The $2.6 billion-valued corporate credit card startup Brex has unveiled Brex Cash, a cash management account designed to improve the functionality of traditional business bank accounts, per a press release. Using Brex Cash, which integrates with Brex’s corporate credit card for startups, businesses will be able to wire money in less than a minute, according to the company.
Deposits held in the Cash account will be protected by the Securities Investor Protection Corporation (SIPC), which insures up to $500,000 of its customers’ money from loss of cash and securities, per TechCrunch. Notably, the product isn’t limited to Brex Card customers: Startups that were ineligible for the corporate credit card offering can also use the service. The company has partnered with Boston-based Radius Bank to access the automated clearing house (ACH) and wire payment rails.
Brex is aiming to lure businesses with the promise of zero fees and rewards:
- Cash account holders won’t be charged transaction fees on any payment types. This is in contrast to the $23 businesses are traditionally charged to wire money, according to the startup’s Cofounder and Co-CEO Henrique Dubugras, cited by Crunchbase. Given the considerable savings, this move could be a valuable selling point for Brex as it looks to attract businesses.
- Account holders will also earn rewards points for transactions and returns on deposits held in their Cash accounts. For payments made via the Cash account, whether that’s ACH, credit cards, or wire payments, businesses will earn rewards points that are redeemable for statement credit, travel, and mileage programs. Additionally, cash balances held in the account will earn 1.6% yield, making it the highest rate in the market, according to the press release.
Brex likely views Cash as a customer acquisition funnel rather than a cash cow — but the company will face stiff competition in the space.
- Given the lack of fees, Cash is unlikely to generate substantial revenue for Brex beyond the transactional fees it charges merchants. But while this product may not deliver revenue directly, it offers Brex an opportunity to attract thousands of business customers who wouldn’t necessarily be eligible for its core corporate credit card offering, allowing it to offer them credit in the future. And this is an important point: The transactional data it gets on customers will allow the firm to offer these businesses credit at lower risk. To this end, we’ve already seen fintech players make similar moves: Stripe launched two lending products for businesses last month, allowing it to leverage its troves of transactional data on clients to better assess credit risk and underwrite loans.
- But as Stripe’s foray into lending illustrates, competition in the US’ business banking market is heating up. Brex identified an underserved niche with its core credit card services for startups that allowed it to acquire clients at pace, not least given the high risks involved in lending to nascent companies. But Brex Cash is a move into a more conventional business banking segment — one that’s significantly more competitive, with incumbent banks, fintechs, and large payments players like Stripe all jostling for customers. As such, although expanding its product suite can allow the company to bolster its attractiveness to both existing and potential customers, navigating the space will also likely be a tougher ask.
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