Henrique Dubugras
Photo: David Paul Morris/Bloomberg via Getty Images

A Brex-istential crisis

Protocol Fintech

Good morning, and welcome to Protocol Fintech. This Tuesday: Brex-it, crypto chaos and fraudsters on LinkedIn.

Off the chain

The crypto markets continued to roller coaster over the weekend, with bitcoin dipping below $18,000 Saturday before recovering. The volatility of cryptocurrencies may be good for some traders, but it’s a bad look for an industry that’s seeking friendly regulation. It’s also a reminder that it’s hard for an asset class to be simultaneously a store of value, an object of speculative interest and a utility for payments. Crypto’s going to have to decide what it wants to be when it grows up, and the current chaos may force that maturation.

— Owen Thomas (email | twitter)


Brex set out to conquer a new market, but then realized it had overreached. Worse, the company fumbled a notice to customers last week that it was firing many of them. Brex would no longer serve the needs of traditional small businesses. The reversal of an ambitious expansion underlined the limits of tech in the world of finance.

Rivals pounced, taking the opportunity to snap up new small-business customers as mom-and-pop shops grappled with one more blow amid the growing uncertainty of a market slump.

“We can no longer serve you.” Brex spooked many of its customers by sending an email warning that their accounts were about to be shuttered. The message was meant for traditional small businesses, but some startups — Brex’s original market — said they also got the notice.

  • In fact, Brex was abandoning smaller, slow-growing businesses because it wanted to focus on its core market of startups. “We would love to be able to serve everyone. But we made a tough choice of focusing on where we started,” co-CEO Henrique Dubugras told Protocol.
  • Brex was part of the wave of fintech startups offering businesses faster, more efficient ways to manage their finances using software and data. Around two years ago, Brex decided to expand its reach to “brick-and-mortar small businesses,” a market with “very, very big” scale, Dubugras said.
  • But Brex found itself in a bind. Its core customers, mainly tech startups, had needs around growth and global expansion, which made it tougher for the company to serve the needs of mom-and-pop shops. “Do we sacrifice experience for our core customer?” was one of the questions his team grappled with, Dubugras said.

“We made a tough choice of focusing on where we started,” Dubugras said.

  • Brex customers are “pushing us to go even faster” and build new and better tools, Dubugras said. Their requests: “‘Can you build more global stuff?’ ‘I want to control more of my spend.’ ‘Can you build more controls and more spend-management things?’”
  • These were challenges Brex was eager to take on. The company had set out to offer software that would make it a “financial operating system” for companies, as Dubugras once put it.
  • These are also customers with much appealing credit-risk profiles, Alex Johnson, author of the Fintech Takes newsletter, said. “Brex is comfortable underwriting venture-backed businesses,” he said. On the other hand, “non-startup small businesses may be a bigger concern … especially in the face of the macroeconomic headwinds we are now seeing.”

“It’s really painful,” Dubugras said of the decision to abandon traditional small and medium-sized businesses. “We did ask them to bet on us.” But with a slumping economy, it also makes sense for Brex to make smarter bets.

— Benjamin Pimentel (email | twitter)


Executives that don't align CX ambitions with accounts receivable leave money on the table

Fewer than half of executives (44%) see better communication with customers as a benefit of digitizing AR. Meanwhile, 72% state that their AR department isn't customer-oriented enough, implying that executives understand the need for customer-oriented AR departments, but aren't aware that they can close that gap as part of their AR digitization project.

Click here to read more from Versapay

On the money

On Protocol: The chaos that has wiped out tens of billions of dollars in crypto wealth has brought the issue of investor protections to the forefront. But questions of what happens to crypto held hostage by an exchange or a DeFi lender are still freshly puzzling.

Investment fraud on LinkedIn is a serious threat, the FBI says. Because of LinkedIn’s reputation as a trusted venue for business networking, scammers can carry out schemes over several months to drain investment funds from users without being detected quickly.

Meta is launching a digital fashion marketplace. Yes, now you can flex on Instagram with digital designer apparel on your avatar. The social media giant will start rolling out the feature in partnership with Balenciaga, Prada and Thom Browne.

Immutable launched a $500 million developer and venture investment fund. The Web3 gaming firm’s president and co-founder, Robbie Ferguson, said that the main goal “is to enable the next generation of Web3 gaming at scale,” and the fund will be put into projects building on its Immutable X protocol.


Dogecoin co-creator Billy Markus wants you to learn from the failings of Celsius, luna and Three Arrows Capital, calling for a collective lesson to “actually listen to people when they call out systemic risks instead of bullying people into silence because it helps short-term bags.”

The U.K.’s digital minister, Chris Philp, still intends for Britain to become a crypto center, but he wants to be cautious about it. He said he wants to move “in a way that protects the public and in particular pays attention to issues concerning, for example, money laundering.” The potential for sanctions evasion was also a concern, he said.

BlockFi CEO Zac Prince wants to assure you that his firm is on top of the crypto crash’s potential for counterparty risk. “We believe we were one of the first to take action with this counterparty,” he said. He didn’t name names, but the Financial Times’ reporting suggests he was talking about Three Arrows.

Coming up

The U.S. House Financial Services Committee has a hearing on Thursday. The full committee will convene for the hearing, titled “Monetary Policy and the State of the Economy,'' at 10 a.m. ET.

The Open Finance, APIs & Partnerships event starts on Thursday. The two-day conference will be held in Chicago at the Embassy Suites by Hilton Chicago Downtown River North, and will feature speakers from JPMorgan Chase, Bank of America, Silicon Valley Bank and others.

The European Blockchain Convention 2022 starts on Sunday. The three-day conference will be held in Barcelona, and will feature speakers from Celsius, Meta, Coinbase and other blockchain industry leaders.


Executives that don't align CX ambitions with accounts receivable leave money on the table

A resounding 96% of respondents claimed that there is work to do in digitizing their AR departments, yet 60% agreed that their AR departments haven’t been prioritized as much as other departments for digitization. At a time when the importance of securing cash flow is higher than ever, many businesses are not putting enough focus on it.

Click here to read more from Versapay

Thanks for reading — see you tomorrow!
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