched SoFi Money and we believe they’ll dabble more in payment products. BlueVine launched a savings account for businesses.
We’ll take some credit for this but people now see that cards are a good business. We’ve seen businesses like Expensify and ScaleFactor launch their own cards. As Stripe and Marqeta provide infrastructure to make it easier to issue cards, we think a lot more people will enter the space. The card business is not only a technology business, but also a financial services business. So, those that can create a financial services DNA inside their firms will succeed.
There’s definitely a trend for vertical software companies moving into cards in order to monetize. You have vertical SaaS like Toast in the restaurant industry moving into payments and capital. Cards are the new payments in the sense that they’re a way to monetize SaaS.
Basically, people will shop for financial services from options broader than just banks. Traditional banking relationships will be built with non-banks that provide financial services.