🧠 The CFO Stack: Who wins, Ramp, Brex, Mercury?

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Hey, Fintech Nerds 👋

Apple closed its Pay Later service months after launching and partnered with Affirm. Those Mastercard BNPL programs aren’t doing so well.

Plaid Layer looks like Shop Pay but for KYC. We desperately need portable KYC, but I worry about appearing to make onboarding too frictionless without focussing on preventing AML.

There's no other way to say it, the Fed order against Evolve is savage. They've been ordered to provide a written plan to "achieve OFAC compliance," define sub-ledgering policies, and produce an interim plan within 30 days to monitor international wires. Oof. The PR team equivocates that to other industry actions. It's not. That's very clear; everything is broken, so go back to 0 and start again. (Check out tweets of the week for how savage)

Maybe we should all just focus on the CFO stack instead? That's your Rant this week :)

Here's this week's Brainfood in summary

📣 Rant: The CFO Stack: The battle to be the operating system for Finance.

💸 4 Fintech Companies:

1. Light - The Netsuite for the AI decade

2. Bridge Marketplace - Bankrate for SMB loans

3. Fizz - The Student Debit Card that Builds Credit

4. Crediflow - AI Credit Analysis for SMB Lenders (UK)

👀 Things to Know:

1. Apple ends its Pay Later product

2. Plaid Layer is an incredible experience but gives me heartburn

📚 Good Read: Central Banking from the bottom up.

Weekly Rant 📣

The CFO Stack: The battle to be the operating system for Finance.

Whether it's Ramp, Brex, Mercury, or insert your favorite company name here, there are hundreds of these companies and many winners.

Expenses and CFO tools sucked because they were a sleepy backwater of finance. Entrepreneurs made it beautiful. - As Alex explains in this video 👇

Each company has a unique perspective and approach to solving the problem. Each approach offers many lessons for bankers, Fintech operators, and VCs.

I love going deeper and figuring out how companies work under the hood.

Having spoken to 5 CEOs in the category, here’s what I learned.

The market opportunity: Why did this category grow explosively?

The tech stack used by software companies felt wildly different from incumbent expense solutions. Concur, SAP, and Expensify were all considered painful or a hack of an incumbent bank account.

• Space for innovation: The user experience sucked, and incumbents were not innovating on it

• Growth customers underserved: VC backed software companies receive multi-million dollar checks but get standard "mom and pop" style banking experiences in many cases

• Revenue opportunity: Interchange (swipe fees) on corporate cards are typically higher than on consumer cards, and transactions are higher.

• Arguably lower risk: The regulatory burden generally is lower (isn't it interesting that Stripe only does B2B on issuing)

From 2018 to today, every growth company has used a B2B Fintech or spend management platform like Ramp, Brex, or Mercury as their default financial operating system.

The Speed and scale of growth in these companies is staggering.

Ramp is now valued at more than $7.5bn and has survived the Fintech winter, continuing to grow. Mercury is profitable and has over 200k customers, and Brex still helps some of the largest growth companies of the past decade expand internationally (like Robinhood, Doordash, Allbirds, and Flexport).

The solution: What is the CFO Stack?

"The CFO Stack" is a term coined by VCs to refer to a category that solves a problem typically seen in a finance team, such as accounting, making payments, analytics, or buying (procurement).

I could insert countless "market map" pictures here, but you can pick holes in every single one. Some companies specialize in just procurement, treasury management, payroll, accounting, reconciliation, or expenses.

Hundreds, if not thousands, of companies are attacking this problem area.

But the big winners are those indexed to growth companies, and they typically start with a wedge in one of two places.

1. Companies that started with spend management are expanding into everything the finance team could ever wish to do (e.g., Ramp, Brex, Airbase, Pleo, Payhawk, etc.)

2. Companies that started with the account/dashboard and are expanding into everything else a finance team could ever wish to do (e.g., Mercury, Arc, Meow, Airbase).

(Note: This does not include companies that focus more directly on SMBs or examples of nonwestern businesses—both of which are a whole other Rant.)

Key Players Ramp, Brex and Mercury Compared

From talking to the CEOs of Ramp, Brex and Mercury. There are lessons in each.

Ramp are the masters of incremental shipping. Eric described the "company equation" in the interview, where they look for leading indicators as KPIs. He gave the example that they're less focused on sales reps and this month's close rate but on how efficient they could be at booking new meetings or on follow-ups. Eric pushes decision-making as close to the product team as possible to improve shipping velocity.

Brex was a first mover, and when they arrived, there were no obvious partners for what they had to do. They had no choice but to build a lot of tech in-house, but Pedro says this has enabled them to expand into other markets as their customers look to grow there. Interestingly, their quarterly shipping cycle resembles Apple's, with Pedro the arbiter of all tradeoffs.

Mercury is sort of halfway between the two philosophically. Immad is the founder's founder; they ship in 4-week cycles and leverage partnerships. Ultimately, everything anchors in the account experience, and while product teams have a lot of autonomy, there are design sessions to ensure the UX is, above all else, flawless.

For me, this triggers a ton of thoughts.

• There's no right way to execute, just what works for that founder and the company they build

• Each has a mechanism to maintain visibility and alignment; for Eric, it's metrics; for Pedro, it's a roadmap; and for Immad, it's UX and design.

• This all feels wildly different from how banks ship products. Only Immad mentioned a committee, and that was for design.

• The fact that these companies are not banks is an advantage, helping them deliver products faster. However, you have to wonder how long it will be before they take meaningful share from incumbents rather than simply filling the hole left by SVB and FRB.

Ramp's focus on incremental improvements and efficient metrics speaks to a data-driven culture. Brex's in-house development and expansion strategy shows the advantages of vertical integration. Mercury's emphasis on user experience underscores the importance of design in financial products.

Potential Threats

Indexing towards growth companies is a fantastic strategy. If your clients grow, and some make it huge, you'll grow with them. The astonishing growth of this category speaks volumes, but eventually, that natural growth will run out.

1. Younger upstarts may more effectively solve problems for their younger growth companies. Just as we've seen Gen 2 and Gen 3 payment processing move in generations, perhaps we could see the same in B2B.

2. Eventually these companies have to learn how to serve enterprise demands, which get demanding. The experience of Stripe having to figure out enterprise is interesting to watch here as a metaphor. Brex is already headed this way and aiming to focus on bigger, globally focused companies.

3. Incumbents are starting to figure out partners. Whether it's Navan and Citi or Gusto and JPMC, the ability to add SaaS to a big bank that can do more is a nontrivial threat.

4. Underlying all of this is the BaaS elephant in the room. If regulators reshape the requirements of nonbank Fintech companies, that could be a game changer. This risk can be mitigated. Brex owns more infrastructure and now partners with Column, Ramp is with Stripe, which is arguably less risky, and it appears Mercury is making it through the current turmoil with zero impact on business or growth.

These threats (or risks) won't slow the companies down; I suspect they'll take them in their stride. There's no existential competitive threat, and the market is big enough to produce many winners.

The frontier is the ERP

As companies add payables, procurement, receivables, automation, and analytics, they start to look like the corporate operating system, the Enterprise Resource Planning (ERP) suite.

ERP is like Quickbooks for grown-ups. Every company reaches that point when it migrates onto NetSuite (or competitors like Microsoft Dynamics or SAP). These ginormous platforms can manage everything from trade finance to 100+ corporate entities, operating globally in countless currencies with 20+ banks.

The B2B Fintech companies keep edging towards those use cases because they're the natural adjacencies to the account.

But what if the ERP was the anchor, not the account?

The ERP as an anchor

The first of this week's 4 Fintech companies, Light, does exactly that. A modern ERP could be a game changer for companies that might have outgrown their domestic account provider and need to go multi-bank or operate internationally.

B2B Fintech is here to stay

Whether it's in the US, Europe, LATAM, APAC, or MENA, there's a Brex for, Ramp for, Mercury for... everyone.

This is a product who's time has come.

But a product that's also never done.

I had an unbelievable time recording those interviews.

That wraps season 1 of the Fintech Brainfood podcast.

Huge thank you to all of the CEOs and founders involved.

Who knows when or if I'll ever do a season 2, but it was a ton of fun.

You can find it by searching for Fintech Brainfood on your favorite podcast client.

ST.

4 Fintech Companies 💸

1. Light - The Netsuite for the AI decade

Light is a single platform for accounts, payables, receivables, and financial reporting. It helps multinational companies manage expenses and procurement. Light also has an AI trained in US, UK, and European accounting practices that help to capture line items from invoices (regardless of language). The assistant can also quickly create sales invoices or answer questions (like how many invoices are due for payment this month).

🧠 Light is aiming to create a new category of software to kill the ERP. Once a company got too big to live in Quickbooks, eventually, Netsuite was the least worst option. Today, every modern account, B2B Fintech, and spend management platform is adding these features. Light is aiming directly at them. The ERP is the operating system, not the account. (Contrast this with someone like Airbase who integrates with existing ERPs). The goal here is clearly to win that class of companies outgrowing expenses but needing an enterprise-grade solution as they expand internationally. Europe is pretty good at enterprise software (SAP, BASF), and it's nice to see some EU/acc happening in Fintech.

2. Bridge Marketplace - Bankrate for SMB loans

Bridge helps mid-sized and small businesses find a loan from a regional bank. The business submits an RFP, compares funding options, and then picks the bank best for its business. It serves US-based businesses with over $100k in annual revenue and works with 75 different lending banks.

🧠 There's a lot to like here. There isn't enough innovation in "real economy" lending. The classic, local SMB business is still underserved by software. This was a spin-out from Citi (and an 11:FS project back in the day). Citi isn't always seen as the innovator, but they have pockets like this where you go, oh, wait, Citi did that? 1,000s of concepts like this die on the cutting room floor in bank innovation teams, and very few make it to scale and production. Kudos to the team.

3. Fizz - The Student Debit Card that Builds Credit

Fizz is a debit card with no fees and no credit check that aims to build credit over time by demonstrating bill payments (including "daily autopay.") Users sign up by linking an existing bank account and get rewarded when spending with partner merchants. They offer on-campus exclusives and surprise drops (like 5x points at Taco Bell in the next hour). They also offer a line of credit deposited into the account, which is paid off with daily autopay (to build credit).

🧠 My gut reaction was "YES, to ending the credit card companies' monopoly on college campuses." I like that it's debit that gets you a credit score but also has rewards. The rewards with local merchants are smart, and the student demographic is highly sought after. The card was issued by Patriot Bank, and "any lending products offered are via Lead Bank." I'm so curious about their partner stack for obvious reasons, especially with Lead Bank in the mix. I hope their compliance game is on point and they're 1000% Mikula rule compliant because this is such a clever package. (Pro tip: From a quick scan, their FDIC disclosures could be tightened up).

4. Crediflow - AI Credit Analysis for SMB Lenders (UK)

Crediflow creates credit memos from unstructured data like PDFs and Excel sheets. They've fine-tuned an LLM to understand each company's credit policy and produce credit memos per that policy. It combines unstructured data with KYB, credit bureau, and incorporation to automate the process from origination to decision. Users can also build custom onboarding flows with a no-code workflow builder and build new proprietary credit models on the platform. The service even automates customer annual reviews and portfolio monitoring.

🧠 Speed to a decision is a huge bottleneck in SMB lending. Their first customer is an SMB-focused lender with an average facility of £500k ($633k), who's now tripled their lending volume. There's a class of non-bank lenders in the UK, but it's not nearly the US market. That may be a good thing because it's way less crowded. I'd be curious to follow this and see if the credit quality tracks better or worse than the humans over time.

(Aside: What I dislike is that the entire blog is AI-generated slop marketing copy. Please, people, do not trust ChatGPT to write your stuff; it gives me the ick.)

Things to know 👀

1. Apple ends its Pay Later product

Apple has ended its in-house installment loan product, choosing instead to partner with other providers (like Affirm). The new partnerships make installment loans available via banks and lenders globally. Pay Later launched in 2023 and allowed users to apply for installments ranging from $50 to $1,000.

🧠 Partnering is the right move. Installments and Pay Later are specialist products. Apple gets to scale the volume of Apple Pay installments it could do globally. Apple is fond of a very meaty take rate on anything it does, so this is no doubt a win for them commercially.

🧠 You have to wonder if the MasterCard BNPL product unit economics were poor. I understand that the previous iteration used the BNPL product from MasterCard, which has failed to gain meaningful traction. If other BNPL providers can offer better economics, this is a no-brainer move from Apple. (h/t Jason Mikula for this point)

🧠 In Finance, everyone is your frenemy. Big banks have always partnered, competed, and been each other's customers. It's interesting watching big tech, especially one so vertically integrated as Apple, learn this lesson.

2. Plaid Layer is an incredible experience but gives me heartburn

Plaid has launched Layer, a new service that allows users of finance products to get through KYC by simply entering their phone numbers. This aims to reduce onboarding to 15 seconds and deliver 17.5% higher conversion at onboarding.

1. Users enter their mobile number, and

2. If the Plaid network has data that makes them eligible to onboard, they can "instantly sign up."

3. Plaid performs fraud checks (like looking at the user's device) and

4. Then offers users the ability to confirm what details they want to send.

🧠 As an industry, we desperately need portable KYC. KYC and onboarding are stuck in the analog era, pulling SSNs and asking for selfies. It's an expensive, leaky bucket that can be easily beaten by deep fakes and stolen data from the dark web. Pulling data from trusted sources (like another financial institution) bound to a device or telephone number is potentially more effective and a much better experience.

🧠 This is a fraud product masquerading as an onboarding product, and that's smart. The way to get the best possible fraud vs friction tradeoff is to do as much passive data detection as possible at onboarding. Looking at the user's device, email, and mobile history, with various two-factor authentications like SMS or passkeys, can add a ton of security. Plaid having that in their network and as a part of the onboarding sell is really good packaging.

🧠 This is an excellent, much-needed product that should meaningfully reduce fraud. It bothers me that it's not advertised or packaged that way, which tells you much about what sells.

🧠 Do you know how to get 100% conversion at onboarding? Let all the bad guys in. That said, there's a reason many sponsor banks are under consent orders for KYC/AML failings. You'd get a ton of new users and revenue if you let every state-sponsored actor launder money through your business. We treated onboarding as a conversion problem, not a good customer conversion problem. Can we, as an industry, measure and benchmark that too? Even anonymously?

🧠 The biggest issue in identity is we lack a ground truth. All data is from somewhere else or a user. We don't know who's behind the screen. Apple, CLEAR, and Visa have all made a play at identity and authentication that aims to fix this. The US Government is aiming to make all driver's licenses (and eventually passports) something that can be added to wallets and aligned with standards like FIDO. Inevitably, all of this will come together. But until it does, identity is a leaky bucket.

Good Reads 📚

1. Central Banking from the bottom up.

The Swiss National Bank is publicly traded, which gives us a window into its relative profit profile compared to a commercial bank. The golden era of central banks is ending. During the "ZIRP era," they paid low rates to banks (e.g., 1%) and earned income from printing money (Quantitative Easing or QE) that they'd then use to buy assets like bonds or stocks. For example, the Swiss National Bank is one of Nvidia's top 40 shareholders.

Higher rates mean banks have to pay their commercial banks much more, such as 5.4% in the US and 5.25% in the UK. As private companies, this would make them "loss-making." In reality, central banks have and do operate at massive losses for decades in many instances with little consequence. Their core role is still seen as providing stability in an economy.

🧠 On point read, as always from Marc. His breakdown of how central banks drive their profit and the various case studies peppered throughout make this a staggeringly good read. His net interest publication is well worth the subscription if you haven't already.

Tweets of the week 🕊

That's all, folks. 👋

Remember, if you're enjoying this content, please do tell all your fintech friends to check it out and hit the subscribe button :)

(1) All content and views expressed here are the authors' personal opinions and do not reflect the views of any of their employers or employees.

(2) All companies or assets mentioned by the author in which the author has a personal and/or financial interest are denoted with a *. None of the above constitutes investment advice, and you should seek independent advice before making any investment decisions.

(3) Any companies mentioned are top of mind and used for illustrative purposes only.

(4) A team of researchers has not rigorously fact-checked this. Please don't take it as gospel—strong opinions weakly held

(5) Citations may be missing, and I've done my best to cite, but I will always aim to update and correct the live version where possible. If I cited you and got the referencing wrong, please reach out