Brex is an American fintech company that operates in San Francisco, California. The company offers business credit cards and cash management accountings. Primarily, its clients include technology companies. However, it did not start its services as a fintech company. At that time, Brex began its operations as a VR startup. Currently, Brex provides business charge cards with financial services based on technology.
What is Brex?
Brex started its operations in 2017 under Henrique Dubugras and Pedro Francceschi. They were also responsible for launching and founding an online payments company, Pagar.me. However, they later sold it to Stone. They are both in their 20s and have been involved in many startups. In 2017, they started Brex, where they are also active. However, their stories go far beyond this.
Henrique, as a kind, was an avid gamer. He was a big fan of an online multiplayer Korean game, Ragnarok. However, he did not have the money to pay for the game’s premium features. Henrique started programming those features himself. Later, he sold them to make money from others. These were premium features that other players were willing to pay for through online transactions.
However, his programming business soon faced many issues due to copyright infringements. He had to close it to solve those issues. However, it did not stop him from making more money. Later, he used the cash from the initial venture to start an online education company. This company sought to solve the issues faced by Brazilian students who wanted to get into US colleges. However, he could not monetize and sustain that venture.
Later, Henrique met Pedro, who programmed Apple’s Siri voice assistant to accept commands in Portuguese. When they were 16 and 17, the founders met on Twitter. They came up with an idea in the form of AskMeOut, a Tinder-like app. For that, they visited a local hackathon and won the first prize. The app could match with Facebook friends. However, the founders could not monetize payments from the platform.
Due to these issues, the founders realized the issues with payments over the internet for their locality. They came up with Pagar.me, an alternative to Stripe.com. Subsequently, Pagar.me become a huge success in a couple of years. The company had processed over $1 billion transactions by that time. However, the pair sold the company in 2016 and moved to the US to focus on their studies.
While in the US, the pair came up with the idea to start a virtual reality gaming company called Beyond. This company introduced them to Y Combinator, a well-known startup accelerator. However, they soon realized that they didn’t have the understanding and expertise for that market. Nonetheless, they used their knowledge to come up with Brex. The previous experience in the fintech industry through Pagar.me helped them with this venture.
How does Brex work?
Brex is a fintech company that offers business with credit cards, cash accounts and other software tools. These tools help them manage expenses, taxes and other transactions. Initially, Brex started as a company that targeted early-stage startups that needed quick and reliable capital access. It was one of the primary challenges the company sought to resolve. However, that isn’t the only area that Brex covers.
Brex also offers credit cards to other companies of an entrepreneurial nature. These include life science, e-commerce and even late-stage and enterprise companies. However, the credit limit for each client differs based on various factors. One of those factors includes the client’s cash flows. Other credit card companies use an individual’s credit history and score as a base. However, Brex does not consider the traditional methods.
Instead, Brex uses a client’s financial backing, spending patterns and sale volume as a base. Similarly, the company does not enforce personal liability on the cardholder. These features make Brex a better alternative to various companies active in the same industry. Primarily, these features come through the Brex Card, which is a charge card. The company requires clients to pay their cards in full every month or 30 days.
The company deducts payments from the client’s bank account automatically. Therefore, Brex needs the client to provide them access to their bank account to work. While it allows the company to operate smoothly, this feature has also garnered some criticism in the past. While the Brex Card is the primary service provided by the company, it also has other tools. These tools are accessible through the company’s website or mobile apps.
What is the Brex business model?
Brex uses a fintech business model. Through this model, the company leverages technology to enhance the fintech industry. The fintech business model allows companies to offer financial services for specific clients. Many of the world’s top finance companies use this model to attract customers globally. One of the primary features of the fintech business model is that it allows companies to expand beyond borders.
Along with the fintech business model, Brex also uses various other models. Its primary revenue stream comes from its Brex Card. For this card, the company charges its users a subscription fee. Therefore, Brex also uses a subscription business model, which provides access to regular income. This income comes every month for all the users using the Brex Card feature.
Brex also charges a fee for every transaction processed through the Brex Card. This feature is similar to other fintech companies that offer similar services. Primarily, Brex partners with MasterCard to provide credit cards. Some of the fees charged by the company go to its partner. However, Brex can also keep some of those fees as income.
Brex also uses an affiliate marketing model. The company promotes its partners, which cater to the needs of startups. As mentioned above, Brex’s primary customer base includes startups. Therefore, Brex promotes those products to its customers by providing them with a cashback feature. The company uses this business model to earn money from its partners.
How does Brex make money?
Brex makes money from various sources. An explanation of each of these sources is below.
Monthly subscription
The direct source of income for Brex includes its monthly subscription. This income relates to its primary product, the Brex Card. As mentioned above, the company allows users access to a business card. In exchange for that card, the company charges a $49 subscription. However, this service also includes other tools which enhance business operations.
Interchange fees
As mentioned above, Brex partners with MasterCard to offer a credit card to its customers. In exchange for every transaction processed through this card, the company charges an interchange fee. This fee goes to the company itself and its partner. However, this isn’t a fixed fee. Instead, Brex charges a percentage on every transaction processed.
Interest on loans
Like other fintech companies, Brex uses its funds to provide loans to various clients. The company launched this feature in 2021 through its Brex Venture Debt program. In exchange for the loan provided to clients, the company charges an interest. However, the rate on this loan is not available publicly. Clients can negotiate this rate with the company.
Brex Cash
Brex Cash is a feature offered by the company that includes a cash management account. This account comes integrated with Brex Card. Largely, it operates similarly to a traditional bank account. However, it primarily links with Brex Cash. This account also provides an incentive through interest on the stored cash. However, that interest is a negligible amount.
Cashback
As mentioned above, Brex also partners with various companies to provide cash back on service. However, this cashback does not come as actual cash but rather points. Clients can redeem these points later. In exchange, Brex makes money on every transaction through its partners. Brex promotes its products, and they pay for that promotion.
Conclusion
Brex is a fintech company that operates in the US market. It provides various tools and products to companies. However, its primary focus resides on startups and companies in their early stages of finance. Brex makes money from several sources, as listed above. The company uses its fintech business model to leverage technology and earn money.
