Last week, Ramp sent a message to crypto companies using its corporate card services saying that it is significantly lowering spending limits and mandating new requirements. Some users were temporarily suspended from spending altogether.
“In light of recent unprecedented events in the cryptocurrency, blockchain, NFT and DeFi ecosystem, we are conducting a review of all businesses operating in this space, including yours, to determine whether we reverse or modify any of the changes listed above,” one memo said.
While Ramp somewhat backtracked on the changes, its move offers a window into how corporate credit card companies could be stress-tested in the current environment. Brex, Ramp’s biggest competitor, said that there have been no changes to crypto users’ spending limits.
In Ramp’s case, companies were asked to upload their current balance sheet, including versions reflecting at least the previous 12 months; its most recently completed income statement; and a list of any cryptocurrency, blockchain, NFT and/or DeFi exchange the company has held an account with in the previous 12 months. “We sincerely regret the potential disruption to your operations, and realize this may have implications for your business,” the email said.
Less than 24 hours after that move, Ramp CEO and co-founder Eric Glyman and other executives sent emails to users on Saturday providing further context on the changes. The company wrote that the initial note “may have caused unnecessary concern” and apologized for the confusion.
Currently, Ramp is seeking to minimize operational disruption on its platform. Ramp has offered users one of three options: reinstated original spend limits, reduced spend limits to a level that is above the customer’s most recent level of monthly spending or adjusted payment settlement schedules from instantaneous to five business days. If crypto companies need access to more credit, they are being asked to send in the aforementioned documentation.
“The bar that I try to hold Ramp to is first and foremost our purpose is to help companies save money and save time,” Glyman said in an interview with TechCrunch.
Ramp has always required companies that work with the purchase, sale or mining of cryptocurrency to provide additional documentation and information when using its platform. But Glyman admits that part of the reason he wanted to do a weekend review on spending limits was that he’s not as deeply engaged with the crypto world as experts are: “I think it’s possible to take steps to address risk as well as being aligned with customers,” he added.
Glyman affirmed Ramp’s willingness to work with cryptocurrency companies, especially amid a turbulent period in the industry.
Ramp’s decision to momentarily limit the spending power of crypto companies could feel either contradictory or in support of the long-term viability of the industry, because one way to increase efficiency is to lower spending. Though, in this case, Ramp perhaps did so in a more heavy-handed fashion than crypto customers may have anticipated.
Companies have the right to limit their lending risk, especially when they are dependent on banking partners. Crypto, in the wake of the collapse of FTX, one of its most high-profile darlings, could certainly use a timeout. At the same time, limiting a segment of customers without a heads-up could hurt day-to-day operations and break the trust between crypto companies and the spending platform.
Trust, in a space as competitive as spend management, matters a ton. Rain, which recently raised $6 million for its web3-specific corporate card, is giving priority to waitlist users who joined because of limitations by Ramp.
Charles Naut, the co-founder of Rain, said that his company underwrites based on a customer’s on-chain assets, while Brex and Ramp require companies to have fiat bank accounts.
“In the beginning, the companies that came to us were the ones that had no choice because they weren’t even able to open up [fiat] bank accounts [ … ] that’s not always possible for some web3 teams,” Naut said. “Over time, we’re starting to win over teams that can have bank accounts but they’d rather go with a card for web3.”
Naut said he hasn’t seen late-stage companies in the space build features or handle compliance issues that startups in the crypto sector have. He noted that Brex’s choice to stop serving SMBs is another example of the cohort focusing on “market core” segments, which don’t include crypto.
Ramp quickly backpedaled its decision, Brex maintained service to cryptocurrency companies, and Rain sought to capitalize on the need for native products. There’s a clear line through all these efforts: Corporate credit card startups are often built to support risky upstarts that would otherwise be ignored by traditional banking institutions, but in a bear market in the heart of a downturn, those very risk calculations get more complicated. Add a once-in-a-lifetime macroeconomic event? Welcome to stress-test territory.