Most banks wouldn’t hire a 22-year college dropout to be a teller, let alone give them product responsibility. Yet, a pair of 22-year-olds have built a brand worth more than $1 billion. Even more amazing, it’s not a consumer or social play, it’s good old B2B and in financial services, the oldest of the old-school industries. The story of how college students are redefining the corporate card space is truly remarkable (TechCrunch piece here, Forbes article here).

It’s revealing to see how two Gen Z Brazilians have reimagined corporate charge cards to take on American Express. Using a classic startup strategy, they identified an underserved segment, VC-backed startups (especially its fellow alums at Y Combinator), and built a card for their needs. And with that momentum, they’ve moved to a second, and much bigger underserved segment, revenue-rich and capital-poor ecommerce companies.

Products: Brex achieved unicorn status on the back of a single product, a corporate card for VC-backed startups. Then at the end of Feb, the startup launched its second product, the Ecommerce Card, aimed at ecommerce companies generating at least $50,000 in monthly sales.

Underwriting:

  • Brex’s key value prop, at least compared to bankcards, is vastly higher credit limits. Similar to American Express, the sky is the limit on the amount of credit extended. It has nothing to do with personal credit scores, and all to do with revenues, cash flow, and bank balances. Like most modern alt-lenders, Brex requires permanent access to customers’ bank accounts. Armed with that real-time data, Brex can determine when to expand, and contract, credit. And every 30 days Brex withdraws the previous month’s charges directly from that bank account eliminating much of the uncertainty about being paid back.
  • Brex also makes a big deal about that fact that the personal credit history of the founders has no bearing on the card, and that founders are not being held personally responsible for the charges.

Pricing:

  • Unlike many financial companies, Brex if very upfront on pricing with Pricing a secondary nav item under Cards. The card is free for the first 5 users, then $5 per month per user after that. Other than that, it is fee free.
  • The card is a charge card, requiring payment in full within 30 days (Startup Card) or 60 days (Ecommerce Card)

Rewards & Extras

  • The card follows the Amex and bankcard playbook with travel rewards points. The monetary value of the points is not discernable from the website (the only part of Brex that is not particularly transparent).
  • They also offer an integrated travel booking site powered by TravelBank.

Bottom line: If you market financial services to small businesses, keep an eye on Brex. There is much to learn from their website design, benefit statements, outsourced travel program, rewards program, and application process. I imagine Brex will be acquired soon by someone with an equally high-flying stock price/valuation (Stripe, Paypal, SAP Concur or even Amazon which would have some interesting synergies, or even Goldman Sachs). It would also be a good fit at BMO Harris to modernize its Diners Club business, but it would take some creative financing to afford the $1B price.

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