Ramp and Brex
Illustration: Christopher T. Fong/Protocol

The spend management battlefield heats up

Protocol Fintech

Good morning, and welcome to Protocol Fintech. This Wednesday: a costly battle brewing in spend management, Binance and FTX bid for Voyager, and the trouble with Tornado Cash.

Off the chain

Expectations for congressional internet savvy haven’t been high since Mark Zuckerberg techsplained to Sen. Orrin Hatch that Facebook runs ads. But I’d expect a little more from the House Financial Services Committee, where PNC CEO Bill Demchak threw shade in a hearing this morning at “unregulated P2P digital payment services” allowing fraud in the money-transfer business. That’s likely a reference to Venmo and Cash App, the objects of scrutiny in a well-timed Bank Policy Institute study. Last I checked, PayPal and Block, the owners of Venmo and Cash App, respectively, had all the needed money-transmitter licenses and FinCEN registrations. Maybe banks — and their overseers in Congress — could spend more time examining their customer service failings?

— Owen Thomas (email | twitter)

Feeling spendy

There’s a new contender in one of fintech’s most heated markets.

Rippling has launched spend management and corporate card software — a market with a long list of players and spirited debate about which is best. "It is for sure a competitive market," CEO and co-founder Parker Conrad told Protocol. "At Rippling, we love going into markets that are really competitive."

Part of the company’s pitch is that it can offer a one-stop shop. The San Francisco-based startup already offers payroll, HR and IT software services. Rippling raised $250 million at a $11.25 billion valuation in May.

  • The company’s focus is on unifying a wide range of employee data across payroll and IT into a central place. (Conrad often compares this to the way Salesforce centralizes customer data.) That information can be powerful in setting rules that guide which corporate cards to issue, expenses to automatically approve and bills to avoid double-paying.
  • "There are a million different things that can impact what policies apply to spending. The way you can control spending — without gumming up the operations of your company — is by applying policies very precisely," Conrad said.
  • The finance software products are available free to companies that use Rippling's card option (through which Rippling can collect part of interchange fees on transactions) and for a subscription fee for companies that wish to use other card providers. Rippling is working with Stripe to issue the cards.
  • The expansion into financial services comes as, Conrad expects, companies will soon seek to consolidate the number of software services they use. "There have been for 15 years people focused on building narrower and narrower SaaS applications,” Conrad said. “There are some deep product advantages of having a modern system that can do a lot of this in one place."

Work travel and conferences are coming back, along with other corporate spending. Businesses are looking for tools to monitor expenses — and startups are racing to provide them.

  • "The market is moving toward highly automated solutions across all payments needs," said Erika Baumann, director of commercial banking and payments at Aite-Novarica Group.
  • Mercury, which offers banking services to startups, last week launched a corporate card called IO. Corporate card startup Ramp last month added a “buy now, pay later” service for businesses. Around the same time, Rho, which offers commercial banking and corporate cards, launched new expense management software. Some analysts have taken to calling the financial-services arms race the "great convergence."
  • "Eventually, I’m guessing that every company in this space will offer corporate cards, business banking, spend and expense management, and treasury management and venture debt," wrote Alex Johnson of Fintech Takes after Rho's expansion. "The convergence in product features feels inevitable. My question — what happens then?"
  • Johnson noted in a follow-up email to Protocol that there are differentiators in the markets that the companies are focused on: Brex and Mercury are focused on venture-backed startups, while firms like Ramp, Airbase, Rho and Rippling have a broader, mid-sized business focus. It will take time to sort out who will stand out from this market collision.

This newsletter last month spotlighted how competition in the corporate card market, and a rivalry between Brex and Ramp, was heating up in the form of mostly tongue-in-cheek tweets. It turns out fintech Twitter can even help dream up new corporate card businesses. Rishab Hegde, the product lead for Rippling’s new spending software suite, envisioned on Twitter the potential for connecting card issuing to Rippling software back in 2019, a year before the Comradery founder joined Rippling and “made this a reality,” as Conrad wrote Tuesday. (A spokesperson said the CEO had seen the tweets before pitching Hegde on leading the product.)

— Ryan Deffenbaugh (email | twitter)

A MESSAGE FROM VERSAPAY

As capital gets more expensive, accelerating cash flow is critical. But for many businesses, ignoring customer experience in AR processes puts the brakes on payments. Check out our report detailing what 1,000 C-Suite execs have to say about customers and AR.

Learn more

On the money

On Protocol: Coinbase hopes to become the AWS of crypto.

Binance and FTX are leading the bidding for Voyager assets. The crypto exchanges have made the leading bids for the assets of the bankrupt crypto lender, according to The Wall Street Journal.

Revolut said it was hit by a cyberattack that exposed the personal data of tens of thousands of people. A company spokesperson told TechCrunch that it was able to isolate the attack and has informed affected customers.

Also on Protocol: Why the Biden administration fears the hype around digital currency could hurt underserved and minority communities.

Republican lawmakers are pressuring credit card companies to abandon plans for a gun-shop code. Republican attorneys general in 24 states have warned Visa, Mastercard and American Express that a plan to add a new code to identify when purchases are made at firearms retailers could lead to misuse of customer data without improving safety.

Overheard

“Right now, Ethereum is Nordstrom,” Ava Labs president John Wu told Bloomberg Television. Nobody tell him what’s happening to foot traffic at malls, OK?

Luke Martin, host of the Stacks crypto podcast, knows who to blame for crypto winter. It’s Randi Zuckerberg and her “WAGMI” anthem. And now people in his mentions are mad at him for reintroducing them to that banger. Line up behind Dee Snider, people.

Just one question for Logan Allin, managing partner and founder of Fin Capital

Allin, who helped start the Duke University chess team as a student, now backs it through his firm.

What’s your perspective on the Tornado Cash fallout, given your investments in DeFi?

The Tornado Cash mixer, and mixer tech, generally speaking, I always thought that would be marked as operating in the gray, candidly. When you have something that’s trying to obfuscate the endpoints, that’s just fraught for using it for fraud or other means. One of our companies, AnChain.AI, specializes in KYC/AML and fraud detection. And they actually focused very specifically on mixers and smart contracts as the top two things that fraudsters are using to move crypto illicitly and operate in the gray. So it's no surprise to me that Tornado Cash was shut down, nor was it a surprise that algorithmic stablecoin providers have had problems as well. Because they weren't really stablecoins and they weren't truly asset-backed. This idea that you can have an algorithmic stablecoin in a black box backing your highly stable asset just never made sense to me.

A MESSAGE FROM VERSAPAY

As capital gets more expensive, accelerating cash flow is critical. But for many businesses, ignoring customer experience in AR processes puts the brakes on payments. Check out our report detailing what 1,000 C-Suite execs have to say about customers and AR.

Learn more

Thanks for reading — see you tomorrow!

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