Power of Payments Ep. 5: Extend’s Andrew Jamison on virtual cards, spend management, and the future of corporate payments

Welcome back to Power of Payments. I’m your host Ismail Umar, and in today’s episode, I’m joined by Andrew Jamison, co-founder and CEO of Extend.

Extend provides digital payment infrastructure for financial firms and allows them to modernize their payment experiences through the use of virtual cards. The firm’s offerings include virtual card APIs, a digital corporate card app, and a card tokenization service.

Extend has partnered and integrated with major card networks including Mastercard, Visa, and Amex, as well as banks like Silicon Valley Bank and City National Bank. 

Andrew is here to talk to me about why he founded Extend, what need it serves in the industry, and where he sees virtual cards and corporate payments headed in the coming years.

Subscribe: Apple Podcasts I SoundCloud I Spotify I Google Podcasts
The following excerpts were edited for clarity.

Why Extend was created

I’m one of three co-founders behind Extend, which was created almost exactly five years ago – we just recently had was our fifth-year anniversary. I started my career working alongside SAP as a consultant, deploying and focusing on the financial modules, and gradually got to manage large-scale global projects. I stayed there for 8 years, and then I left to go to INSEAD and do an MBA for a year.

And that created a great transition for me to go and join American Express back in 2004, where I stayed for 12 years, managing their B2B products, and looking at how American Express could help companies manage a lot of their indirect expenses. And that’s a portfolio which I doubled in size over the last 6 years that I was there. That was a really good growth experience, because in there, we bought companies and I had the experience of integrating startups, which was really healthy in terms of getting to understand the broader ecosystem. I left Amex in 2015 and took a sabbatical for about 14 months, for personal reasons, and then eventually got back in the game and made the decision to transition into the world of startups, which was not what I had ever anticipated doing, but ultimately is where I ended up.

Extend happened a little bit by accident. As I mentioned, I’d left American Express for personal reasons related to my mother’s health. And so, I had the opportunity of really being able to think freely around what it is that I really wanted to do, and Extend wasn’t really part of that journey at all, for, I’d say, the first 10 months or so.

And then, I started to realize that there was an explosion in virtual cards – companies like Marqeta were powering a lot of the gig economy solutions. And I started to realize that virtual cards were at the heart of what was happening there. And then I started seeing neo-issuers, the likes of Brex, and now there’s many more since then: Ramp, Divvy, Spendesk – new commercial card issuers coming into the game, heavily reliant on digital cards. And it really got me thinking in terms of, where was the industry going? Where were we going to go and digitize this world that, to date, had been fairly stagnant in terms of the capabilities that were being pushed out to companies?

And that’s really what got me thinking and talking at length with one of my two co-founders, Danny, who’s a very close personal friend of my wife’s. He’s a Full Stack iOS engineer. And so, we started talking more seriously about it. One day at a barbecue, he turned around and said, ‘Hey, why don’t we do this together?’ And that was really the moment when I realized it was doable. I had the experience of financial services, having been at Amex for 12 years, I had the experience of virtual cards, because Amex bought a virtual card engine back in the 2008-2009 timeframe. So, I had a fairly intimate understanding of how that technology worked. But I didn’t have the technical chops. Sure, I’d been an SAP consultant, and I’d dabbled in code for a few months, but I was no expert in user experience. And that’s precisely where Danny was an expert, building applications for consumer brands and luxury brands. And that really gave me the confidence to say, ‘Actually, we can do this. I’m fin, he’s tech’. And so, off we went.

And then along that journey, very early on, Guillaume, who I’d known for a long time in American Express, had left Amex. And he started helping us define what the strategy needed to be as we headed to conferences like Money20/20. And he very quickly became engaged. And before we knew it, he was interested in joining. Given his strategy and operations background, that created a level stool for us to create a business – three people, completely different skill sets with little overlap – it gave me tremendous confidence that we had the right level of maturity and experience to really give this a good show.

Extend’s core offerings

We are a technology company, an infrastructure company. And we serve the traditional banks, the high street banks that essentially are sitting on legacy infrastructure that is incredibly resilient and has incredible uptime capabilities. And by that I mean the credit card processors and the card networks that support commercial cards, because today, we only service small and midsize businesses. It was really about understanding that ecosystem and seeing what was different between the tools that they had and what was emerging with the Brexs, Divvys, Ramps, and the Marqetas, and realizing what was missing was a digital layer.

So we spent the first three and a half years creating a digital wrapper over the strategic infrastructure that the banks used – card processing and card networks and other different services – and started to orchestrate a set of APIs on top of them, so that we could then create all these digital tools that the banks didn’t have in their arsenal. And that includes four core products that we are in market today with. One is a set of spend management applications, because what we realized was that user experiences for small business and middle market were really non-existent. They either had enterprise solutions or consumer solutions, but nothing for small business and middle market. So, we built out this set of apps to help with spend management.

Two, we went and built virtual card APIs as a second product. So, customers can use our APIs natively and can get access to them in less than 48 hours, which is good for these code and developer-friendly companies that want access to APIs.

Three, we started to bring in these bank services, which is the ability, for instance, to push cards into wallets, the ability to do sanction screening on virtual card recipients who are not the main cardholder.

And then the fourth pillar was, we started to build out this connectivity infrastructure that allows us, through one set of APIs, to connect banks to the software solutions that businesses are running. So, how do we create that connection point that allows software companies to access multiple banks, and for banks that are connected to us, to be able to connect to an ecosystem of accounts payable and other payment solutions that are already in the marketplace being used by businesses today?

Virtual cards: what, how, why

Virtual cards are, in essence, a unique 16-digit number. So it is, for all intents and purposes, like any other credit card. The difference is, it doesn't come in the form of a piece of plastic. It comes to you digitally through a phone, and you see the digits, the security codes, the expiration dates. And so, the benefits there are the ability to instantly go and provision people in as little as a few seconds. You can type in someone's email address, and give them access to a card with a specific and unique account number, with a set limit of how much they can spend, how many times they can use the card, and over what period of time they could potentially use the card. But the benefits are all about the instant nature of the access you provide.

It's also about making sure that there's very tight controls over who can use it, and also over what period of time they can use it and how much they can spend. And then there's the benefit of reconciliation, which is, when you issue that card to an individual or to a vendor, you can tag that card with some very unique parameters, in terms of, is there a project associated with this? Is it linked to a contractor? Is it an interviewee? Or is it linked to a specific purchase order or invoice? So this enriched data then flows with every transaction that hits that card. So it means at the end of the month, the finance team can very quickly allocate all of these charges back to where they are supposed to have been, or at least know what was the genesis of those charges in a lot more detail than they have been able to in the past.

“Wrapping” legacy infrastructure with new solutions

Having spent a lot of time in the financial services world, you realize that the card issuing platform is just one of the platforms that the banks use to create a holistic servicing model for their customers. And the reality is, to try and replace those systems isn't just as simple as saying, ‘Look, this other system looks better, looks sleeker, is more modern’. Because ultimately, you have to tie it back in to all of their customer service portals, you have to tie it back in to how remittances flow through.

And so, to give you an example, when I was at American Express, they rolled out a new issuing platform, and over the course of 10 years, they spent over a billion dollars. But that wasn't the cost of the software; that was the cost of integrating it to create that seamless experience for the consumer and for the commercial customers. So, it isn't as simple as ‘rip and replace’, because that strategy is not realistic. The reality is, people are now looking at abstraction. And the reason why I say that is, I look back at my own experience at SAP. And what you saw happening increasingly was, companies realized that SAP was a phenomenal ledger. But they needed to build other user experiences. And so, they started building digital layers over the top, but the ledger remained the ledger.

I think the same thing will happen in financial services. The ledger will continue to play its role, the card networks will continue to play their role. And what's going to happen is, you're going to build user experiences, you're going to build APIs and connectivity capabilities, that essentially abstract away the complexity. And the reason for that is, more and more of the services that are being delivered to customers rely on multiple systems underneath. And to date, all banks were able to offer their clients was singular endpoints, which meant that actually, if I wanted to create a seamless experience, I as a corporate customer would have to go and connect to three or four or five different platforms.

And so imagine, you and a thousand small businesses all having to connect to five different endpoints, versus the world that we present today, which is, come and access, essentially through one endpoint, all the services that have been re-orchestrated and catalogued, and now enable customers to go and pick up virtual cards, figure out what balances are, cancel cards, and look at enriched data, etc. So now, it’s really about streamlining that experience for these customers through either a user experience or through the APIs that we offer, and allowing them to integrate those APIs into their existing business services.

Future plans for Extend

We’re now integrated with seven financial institutions, and we have a few more contracts in the final stages right now. It's about expanding the number of banking partners that we go and service. And that's been our number one priority for this year. And we'll go into next year, especially as we start thinking about international expansion. We’ll launch in the UK later in Q3. And in Canada, also, likely end of Q2.

And that leads us to the next part of the strategy, which is the hub and spoke piece I talked about, where we connect a growing number of financial software solutions back with the banks. And so, it’s a little bit of a chicken and egg. The more banks we have, the more attractive we become. The software solutions, you can now see one access pipe to multiple banks. So that’s why the banks come first. And then we start thinking about building that ecosystem, where, for all intents and purposes, we’re like Intel Inside, the machine, the brains that connects two distinct parties, and creates a trusted network by which these different companies can connect software and their bank partners seamlessly.

The future of virtual cards

I think that virtual cards are already replacing physical cards in many instances. The real hold-up in terms of going fully digital at this point is all about merchant acceptance and the merchant network. With COVID having struck back in 2020, we rapidly saw – specifically here in the US, because the US has been a very slow adopter – of contactless payments. But the benefit, now that we've gone through the pandemic, is effectively that all consumers didn't want to handle cash. And merchants realized that pretty quickly, and started realizing that they needed to change that point of sale so that people could increasingly move to that contactless environment where they tap their phone or their card.

And effectively, the phone very quickly became a tool. You saw a big spike in the likes of Google Pay, Apple Pay, and other contactless modes of payment. So, the reality is, as the merchant ecosystem evolves, we will start to see more and more contactless payments in different forms. And I think that's a trend that's only going to accelerate. And so, the benefit of digital cards is that everything can be controlled in an instant. You can control transactions with merchants, you can put controls over how you share access to your card in a controlled and limited fashion. Be it to a supplier, a contractor, an employee, or an interviewee, you now have tools through which you can instantly provision or revoke access to these cards. There's so much more upfront control.

And so, in a way you move to a world where, do I need a corporate card? Or do I actually need to have a card that sits there that has no balance or capacity to spend until I request capacity to spend because I'm traveling to a conference, because I need to pay an invoice or subscription. And that creates much more immediacy and much more transparency now, for the CFOs and the finance teams. And that insight is really meaningful to businesses, especially as you enter an era like today, where there’s a lot of uncertainty in the world. The CFOs don’t want to see surprises coming through at the end of the month, when suddenly people put through their expenses. So that transparency, that visibility is what finance leaders want to have in their organization.

I think, for me, what’s going to be interesting is how all these different payment form factors will come together. We've talked a lot about virtual cards, but we also increasingly see the ability to move some forms of cash, essentially pushing cash to individuals for reimbursements, and we start thinking about FX. And for me, the interesting part about FX is how cryptocurrencies are going to play a role in that space, because of the efficiencies that you have, where you can hop on a rail, hop off a rail, and benefit from an instant ability to go in and move money from one location to another, where you don’t essentially get hit by the capital gains component that's currently associated with cryptocurrencies. And how all of this comes together to create a much more seamless ecosystem.

And the exciting part then goes to say, okay, so if we do this for businesses, how can we also create that digital ecosystem for the consumer, because clearly, the consumer use cases are just as interesting when you start thinking about your kids going to college, your family that lives overseas, and you may want to be able to pay for things on behalf of your parents and have transparency as to what's being bought and where. So, I think this is just the very beginning, in my mind, of the journey that we’re going to see towards having a better ecosystem that creates more transparency and more immediacy around how folks can pay.