It’s hard to talk about anything these days without it somehow circling back to the pandemic. But, since this is a show about innovation, it’s not all bad news — innovation thrives in challenging times. Crises spur new ideas, creative spins on what we do already and demonstrate the value of thinking differently. And Fintech is no exception.
So says our guest today, Erica Dorfman. When it comes to innovation, she should know. That’s because Erica is the VP of Cash at Brex, a company who consistently nails it when it comes to thinking outside-the-box.
We had a chance to talk about:
- The benefits to Brex owning its entire tech stack
- How Cash is innovating the high-yield business cash management account
- The positive possibilities a pandemic provides
Owning your entire tech stack
Social distancing almost immediately proved the value in non-traditional ways of doing things. Companies who never would have entertained the idea before are now embracing remote teams. People who would never shop online are seeing just how convenient it is. Teachers and students are realizing internet-only classes can be just as fruitful. The world is seeing the value of tools that foster agility, while traditional approaches freeze in their tracks.
Agility is one of the main goals Brex had in mind in creating Cash. And while Erica sees the value in traditional finance — that’s where she got her start, after all — she’s can see where the excitement around fintech comes from. It’s the ability to marry traditional finance — and the complex, inflexible tools it entails — with technology that provides access to a much broader array of companies and customers. It’s all about flexibility.
And one of the ways Brex is able to keep their technology agile is by building their entire tech stack. They built the credit card core behind Card. And when they launched Cash last year, they build a banking core. That’s not easy. But it’s incredibly valuable — Brex is now in control of the entire system, with no middleman between them and how they engage with customer accounts. For customers, this makes onboarding easier. With Card, there aren’t a million integration hoops to jump through and it automatically works with Cash. And they do this without charging any usage fees.
The brokerage side of Brex
The reason they can avoid charging fees is that the account itself is an innovative spin on high-yield cash accounts. In order to offer the product to its customers for free, the account is actually a brokerage account. Through Brex and its partners, customers are investing in government money-market fund securities, which are extremely liquid and provide customers with a yield on these securities.
It’s a relatively simple product, but very few others are incorporating this type of brokerage innovation into their products — especially not for SMEs and startups. This alternative investment type is extremely valuable for these clients. As these companies grow, they’ll need more sophisticated cash management solutions to grow alongside them. And the ease with which these companies can use both Card and Cash and the flexibility it affords them is more important now than ever, with SMEs being hit perhaps the hardest in this crisis.
The value of thinking differently (even in a crisis)
Brex are not SBA lenders but, through partnerships, they are helping some of these SMEs access the loans they need to get through this period of uncertainty. They’re also hosting webinars and putting materials out to help customers think through the various financial relief mechanisms available to them. But Brex is still seeing a lot of new applications and are onboarding plenty of new customers. And Erica attributes this to the tech industry’s innovative spirit.
And if you look back to the last financial crisis — you can see her point. Betterment, Wealthfront and even Airbnb were all founded in 2008, the peak of the Great Recession. In this challenging time, we are seeing a repeat as the tech space continues to grow and new companies crop up every day. Hard times lead to great opportunities to respond in the right way, and with fintech untethered from any physical location, working seamlessly and able to react and pivot quickly — it’s poised to respond in the right way.
Until next time!