Hi all, Julie and Michael here.

Today we're taking a closer look at Ramp and the corporate spending space. You’ve likely heard of a few of the companies we’ll mention, like Ramp, Brex and Divvy. Perhaps you’ve even used one of them before too. But do you know what sets these upstarts apart from the incumbents, where most of their revenues are coming from, or what future products we might see from them as they continue to raise loads of money from venture capitalists and other investors?

We want to be fully transparent and note that Ramp paid us for our work here, but reminder that Fintech Today turns down offers from companies that we don’t believe are worthy of our readers' time.

Brex and Ramp are two of the fastest growing companies in fintech, and Divvy is getting bought for ~$2.5B by Bill.com, so it’s safe to say we were excited to dive into this topic!

What Is Ramp?

Most credit cards want you to spend more since this is how they make their money. With every swipe, they make between 1%-3% in what is called “interchange.” So when a corporate credit card says it’s designed to help businesses spend less, naturally we were a little skeptical. But this is exactly what Ramp does. And it’s attracting a lot of investors as one of the newcomers to the space.

Ramp is a corporate card and spend management platform designed to save time and money for businesses. It says it has saved its customers $10M+ since onboarding its first customer in August 2019, amassing over 1,000 customers across a range of industries, all of which are looking for greater efficiency and to place technology at the core of their business. In doing so, Ramp has raised nearly $400M to date from investors including Stripe, Goldman Sachs, D1 Capital, Coatue Management, Redpoint and Founders Fund, and is valued at $1.6B.

Who Are The Competitors

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The differentiation between the main upstarts is hard to come by, but it’s pretty staggering between them and the incumbents. They all have a similar mix of expense management, rewards, personal guarantee, and tech. That last word is the key: tech.

This is what gives these players an edge against the incumbents.

Brex, the other large player we mentioned before, started as a company card for startups who traditionally relied on founders' personal savings and personal credit cards. It has since expanded into offering business bank accounts, rewards and management software. It’s a sales driven corporate card focused company that later added a software component. Brex is more like a modern credit card company, competing with American Express. It even has its own confusing points rewards system and partners with airlines to transfer points. Divvy is a similar proposition.

As we were working on this report, Bill.com announced plans to acquire Divvy, giving us a better look at some of Divvy’s financials. Brex and Ramp are still private so it’s hard to gather much information, but Ramp did say that it was nearing a transaction run rate of $1B when it announced it’s recent funding rounds in April. Brex is older and has a higher TPV than that, but it’s unclear what that number is. If you know, we’d love for you to share ;)

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In terms of incumbents, you can’t get bigger than American Express. It’s the $123B behemoth in the sector, and the largest issuer of commercial cards in the world. However, while employees like flashing a corporate Amex card, the company hasn’t done much to cater to the unique situation of startups or provided the depth of integrations into finance teams that Ramp does. Amex has been forced to respond to Ramp and its fintech upstart peers by launching The American Express Corporate Program for Startups.

Other competitors are software products that don’t touch transactions and are less integrated in the end-to-end process than Ramp, which is a product driven company.

As you move to large and global companies, the banks currently still control market share since they do a lot of custom reporting and operate the program globally. But if a fintech can disrupt treasury for these large corporates and help them to shift their spend management from banks as a package deal, then that could certainly change.

What Is The Problem They Are Solving?

There is going to be over $1T spent on corporate cards each year by 2024, according to Accenture. The geographical dispersion of workforces and the lack of regular physical contact at a central office will only compound the previous issues related to spend management that keeps CFOs and finance teams up at night. Though, at least they don’t have to worry about business travel as much (for now).

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The main problems are that traditional expense management software is old and difficult for both employees and finance teams to make sense of. I am sure many readers have had experience trying to submit expense reports in software that looks like the above with confusing categories, workflows and unintuitive jargon. These complicated systems and software not only provide a bad user experience, but also means there is a real lack of oversight on what is being spent by who and on what. This leads to bloated spending as well as wasted time by finance teams trying to reconcile and chase employees down for info.

How These Startups Are Solving The Problem

Ramp, Brex and Divvy are here to make the lives of both employees and finance teams easier. Ramp, for example, provides corporate cards and accompanying intelligent spend management software which provides control, automation and visibility.

This means companies can issue cards virtually, providing a quick way for employees to be able to buy the things they need without having to wait for snail mail. For example, as COVID hit, many employers allowed their employees to buy office equipment to upgrade their home offices. Companies that use Ramp were able to quickly issue virtual cards for employees to make purchases, with approvals also integrated into Slack. Ramp also made it so companies could tie these cards to specific purchases, such as an at home office set up.

By using the virtual cards, Ramp’s software automatically collects and matches receipts for easy reconciliation, using rich merchant and category data. This gives the finance team complete visibility into spending, helping make their lives easier with reporting and forecasting. This means a lot less messing around in Excel or worse, manually copying data from emails and PDFs.

This also makes closing each fiscal quarter or fiscal year that much easier. Integrations into accounting software such as Xero, Quickbooks, Sage Intacct, Netsuite and more, enables books to be closed 5x faster according to Ramp. Using Ramp, finance teams can see in real time how forecasts and budgets are playing out, rather than having to wait until quarter end or year end, when it is too late to make changes and adjustments. Check out its customer case studies on SaaS company Clubhouse and Mode.

Ramp’s software also gives finance teams control over spending that previously hasn’t been possible. With Ramp, payments can be approved at the time of purchase, giving the company greater control and the employee greater clarity in what they are spending. That was never possible at traditional players.

Who Are The Customers

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Ramp's biggest success so far has been with early-stage startups in technology focused industries like consumer tech, e-commerce and the direct to consumer space, saving them millions of dollars.

These savings come from a variety of sources, such as:

  • Reducing wasteful spend
  • Rewards from Ramp’s partners which include Amazon AWS, Notion, Sendgrid, Google amounting to $175k per customer
  • Simple and transparent 1.5% cash back
  • Time saved from streamlining workflows e.g. cutting month-end close process by 86%
  • Replacing expensive expense management solutions

All of these factors have made Ramp the #1 spend management vendor on G2, a B2B software marketplace. Small teams get the benefit of a simple solution that allows them to delay hiring a finance team and larger enterprises get a consolidated finance team and software solution.

Ramp’s Future

Ramp is increasingly seeing success with mid-market and enterprise customers who are looking to consolidate their software stacks into one all-in-one solution, which is a key advantage of Ramp. Larger customers have various tools which increase the opaqueness of a company's financial health, with data split across payroll, expense and AP/AR solutions. Ramp combines corporate cards, expense management, reimbursements, vendor management with reporting and analytics in a single, free platform, reducing the manual work for finance teams.

The team at Ramp is working hard to bring even more integrations for finance workflows and payments to its platform, as well as more sophisticated solutions for larger enterprises to help save finance teams more time. As COVID-19 has accelerated the shift to digital, companies like Ramp are increasingly likely to benefit from broader company digitisation which could include a shift away from manual check payments to card payments and tools to increase control and visibility with a newly distributed workforce.

To do this, Ramp is hiring aggressively. Currently a team of 100, Ramp has recruited talent from both software and finance with decades of experience at household names such as Affirm, American Express, Facebook, Stripe, Square and Goldman Sachs. It's also recruited engineering talent from the best universities in the US. It is investing heavily in its engineering, sales, product and partnership teams efforts to reach more customers. If you are interested in working at a rapidly growing, industry leading fintech check out the open roles here.

While Ramp has seen success with smaller startups and provided them with a solution to manage at their current size, the team recognizes their customers, like themselves, are growing at a rapid pace and their needs will only grow over time and it is Ramp's intention to help them along the ride. Rapid scaling creates inefficiencies, wasteful spend and a lack of visibility, but not with Ramp. It's building products to help its customers as they grow into large organizations.

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