‘There’s been huge investment in point solutions, but they don’t exist long term’: Jay Dearborn, Wex

  • Payments firm Wex has found a way to continue to consistently grow its fuel card, corporate payments, and health care products offerings.
  • Chief strategy officer Jay Dearborn joins us on the podcast to talk about where the firm is investing and what type of M&A he's looking for.

Email a Friend

‘There’s been huge investment in point solutions, but they don’t exist long term’: Jay Dearborn, Wex

For publicly traded fintechs at scale, Wex is an interesting one. Combining a fuel card business with corporate payments and a healthcare offering, the firm has found a way to grow consistently over a couple of decades.

Strategically, the firm is looking at synergies in its businesses – it recently launched Flume, a B2B digital wallet. And, it’s looking strongly at M&A opportunities as valuations come down in this market. 

Jay Dearborn, Wex’s chief strategy officer, joins me on the podcast today to talk about the state of the market – namely, where there are opportunities for new products and acquisitions. Jay talks about the dynamics around revaluing fintechs – he doesn’t believe that it will ever really be a buyer’s market, but he does see the need for companies to get profitable – or at the least, be able to persuasively thread a story about what the path to profitability looks like.

Jay Dearborn is my guest on the Tearsheet Podcast.

Subscribe: Apple Podcasts I SoundCloud I Spotify I Google Podcasts

The following excerpts were edited for clarity.

Taking stock of the economy

I think back in October of last year, we were talking about deterioration in the macro environment and how, in particular, privately funded fintechs, but even those that have gone public, how are they going to get to profitability? Or, or how are they going to bridge to their next round? And now that we're six months, we were right – it got worse and probably is still heading in the wrong direction. There's just more stress in the marketplace around fintechs.

Funding and M&A environment

There are a couple of things to grab onto. Funding is drying up, but there's record amounts of dry powder that is still existing out there. It's waiting on the sidelines. In doing strategy at Wex, I think about it the same way: we've got a lot of dry powder, too. And, I'm waiting there on the sides. Consolidation is inevitable, though, in the industry. 

We've had this period of unbelievable innovation over the past 5 to 10 years in fintech, a huge amount of money has gone into what are point solutions that have gotten to scale but, you know, point solutions don't exist in the long term. They do tend to get gobbled up and put into multi point solutions. I think that's kind of what we're gonna see here in this next wave of evolution in the fintech industry.

Wex history and business

I will tell the story of Wex real quickly because I think it's a good example of an evolutional cycle in fintech. We started this business as a fuel card business back in the 80s. From that original basis, we expanded into corporate payments. We're now one of the largest virtual card providers in the world, wholly owning our own tech stack, as well as having a captive bank and eMoney licenses around the world. Then also, we have 30 million American lives on our consumer driven health care platform as well.

What ties it all together is, how do we help businesses simplify their business? And so, you know, we don't help them in what it is that they're actually doing. But we're in the background, helping them with all the administration. For us, as we thought about that single point solution in fleet card, it gave us great payments expertise. And it allowed us to get into our customers’ heads and understand what their administrative needs are. Wwe've just expanded our wallet over time to help them on those back office tasks. 

Synergy and cross-selling opportunities 

There is increasing synergy. We used to keep them in silos, because there was just so much TAM to go after. But at this point, we've kind of woken up here around the time of COVID and said, My goodness, we have 800,000 customers. These are businesses – we do B2B fintech and you know we're still working on our cross sell motion, but the CHRO who buys our health and benefits offering, they also have a corporate AP need. Zack’s Plumbing and Heating, who may have a couple of different fuel cards from us, also needs corporate payments offerings to help Zack receive his money and then pay it out.

It is a new muscle for us. I think at this moment of time, when we have deceleration in the macro environment, there isn't as much low hanging fruit. And so we start to think through what is truly unique about the mouse traps that we've all created and how we really monetize that. I think you see cross sell motions being focused on by a number of publicly traded companies that have multiple business lines.


Even in a decelerating macro environment, we still focus on 10% to 15% revenue growth. And this is something that we've delivered on for decades at this point, and we plan to for the decades ahead. We're thinking about how we generate that through a cycle, when there are less opportunities to go and get new sales. And so part of what you have to do is figure out your back book, your customers, those 800,000 customers that we have, how do we provide them more services, more value that allows us to continue to drive revenue? 

And then for us, because it's not just revenue that we care about, we’re a very profitable business. We care about driving earnings per share for our shareholders. It's about how you get leverage out of that model to then drop it through to the EPS.

Valuations come down

There's some really big markdowns, aren't they? With valuations there are periods of peak and trough. It was clear that we got quite hot in fintech, particularly as we went into the beginning of 2022. Those have definitely reset. And I think it's forced those that invest in fintechs – and I count ourselves as one of them with the way that we we purchase companies in our M&A program – it’s forced all of us to rethink about the quality of the product, first and foremost, how does it serve the customer? 

Then, we think about the quality of the revenue that comes in. Does it ever become profitable? At the end of the day, there has to be a profitable business. We can all be patient and wait 10 years for something to scale to multiple, multiple billions. But at the end of the movie, it all has to make a profit. This is Business 101 – we get carried away or enamored with the grand idea. But let's keep in mind that at the end of the day, the grand idea has to make money.

For us, what's happening here during this period of time is we do expect valuations to continue to come down. That presents us a great opportunity. I don't think it will ever be a buyer’s market frankly – there's just so much dry powder out there in the PE space. I think we'll have more properly balanced risk/reward and valuation for assets. For us as a strategic buyer, we care a lot about synergy value. So tying back to your question about does it fit in with our ecosystem, we care about things that fit in with our ecosystem, so that we can naturally drive more value than someone else. it's not going to be a buyer’s market, but it will be more properly valued, and there'll be opportunity in that for all of us.

Companies going private?

Bottomline is probably the poster child with Thoma Bravo taking it private. But that thesis, I think, is a good thesis, which is the public markets are not going to be patient for the transformation that needs to happen to get some of these fintechs to the combination of scalability and profitability. The private markets are far more patient. And you can exercise a pathway to profitability playbook, that might take you three to seven years. The public markets are not going to be tolerant of not having that incremental quarter after quarter of improvement.

It's interesting – if you take a look at some of these fintechs that went public over the past three to four years, you essentially try to distill it down to what the true value of the entity is, their balance sheet, the cash and the receivables and the debt that they have there. You know, we're getting to a period where at least the public markets are really intolerant of not profitable models that don't have a demonstrable pathway to profitability. And I think this is going to be key for any of the fintechs that went public over the past five years. 

What you're going to have to tell investors if you're going to remain public is I have a vision for how this flywheel is going to work that allows me to both drive outsized revenue growth, which they historically have done, but do it at a marginal contribution that starts to create money, so that we don't have the cash burn anymore.

Wex’s matrix and its impact on M&A

On the horizontal side, that's actually the bread and butter of what we do: that shared infrastructure around the treasury account. So think of a treasury account that stores value, and then the payments, how do you move money? In the last year, I think we moved close to $200 billion worth of payments with our technology and our software.

Where we really focus our M&A is on the front end, new customer experiences that can leverage our treasury and our payments backbone. I think about the long term, secular tailwind, that is driving this intersection between payments and software. 

Software and payments

Our fleet business is turning more and more into a mobility business, which is how you move your people and assets in the field. We talk about electric vehicles – it's going to be a mixed fleet world for the next decade. And so how do we put together our fuel card offering with different EV offerings? But then also, how do you manage those assets in the field? How do they buy their disposables and how do you maintain them? And how do you move them around and then incorporate payments? It's about how you pay and get paid. How do you pay and get paid, and then figure out which customers you want to help do that, because in B2B, there's so many bespoke disparate processes, depending on which segment of the economy that you're in.

For us, just given our pedigree, we obviously have this great exposure to the trades. We got into the health business in 2014 – the company was producing like $70 million worth of revenue out of our health business at that point, and today, it's a half billion dollars. And we've done half a dozen M&A transactions along the way, adding on COBRA and these different things that surround the CHRO with what they need in order to administer their business.

Thinking about the platform of the future

It's amazing to see the story unfold over the course of seven years I’ve been here. What we've done over the past seven years is essentially lift everything to the cloud. At this point, by the end of 2023, 100% of our platforms will be cloud based. We've only developed new technology with AWS, native tools for the past couple of years.

A great example of this is our open loop processor that is the engine of our virtual card embedded payments solution. We serve fintech as well as the online travel agencies around the world with this stuff – it’s as good as any fintech out there. And what's unique about us is we're creating this distinctive product. But we also have this publicly traded captive bank, this pedigree of having appropriate risk tolerance, but more on the conservative side. When you partner with Wex, it's our position in the marketplace that we're not looking to grow this at 40% plus a year. It's a very logical, very safe growth – we position ourselves as trusted partners with an extremely high degree of recurring revenue, that drops through for our investors.


Deep in the ethos of the company is this concept of, we love our end markets, and we're going to both serve the end market directly. And we're going to serve up our tools to be white labeled for partners, and that holds true across all three of our lines of business. 

In our corporate payments business, we have the likes of American Express, Commerce Bank, and PNC. We just announced last year at First National Bank of Omaha, they’re white labeling our software for AP automation. We can provide them the software that helps them go out there and compete.

Our health business was actually started by creating software for TPAs, FIs, and health plans to go off and give consumer driven health care products to businesses. And at this point, we participate in all three of these markets directly, and through the partner channel, with really strong rules of engagement in doing right by our partners, because the markets are big enough that we can attack them in both manners.

Flume, Wex’s new business payments product

We did a bunch of business testing and the name Flume was the one that resonated. At the nexus of our fleet and our corporate payments business is a massive amount – hundreds of thousands – of small businesses that we're serving just on their fuel card interface. We have this great infrastructure, this great horizontal capability in our corporate payments business. And so the thought was how we can help small businesses get paid, bring money in, and then pay up. 

We took a really clean sheet approach to this. It's new for us – we created a digital wallet within our ecosystem, where we're the custodian of the funds and the money moves in, FDIC insured. This is important in today's environment. And we help them do the payout. This is very much a mobile first solution, focused on the trades. 

Zack's Plumbing and Heating has a general manager and an office admin – how do they run their business with a mobile tool that can invoice, can take payments? We want to wrap that customer with a wet set of offerings tailored for small business.

Zack’s Plumbing and Heating has one customer account with Wex that allows Zack to receive money, to spend money, to have all of the controls, the rich rebate around the fueling experience, and to have all of his consumer driven health care made easy, because Zack doesn't have time to figure out how to optimize any of these three. Our job should be to make it as easy as possible for Zack, a small business owner, to succeed doing what Zack does. And we help on the admin in the background.


Our priorities haven't changed at all. We have delevered this company to the point where we're now below our long term leverage. And we're very much focused on M&A and where those right opportunities for us – we continue to be hyper focused on that. We see a downturn really as an opportunity for us to pounce and have a real step change in our own evolution. So, we're watching this as we go through it. We continue to grow the business. We're excited about navigating our way through what is sure to be a turbulent time.

0 comments on “‘There’s been huge investment in point solutions, but they don’t exist long term’: Jay Dearborn, Wex”


Looking deeper at mortgage demand and products with BMO’s Tom Parrish

  • A BMO survey found that 64% of Americans are delaying homebuying due to concerns about mortgage rates.
  • Tom Parrish, managing director of consumer lending product management at BMO, joins us on the podcast to talk about home buying, financing, and general market trends.
Zachary Miller | September 25, 2023
Partner, Podcasts

‘Getting the model right’: How Regional Finance balances customer-centricity and fraud prevention in digital lending

  • In this episode of the Tearsheet Podcast, Regional Finance explores credit modeling in the digital lending landscape, focusing on the balance between serving customers and preventing fraud.
  • We speak with Chris Martin, head of product management at the $1.5 billion consumer lender, and with Argyle's Matt Gomes, who leads the firm's data and tech efforts in banking and lending.
Zachary Miller | September 21, 2023

Evolving Regulations, Evolving Payroll: The future of Earned Wage Access with Clair CEO Nico Simko

  • In this episode of the Tearsheet Podcast, join us as we delve into the evolving landscape of Earned Wage Access with Nico Simko, CEO of Clair.
  • Nico walks us through the changing regulatory environment, defensible distribution strategies, and his vision for a full-service frontline bank for hourly workers.
Zachary Miller | September 19, 2023
Partner, Podcasts

Navigating the future of digital banking: A conversation with Deloitte’s Nick Cowell

  • Join Nick Cowell, Deloitte Partner, as he discusses the digital banking landscape in North America and how traditional banks are adapting to meet evolving consumer demands.
  • Explore the changing dynamics of the banking industry and learn about the rise of digital neobanks, evolving customer expectations, and the critical success factors for incumbent banks in a digital-first world.
Zachary Miller | September 14, 2023
Modern Marketing, Podcasts

Marketing financial services to Gen Z with Step’s CJ MacDonald and Visa’s Ruben Salazar

  • FIs are beginning to wake up to the importance of Gen Z as an emerging customer. But they don't necessarily know how to reach them and what to say.
  • We speak with Visa's Ruben Salazar and Step's CJ MacDonald about what's working in marketing to the young generation as part of our podcast series on Gen Z.
Zachary Miller | September 12, 2023
More Articles