We’ve written a lot about fintechs that aim to help other fintechs and traditional banks launch products and services.
But it feels like we have written far less about fintechs that exist solely to help the incumbents better compete with fintechs.
Extend is one such company. The New York-based startup, which provides digital payment infrastructure for financial institutions so they can offer virtual cards to their users, has raised $40 million in a Series B funding round led by March Capital.
Other investors include B Capital, Point72 Ventures, Fintech Collective, Reciprocal Ventures, Wells Fargo and Pacific Western Bank. The latest financing brings Extend’s total raised since its 2017 inception to $55 million.
Extend has integrated directly with major networks and processors — including Global Payments/TSYS, Mastercard and Visa — with the intent of building technology that supports virtual cards on top of the infrastructure banks are built upon. This means that card issuers can combine Extend’s offering with their current products, with “no technical implementation required,” according to the company.
So far, Extend has more than 2,000 business customers currently using its applications, is growing 30% month-over-month and has a run rate of "close to $2 billion dollars” in processing volume, or the spend clients are making on its virtual cards, according to the company. It makes basis points on the transactions made on those cards.
Last month, Extend inked a deal with American Express which allows its millions of small and mid-sized business card members to access virtual cards through their existing physical cards “in minutes.”
“We have now exposed these digital capabilities to every existing cardholder,” said Andrew Jamison, CEO and co-founder of Extend. “This is the first time that someone has turned virtual cards into a feature on an existing piece of plastic, rather than a new product in itself."
Most competitors require a customer to switch bank partners and open a new account, and existing virtual card offerings have only been accessible at an enterprise level, said Jamison.
Extend, he claims, is the first company to deliver an issuer-agnostic solution for SMBs at scale with its “virtual card platform-as-a-service.”
The appeal to businesses as opposed to turning to startups in the space, according to Jamison, is that they don’t have to create a new account “to get access to the digital capabilities that they’ve been wanting to get in the first place.”
So in essence, we can add Extend to the growing list of companies focused on the corporate spend space, including Brex, Ramp, TripActions and others.
Jamison previously worked at SAP and then American Express for a number of years, moving from London to the U.S. in 2009 to help the credit card giant incorporate new digital payment capabilities, one of which included virtual cards.
“I got involved when it was half a million dollars in volume, and it doubled over the course of five years as we saw this shift to digital over the course of that period of time,” he recalled.
But it wasn’t easy. Virtual cards at the time were reserved for “only the biggest of all companies,” and the effort took engineers on both sides, Jamison said. Then, Marqeta started to power businesses directly with digital cards.
“I realized then this was the better way to get cards to people, and that this was clearly to be the future of card issuance over time,” he told TechCrunch. “And that was the genesis of Extend. The company was founded based on the recognition that we could take virtual cards and use them as a stepping stone to helping with the $40 billion payment industry transformation.”
Despite the fact that legacy platforms were “incredibly robust,” Jamison knew they were not built for the digital era we find ourselves in today. So he set about creating digital assets, or a broader connectivity framework, that would allow Extend to help banks scale capabilities across their whole portfolio “and eventually all the way down to the consumer.”
He emphasizes that Extend does not underwrite or process transactions.
“We represent a place where we'll be able to create 21st century technology and make the traditional banks look and feel like they were actually born in the 21st century,” Jamison said. “We help the incumbents close the gap relative to those players.”
Extend also offers a number of API solutions for banks and third-party service providers that it says can help them create new products for customers.
The 42-person company has also developed a “developer-friendly” API catalog which Jamison says is giving issuers a way to offer APIs to its customers.
So far, Extend has signed deals with seven traditional financial institutions, with the target of working with 20 by the end of next year. City National Bank and PacWest are both customers and investors.
Sumant Mandal, co-founder and managing partner of March Capital, said he was impressed with Jamison’s having spent over a decade at Amex.
“He understands that enabling modern payment solutions has become a mission critical priority for banks, especially as fintechs continue to challenge banks,” Mandal wrote via email. “Customers repeatedly highlighted the frictionless and consumer-grade experience, with onboarding taking less than five minutes.”
He believes the company is unique in that it has been able to upgrade bank payment infrastructure “without the need to rip and replace an entire system,” so that banks can offer the same level of products and features as fintechs in the virtual card issuing and corporate expense management space.