Fintech

Inside Stripe’s latest moves

Comment

row of small stones
Image Credits: Juj Winn (opens in a new window) / Getty Images

Welcome back to The Interchange! If you want this in your inbox, sign up here. While there is always a lot going on in the world of fintech, this week felt a little subdued overall — at least when it came to funding rounds. But there was definitely still other fintech news to cover, and we’ll dive into it here.

Stripe has been busy

Stripe made headlines more than once this week as it acquired a (non-fintech!) startup and announced an expansion of its issuing product into credit.

In each case, I covered the news exclusively, which helped give me some insight into the fintech giant’s motivations behind each move.

Let’s start with the acquisition. Stripe picked up Okay, a startup that developed a low-code analytics software to help engineering leaders better understand how their teams are performing. Okay is a small startup, with just seven employees, that over time had raised $6.6 million from investors such as Sequoia Capital and Kleiner Perkins after graduating from Y Combinator’s Winter 2020 cohort. I didn’t talk to Stripe directly about the deal but Okay’s co-founder and CEO Antoine Boulanger told me that “by increasing engineering effectiveness, Stripe will be better positioned to attract and retain talented engineers.” It also presumably will be in a better position to compete in an increasingly crowded space.

In other words, Stripe deciding to acquire a startup that helps engineering leaders build performance dashboards to gauge how their teams are doing feels like the company is very serious about making sure its own engineering team is working effectively enough to not only move faster, but also be more productive. I found it interesting that one of Okay’s customers is Stripe competitor Plaid. Or I should say was. Of course, now Okay will be folded into Stripe’s engineering team and will no longer serve outside customers.

Stripe also announced this week its plans to give companies the ability to create and distribute virtual or physical charge cards that allow their customers to spend on credit rather than using the funds in their accounts.

“Among our suite of products, Issuing [which it launched in 2018] has been doing really, really well,” Denise Ho, Stripe’s head of product for BaaS, told TechCrunch. “And the No. 1 top demand within Issuing has been the ability for Stripe to enable our platforms to offer credit to their users.”

This has a twofold benefit for Stripe — giving it a new revenue stream as well as the option to offer new financing capabilities to their customers “with little additional operational cost,” Stripe touts. It also gives companies like Ramp and Karat, among others, the ability to give their clients access to credit at a time when credit may not be as easy to come by.

Ho also told me that Stripe has worked hard to make sure all its products work well together. For example, she said, its Issuing product is built on top of its Connect offering so customers “don’t have to KYC every single [one] of the thousands of businesses on their platform.”

“And when these businesses need to pay you back for, say, the couple [grand] they spent last month, they can use Stripe Invoicing and Stripe payments. And then we have the ability to move the money from the payments balance into issuing.” One Twitter user speculated that the expansion might mean that Stripe “is going towards becoming a bank.” While we don’t know about that, we can say that Stripe’s efforts to become a one-stop-shop for its customers appear to be advancing.

Stripe, which is one of the world’s highest-valued private companies, has had some struggles as the payments space in which it operates only continues to get more competitive and the IPO market has dried up. In the past year alone, companies such as Plaid and Finix have released competing products, for example. And Stripe, which has yet to go public via a long-awaited IPO, earlier this year raised $6.5 billion at a $50 billion valuation after being valued at $95 billion in March of 2021. Stripe’s latest raise took place months after the company laid off about 1,120 workers, or 14% of its workforce, in November of 2022 after saying it had “overhired for the world we’re in.”

On that note, CB Insights pointed out in an email this past week that despite laying off 14% of its staff last year, Stripe still has nearly 2x the employees of Adyen while its valuation ($50 billion as of March 2023) is essentially equivalent to Adyen’s market cap. — Mary Ann

Close up macro color image depicting an abstract view of a collection of debit and credit cards and numeric digits.
Image Credits: Getty Images

Spend management update

Another week, another spend management company providing milestones.

This past week, two players in the space provided us with some business updates worth noting.

For one, Brex shared that two of its products — Empower, Brex’s spend management platform, and Brex business accounts — “have each achieved $100 million in ARR.”

When TC+ editor and my Equity podcast co-host Alex Wilhelm and I pressed Brex on what this meant exactly, a spokesperson told us the following via email:

  1. ARR in this case means annual recurring revenue.
  2. To clarify, it’s revenue that is contracted on Empower, which includes software and interchange from committed spend.
  3. The revenue in regards to Brex business accounts is from its deposits where the company is “paid by banks and asset managers for providing funding / assets under management. That is highly recurring as customers rarely move their funds.”

The company added that since launching Empower last year, Brex has signed on companies such as Coinbase, Indeed, SeatGeek, Lemonade and DoorDash, among others. It also said that its business accounts, which it describes as cash management accounts with a suite of money movement tools across ACH, wires and checks, have seen “rapid growth due to the ease of use and up to $6M in FDIC insurance coverage.”

You may recall that Brex also recently announced it was going global.

It’s not the only one.

Mesh Payments this past week also announced an expansion to support global multinational businesses operating in Europe, the United Kingdom and Asia in local currencies. The company believes that by doing so, it can work to solve “a major pain point companies encounter when managing spend for remote workforces and across multiple entities.”

I hopped on a call with Mesh co-founder and CEO Oded Zehavi, who shared that the expansion comes during a period in which the fintech company saw its payments volume (and revenue as a result) climb by 3x compared to the first half of 2022. He was candid about the fact that while that volume came both from existing and new customers, the company could definitely see a decline in spending from existing clients — but was making up for that by continuing to sign on new ones, including an unnamed Fortune 100 company.

Mesh aims to serve mid-market and enterprise companies, and Zehavi said the expansion into Europe, the U.K. and Asia is just the beginning as the company continues to explore other territories. Acknowledging that it is challenging to serve global customers, he said that in some cases Mesh partners with local banks and with other fintechs that serve multiple territories.

He was also adamant about the fact that disruption of this space still has a long way to go.

“We just came from a Gartner event and I will not exaggerate and say that more than 90% of the companies that attended this event are using Concur, and don’t use any one of the new players in this space,” Zehavi said. “So it means that the space is still far from being disrupted.” – Mary Ann

globe and dollars
Image Credits: PonyWang (opens in a new window) / Getty Images

City Spotlight: Atlanta

On June 7, TechCrunch is going to (virtually) be in Atlanta. We have a slate of amazing programming planned, including the mayor himself, Andre Dickens. If you are an early-stage Atlanta-based founder, apply to pitch to our panel of guest investors/judges for our live pitching competition. The winner gets a free booth at TechCrunch Disrupt this year to exhibit their company in our startup alley. Register here to tune in to the event.

Image Credits: Bryce Durbin (opens in a new window)

Weekly News

TC+ editor Alex Wilhelm did a couple of fintech-related deep dives this week, including his unique take on Klarna’s first-quarter earnings that led him to conclude that while “a few good quarters do not make for a comeback…there’s lots to like about the company best known for its buy now, pay later services.” He also dug into U.K.-based neobank Monzo’s fiscal 2023 results and “what its recent profitability tells us about its performance this past year (spoiler alert: good things).” Alex also took that opportunity to make some other observations on other neobanks worth $1 billion or more. As he put it, “We are compiling an IPO list in our heads, after all.”

This week, Mary Ann caught up with personal finance guru Suze Orman, who made her debut into the startup world about a year ago with SecureSave, a company that enables employers to offer employees sponsored emergency savings accounts. Mary Ann and Suze discussed a number of hard-hitting topics, including why SecureSave isn’t like its competitors (it doesn’t try to go after all your money) and how Americans aren’t saving enough (people like to spend — spoiler!). Oh, and we found out her weapon for success. There was more fintech talk on Friday’s episode of the Equity podcast as well. Check it out here.

As Ivan Mehta reports, Amazon may have gotten out of the food delivery business in India but recognizes that dining is big business. The company is now testing dine-in payments at select restaurants. Read more.

Affirm has a partnership with FIS’ Worldpay that enables Worldpay merchants to offer Affirm’s Adaptive Checkout product. Eligible consumers can, in a few clicks, sign up for biweekly and monthly payment options. Check out TechCrunch’s coverage of Affirm, including what happened with Affirm’s earnings earlier this year and the buy now, pay later boom.

Speaking of FIS, rumor has it that the company is acquiring BaaS platform Bond, according to fellow fintech enthusiast Jason Mikula.

Other headlines

JPMorgan debuts payments partner marketplace

How a $13 billion fintech that angered Jamie Dimon won over banks

Kasisto launches KAI-GPT, the first banking industry-specific large language model

Adyen launches payout services to provide faster global payments

Fundings and M&A

Seen on TechCrunch

Revolut alums raise millions for Vault, a startup offering banking services to Canadian SMBs

Olé Life wants to make buying life insurance for Latin Americans easier

Vartana lands a $20M investment to scale its sales closing platform

NomuPay, formed from pieces of failed fintech Wirecard, says it’s raised $53.6M for cross-border payments

Hostaway unlocks $175M to expand its vacation rental management platform

Qflow raises $9.1M to track construction receipts, making it easier to de-carbonize

Taxfix, the $1B German accounting startup, slashes 120 jobs amid funding crunch

And elsewhere

Mexican fintech unicorn Stori secures $50M in debt capital

Fintech startup from JPMorgan alum raises $23.5M

Brazilian health insurance company Sami secures $18M

ICYMI fintech funding round-up: Ballerine, Trébol & more

RealBlocks raises additional $10M in extension of Series A financing

SVB alum raises $7M for new cash management startup

Image Credits: Bryce Durbin

More TechCrunch

Welcome back to TechCrunch’s Week in Review. This week had two major events from OpenAI and Google. OpenAI’s spring update event saw the reveal of its new model, GPT-4o, which…

OpenAI and Google lay out their competing AI visions

Expedia says Rathi Murthy and Sreenivas Rachamadugu, respectively its CTO and senior vice president of core services product & engineering, are no longer employed at the travel booking company. In…

Expedia says two execs dismissed after ‘violation of company policy’

When Jeffrey Wang posted to X asking if anyone wanted to go in on an order of fancy-but-affordable office nap pods, he didn’t expect the post to go viral.

With AI startups booming, nap pods and Silicon Valley hustle culture are back

OpenAI’s Superalignment team, responsible for developing ways to govern and steer “superintelligent” AI systems, was promised 20% of the company’s compute resources, according to a person from that team. But…

OpenAI created a team to control ‘superintelligent’ AI — then let it wither, source says

A new crop of early-stage startups — along with some recent VC investments — illustrates a niche emerging in the autonomous vehicle technology sector. Unlike the companies bringing robotaxis to…

VCs and the military are fueling self-driving startups that don’t need roads

When the founders of Sagetap, Sahil Khanna and Kevin Hughes, started working at early-stage enterprise software startups, they were surprised to find that the companies they worked at were trying…

Deal Dive: Sagetap looks to bring enterprise software sales into the 21st century

Keeping up with an industry as fast-moving as AI is a tall order. So until an AI can do it for you, here’s a handy roundup of recent stories in the world…

This Week in AI: OpenAI moves away from safety

After Apple loosened its App Store guidelines to permit game emulators, the retro game emulator Delta — an app 10 years in the making — hit the top of the…

Adobe comes after indie game emulator Delta for copying its logo

Meta is once again taking on its competitors by developing a feature that borrows concepts from others — in this case, BeReal and Snapchat. The company is developing a feature…

Meta’s latest experiment borrows from BeReal’s and Snapchat’s core ideas

Welcome to Startups Weekly! We’ve been drowning in AI news this week, with Google’s I/O setting the pace. And Elon Musk rages against the machine.

Startups Weekly: It’s the dawning of the age of AI — plus,  Musk is raging against the machine

IndieBio’s Bay Area incubator is about to debut its 15th cohort of biotech startups. We took special note of a few, which were making some major, bordering on ludicrous, claims…

IndieBio’s SF incubator lineup is making some wild biotech promises

YouTube TV has announced that its multiview feature for watching four streams at once is now available on Android phones and tablets. The Android launch comes two months after YouTube…

YouTube TV’s ‘multiview’ feature is now available on Android phones and tablets

Featured Article

Two Santa Cruz students uncover security bug that could let millions do their laundry for free

CSC ServiceWorks provides laundry machines to thousands of residential homes and universities, but the company ignored requests to fix a security bug.

2 days ago
Two Santa Cruz students uncover security bug that could let millions do their laundry for free

TechCrunch Disrupt 2024 is just around the corner, and the buzz is palpable. But what if we told you there’s a chance for you to not just attend, but also…

Harness the TechCrunch Effect: Host a Side Event at Disrupt 2024

Decks are all about telling a compelling story and Goodcarbon does a good job on that front. But there’s important information missing too.

Pitch Deck Teardown: Goodcarbon’s $5.5M seed deck

Slack is making it difficult for its customers if they want the company to stop using its data for model training.

Slack under attack over sneaky AI training policy

A Texas-based company that provides health insurance and benefit plans disclosed a data breach affecting almost 2.5 million people, some of whom had their Social Security number stolen. WebTPA said…

Healthcare company WebTPA discloses breach affecting 2.5 million people

Featured Article

Microsoft dodges UK antitrust scrutiny over its Mistral AI stake

Microsoft won’t be facing antitrust scrutiny in the U.K. over its recent investment into French AI startup Mistral AI.

2 days ago
Microsoft dodges UK antitrust scrutiny over its Mistral AI stake

Ember has partnered with HSBC in the U.K. so that the bank’s business customers can access Ember’s services from their online accounts.

Embedded finance is still trendy as accounting automation startup Ember partners with HSBC UK

Kudos uses AI to figure out consumer spending habits so it can then provide more personalized financial advice, like maximizing rewards and utilizing credit effectively.

Kudos lands $10M for an AI smart wallet that picks the best credit card for purchases

The EU’s warning comes after Microsoft failed to respond to a legally binding request for information that focused on its generative AI tools.

EU warns Microsoft it could be fined billions over missing GenAI risk info

The prospects for troubled banking-as-a-service startup Synapse have gone from bad to worse this week after a United States Trustee filed an emergency motion on Wednesday.  The trustee is asking…

A US Trustee wants troubled fintech Synapse to be liquidated via Chapter 7 bankruptcy, cites ‘gross mismanagement’

U.K.-based Seraphim Space is spinning up its 13th accelerator program, with nine participating companies working on a range of tech from propulsion to in-space manufacturing and space situational awareness. The…

Seraphim’s latest space accelerator welcomes nine companies

OpenAI has reached a deal with Reddit to use the social news site’s data for training AI models. In a blog post on OpenAI’s press relations site, the company said…

OpenAI inks deal to train AI on Reddit data

X users will now be able to discover posts from new Communities that are trending directly from an Explore tab within the section.

X pushes more users to Communities

For Mark Zuckerberg’s 40th birthday, his wife got him a photoshoot. Zuckerberg gives the camera a sly smile as he sits amid a carefully crafted re-creation of his childhood bedroom.…

Mark Zuckerberg’s makeover: Midlife crisis or carefully crafted rebrand?

Strava announced a slew of features, including AI to weed out leaderboard cheats, a new ‘family’ subscription plan, dark mode and more.

Strava taps AI to weed out leaderboard cheats, unveils ‘family’ plan, dark mode and more

We all fall down sometimes. Astronauts are no exception. You need to be in peak physical condition for space travel, but bulky space suits and lower gravity levels can be…

Astronauts fall over. Robotic limbs can help them back up.

Microsoft will launch its custom Cobalt 100 chips to customers as a public preview at its Build conference next week, TechCrunch has learned. In an analyst briefing ahead of Build,…

Microsoft’s custom Cobalt chips will come to Azure next week

What a wild week for transportation news! It was a smorgasbord of news that seemed to touch every sector and theme in transportation.

Tesla keeps cutting jobs and the feds probe Waymo