Since we started Brex, my co-founder Henrique and I had much bigger plans than only corporate credit cards. Business bank accounts are a pain for virtually every company for a long time, and for the last 18 months we embarked on a journey to build a banking experience that, coupled with the Brex credit card, is 10x better than anything out there.
Alan Kay used to say that if you’re serious about software, you should make your own hardware. In fintech, I believe the equivalent analogy is: if you’re serious about financial services, you should build your own infrastructure. At Brex, we have a strong belief that great financial products innovate at the core, and not only at the UI layer. So instead of relying on existing banking systems to build Brex Cash, we took the approach of building our core systems from scratch, building directly on top of the payment rails (NACHA and FedWire). This level of autonomy with the technology stack enables us to do amazing things like instant onboarding, making funds available instantly, charging no fees on wires/ACH (given our more efficient cost structure), and deeply integrating with the Brex card. And at the UI layer, we packed all of this into a user experience that is minimal, polished and designed to save companies time and get them back to running their business.
We also wanted to make business banking better in all aspects - not only on software. We noticed our customers raised millions of dollars and kept the money parked in their checking accounts, earning no interest. A 10x better experience meant offering the highest yield on their money and, to achieve that, Brex Cash became not only a complex technical challenge, but also a financial/regulatory one. The way most fintechs offer banking services without having to be regulated as banks is by “reselling” another bank’s products and bolting a UI on top of the bank’s checking/savings account. But because traditional banks separate checking and savings accounts, customers earn a lower yield on their money as a whole. Instead, we chose a different structure: customers put their cash into Brex Treasury LLC, a registered broker-dealer affiliate of Brex Inc., that invests the cash in low-risk securities, such as U.S. Treasuries.
The reactions of our early Brex Cash customers have been overwhelmingly positive, and we believe we’re on the path to build the best bank account replacement, not only for startups but for any business in America. Personally, I’ve been dreaming about this product since I was 16 years old building my first company in Brazil, and I’m incredibly proud of the Brex team for their hard work to make this dream a reality :)
I’m pleased to hear about the 1.6% return. I posted a while back asking HNers what they do with their business cash, and no one had a good recommendation. It kills me to have cash sitting in a bank account earning zilch (unlike my personal cash, which earns 2%).
I’ll take a look at this new offering and likely move a bunch of cash over if everything checks out.
Yes, you get an account and routing number with your Brex Cash account, which you can enter into on Stripe (like you would your bank account's account/routing number) to receive your Stripe payouts.
Other than using Money Market accounts instead of FDIC-insured accounts, what specifically is better about banking with Brex? And for those factors that are quantitative, how MUCH better are they?
1) 1.6% or more yield on your cash balance. (Savings accounts in the US offer 0.06-0.16% interest on average.)
2) Zero fees on ACH and wire transfers. (Average wire fee is $23.)
3) Get Brex reward points every time you do a transaction. (Haven't seen an account give reward points for each transaction but I could be wrong.)
4) One account for all your deposits. (Typically have two accounts -- checking and savings -- with checking typically earning less yield and savings accounts having a transfer limit of 6 transactions/month).
5) Easy-to-use online interface designed to give you back time to run your business. (Of course, very easy for me to say this so I'll let the customer feedback do the talking as we roll Brex Cash out).
Living in Europe, if this is really true then the US banking system sucks even more than I thought.
What you describe is basically a normal (northern) European bank from the sound of it.
The only difference is the interest rate, in my own bank I get lower rate until I hit a certain threshold, but it's the same account and there are no limitations on withdrawals etc. If you offer 1.6% from the first dollar than that is slightly better.
Predatory lending and fraud isn't really a feature of business banking. Predatory and fraudulent lending isn't restricted to business - though perhaps may be more lucrative. Banks do rather have the deserved reputation of lending an umbrella to ask for it back should it rain.
The bullets the GP lists were standard features of the high street business accounts I've had. Didn't care about reward points, but I don't seek those on personal accounts either. :)
So this is cool, and I hate my current business bank (Bank of America). I've been waiting for someone to tackle the "banks suck" problem.
But FTA:
--
"It’s not a bank, but in practice, it can replace a bank"...Brex now has many similarities to a bank...Brex Cash is backed by the Securities Investor Protection Corporation (SIPC), a nonprofit agency overseen by the U.S. Securities and Exchange Commission that insures up to $500,000 and specializes in protecting customers of brokerage firms from the loss of cash and securities.
--
Can you guys elaborate on this in non-marketing/PR speak? If it looks like a duck and walks like a duck...
Yes - I understand that legally a "bank" is a very specific and highly-regulated thing, so what this sounds like to me is that it's hard to expensive to launch a bank, but if you launch something that's basically a bank without calling it a bank (but in partnership with a bank) you can get around the regulations.
Do we want you to be getting around the regulations? Are those regulations in place to hurt or help us (the business owners)?
I'm genuinely curious here -- I am seriously excited about a real, digital-first, intelligent, non-physical business bank. But I'm immediately concerned that you're trying to "move fast and break things" and frankly I don't really want that when it comes to my business checking account.
Thoughts?
EDIT: I'd missed Pedro's post when I wrote this. To quote:
...because traditional banks separate checking and savings accounts, customers earn a lower yield on their money as a whole. Instead, we chose a different structure: customers put their cash into Brex Treasury LLC, a registered broker-dealer affiliate of Brex Inc., that invests the cash in low-risk securities, such as U.S. Treasuries.
This sounds..."clever". Do I want my corporate card to be clever? Totally! Be clever. Do your thing and put Amex into the ground.
Do I want my bank to be clever? I'm not so sure...
If anyone is interested in a bank built for startups, also worth a mention is Mercury.co. Been using them since their alpha, and I'll never use SVB or Wells Fargo or any of the traditional banks again. They have obsessively good support, do everything you need them to do without having to go into a branch, are backwards compatible for everything you need from a bank account, you basically just set it and forget it, and best of all it's completely free.
Worth disclosing if you are an advisor or investor. From your Twitter feed it look like you might be?
I’m not affiliated with either, but from the looks of it Brex has no fees for wires unlike Mercury and offers a higher APY than Mercury as well. For a startup thinking of using Brex it seems like it’d make more sense to use Brex for banking needs vs something else for simplicity.
It actually makes me wonder why Mercury chose not to do YC? I honestly think an unrecognized risk here is that if you’re a startup in the business of selling a product to other startups it seems like you have more to gain (and a lot to lose) by not going though YC since you lose out on a lot of customers that’d use you just for being in YC. Now that there’s a YC company that is competing with you as a non-YC co you will lose every time to win that business.
You’re absolutely right. I’m an investor but I’d have said exactly what I did either way. Part of my being opinionated about the subject stems from having built Founderkit, which compiled terrible reviews of SVB, batch after batch. I hated seeing YC companies join just for the brand or “network” then end up completely let down by the service.
When I switched away from conventional banks (Wells Fargo in my case), I was surprised how many edge cases there are in banking, so while I love the idea of positioning a new product as a new thing, there seem to be many features and cases when I’d simply want the best bank, period, run by a team whose livelihood depends on serving me so my team, investors, and customers are never left hanging.
On the YC point, it’s none of my business why the founders didn’t do YC again. The CEO was a partner so he very likely was given the option. Since the YC deal can vary with more experienced founders or later stage companies, it simply comes down to the deal offered to your startup. And if you have great relationships with VCs and the tech community already, perhaps it’s an option you’d forgo. And while YC companies are typically excited to try a service that came out of YC, in my experience that has to do with the continued involvement of the founder(s) with with YC (on the forum, offering deals, speaking, etc.). YC founders are smart, and they’re going to choose the best tools for their business every time. But the do YC again question is for the founders to have decided, and I’m sure they considered the option deeply. Anyway, appreciate the thoughtful reply to my comment.
The challenge for Mercury is that on the surface it doesn't appear they are competitive on rates or fees, so if you are a YC founder and even if no one there is explicitly saying that you must choose a YC-backed company over one that is not when choosing the right tools for your business, there is little other information out there that would sway you to not choose the YC one, especially one in this case that has a big head start. Choosing a tool to handle your money for you takes a lot of trust, and I think a lot of startups would look at the funding, headcount/team, and brand that Brex has built and feel like it would be the far safer option, given what's publicly known. I tried googling reviews for Mercury and the only thing I could find was the Product Hunt listing, which is at 3/5 stars.
The rate comparison is actually pretty big because Mercury is only paying the 1%-1.5% on the savings account (which is frankly an uncommon account to use/need for a business), so you'd have to deal with transferring funds between a checking and savings while adhering to the legal transfer limits, whereas with Brex it's just one interest-bearing cash account paying 1.6%.
Yeah, Mercury's going to have to up their game if they want to stay relevant. I remember my disappointment when I found out I had to park 250k in a 0-yield checking account to qualify for the 1.5% yield on a savings account that can only do something like 5 transfers a month, making it a complete non-starter for running a real business. It felt like they're playing all the same old tricks on us as the incumbent banks, just with a prettier UI.
This new Brex account with 0 fees and 1.6% yield on the entire deposit with no transaction limits feels like a breath of fresh air in comparison.
Thanks for the response, all great questions. Answers below:
> Can you guys elaborate on this in non-marketing/PR speak? If it looks like a duck and walks like a duck…
Brex Cash functions like a checking account, but the structure behind it is different. Traditional banks separate checking and savings accounts, which means customers earn a lower yield on their money as a whole. To be able to offer yield in all of the funds, we use a different structure: customers put their cash into Brex Treasury LLC, a registered broker-dealer affiliate of Brex Inc., that invests the cash in U.S. Treasuries through a money market fund. This means that while we don’t offer FDIC insurance, funds are held in low-risk securities backed by the U.S. government.
> Do we want you to be getting around the regulations? Are those regulations in place to hurt or help us (the business owners)?
Brex Cash is regulated as a broker-dealer, by FINRA. This is a well known structure used by Fidelity and other large financial institutions to offer similar products offering higher yield cash accounts.
> I’m genuinely curious here — I am seriously excited about a real, digital-first, intelligent, non-physical business bank. But I’m immediately concerned that you’re trying to “move fast and break things” and frankly I don’t really want that when it comes to my business checking account.
Totally understand the concern, and this is top of mind for us as well. We’ve spent over a year building the right technical, regulatory, and financial foundation to make sure we can scale this product. This is a product that we have built to be resilient and not to move fast and break things -- when it comes to customer’s money, we simply don’t do that. We’ve been working with customers for months to make sure the product functions well. Lastly, we’re rolling it out slowly, starting with an early access program for existing customers. Our motto internally is: “The Brex Cash rollout should be boring” :).
"SIPC protects cash that is deposited with a brokerage firm for one limited purpose….the purpose of purchasing securities,” says Harbeck. “Cash deposited for other reasons would not be protected. SIPC does not protect checking and savings accounts since the money has not been deposited for a protected purpose."
It sounds to me like this would apply to you just as to Robin Hood's ill-fated product. Just saying "we're a broker and cash sweep into a money market fund is what brokers do" doesn't seem like a meaningful argument. Why are you different?
> SIPC protects against the loss of cash and securities – such as stocks and bonds – held by a customer at a financially-troubled SIPC-member brokerage firm.
It sounds like SIPC protects against loss of cash for the purpose of purchasing securities _and_ the loss of the securities themselves. So in this case it sounds like by sweeping customers' cash into a money market fund, SIPC protection would apply to the money market fund investment.
I think Robinhood's issue might have been that they didn't actually do any securities trading and tried to just rely on SIPC insurance for customers' cash that's just sitting around.
Regardless of if my interpretation is correct, I'd be _really_ surprised if they just somehow ignored the whole Robinhood fiasco and managed to make the exact same mistake on the regulatory side.
That distinction doesn't make sense to me, for one simple reason. For Robinhood to promise a return of 3%, they must have been sweeping the money into some sort of investment vehicle. But the SIPC still said they weren't covered.
I wouldn't be so sure, there was the rather plausible speculation that the 3% from Robinhood was a loss leader that wasn't meant to last long, in order to drum up hype for the launch. They could very well have been planning to earn the fed rate and fronting the difference for a period of time and then bait & switching (and/or introducing some premium plan to make up the difference).
Also, money market funds, which are generally considered cash-equivalents, don't usually yield north 3% either afaik, and I can imagine putting customers deposits in riskier higher yielding investments could have also have ran foul of banking regulations.
Brex is using neither of these strategies here as far as I can tell, and they're providing a decent amount of transparency into how the funds are going to be handled, so it should be fairly easy for regulators to review. If regulators do take issue with their strategy, I suspect we'll probably hear about it in the news soon enough. In the mean time, it's still an early access product, so it's not like we can use it immediately anyways (I'll definitely be signing up though).
From the first sentence under the "What are securities" section:
> SIPC protects stocks, bonds, Treasury securities, certificates of deposit, mutual funds, money market mutual funds and certain other investments as "securities."
Well, I'm not going to take responsibility for reconciling the inconsistency here.
People said at the time that Robin Hood was offering a money market fund by another name, using short term investments to produce that 3%. The head of the SIPC took exception to the idea that the accounts would be covered, as I quoted. I can't say where the confusion lies.
IIRC this is what Robinhood did when they tried to launch their 3% APY account. I guess where they went wrong was calling it a “checking and savings account”? I thought they also got in a bit of hot water with the SIPC because the insurance isn’t meant to insure “checking account” like products, which is essentially what this is, no?
Ok, so how is Brex different in this case? Both are effectively checking accounts, except one is for businesses and the other was for retail customers.
It sounds like they're an American version of Monzo. Monzo started out by issuing Mastercard credit cards with a cool app but have since been granted a proper banking license and are now a proper bank. Monzo also wrote their own software.
In other words, Brex may not be a bank yet but don't wrote them off as smoke and mirrors either.
I have more than that as runway. I just don't want it to be in my LLC's checking account.
Which is fine. Brex has no obligation to underwrite me. But I got an Amex and Chase business credit card in 15 minutes with cash back bonuses that match Brex's. Yes, I'm personally liable to the balance, but I'm not accumulating any anyway. I auto-pay the balance every month.
> Now, any startup, regardless of funding, can create a Brex account to store cash, explains Dubugras, and all companies using Brex Cash will be immediately issued a Brex corporate credit card
so is the article correct, or is the email correct? because to me "regardless of funding" reads "we don't care how much you have on hand" but that does not seem consistent with the gmail exchange.
So you... have invented a ZBA with an automatic sweep to a money market/bond fund? A treasury management of every single regional and above bank can do it on balances above $10k. They can probably do it for less but the transaction costs are a killer (and if you tell me that you don't have those transaction costs I'm going to look at you really funny)
I mean the ultimate job of a CFO of a company with a pile of cash is to make sure that the pile of cash at the fed close is nearly the same (preferably exactly the same) at the fed open the next day, which is why treasury management is not popular below companies of a certain size with gigantic finance departments. One can make a respectable amount of money collecting customer's cash investing it for 10-30-90 days before redistributing it to some other customers a-la AirBnB but that requires people that otherwise would be working for Goldman to be on a payroll, and their total compensation makes all non-FAANG engineers cry.
So if my startup has $800k split between four banks because I know about coverage limits, what are you doing that's better?
It’s true that banks are able to offer money market fund sweeps, however, they are incentivized to hold funds as deposits (better for their bottom line), which often results in limitations on account activity, and checking account interest rates near 0%.
We built Brex Cash to give startups their time back -- so customers can spend time building their businesses, instead of optimizing deposits and spending across multiple bank accounts. Within the Brex Cash account, our goal is to provide startups with a safe and liquid place for their funds, with benefits of yield that larger companies are offered.
I just received my Mercury.co debit card in the mail, and now I'm planning to move all my money from SVB into Mercury and close my SVB account. I already use Brex for corporate credit cards, and they've been awesome. It looks like I will need to "request early access" for Brex Cash (and I probably don't meet their requirements since I'm not VC funded), so I'm not going to wait around for that.
However, Stripe is the very core of my business. They already offers corporate credit cards, but I've never thought about switching or adding new cards, because I'm very happy with Brex. I use Brex virtual cards for everything now, and I recently received a physical card that I can use for flights and hotels.
However, if Stripe ever offers a bank account in the future, then I'll immediately close my Brex and Mercury accounts and just migrate everything into Stripe. Nothing would beat a single login where I have my bank account, debit cards, credit cards, and all of my customer payments. Also Stripe is much bigger and I have much more trust in their security and engineering teams.
Glad to hear that you’re having a good experience with the Brex card! We would love to hear your feedback on the card, and what you would like to see in Brex Cash. We are doing a limited roll-out for Brex Cash, however, as YC alumni ourselves, we are prioritizing this community and would like the opportunity to show you the product and let you see for yourself if it’s a strong fit for your business. Shoot me an email: ritik [at] brex.com
What protections are in place to protect customers financial transaction information and will that information be sold, lent, or shared with any outside parties?
> What protections are in place to protect customers financial transaction information and will that information be sold, lent, or shared with any outside parties?
[I work at Brex]
Data privacy is something we’re really passionate about. We’ve had strong stance internally since we launched the Brex card, and a few weeks ago we made that publicly available, in a very transparent way (https://brex.com/privacy). Tl;dr: we do not and will not sell any personal information.
> Tl;dr: we do not and will not sell any personal information.
Ok, you won't sell it; but will you give it to third parties (even without payment) without the consent of the subject beyond the extent required by law?
(BTW, this was the weasel-language used by Facebook. They didn't sell information to Cambridge Analytica, but they conveyed it to them anyway, where it was misused.)
> Ok, you won't sell it; but will you give it to third parties (even without payment) without the consent of the subject beyond the extent required by law?
[I work at Brex, and I’m not a lawyer :)]
Yes, you’re right in that we work with a small number of 3rd party systems which go through a rigorous screening, much of it focused on how they store and secure data. These systems are either for internal monitoring (e.g., system logging), or for running the business (e.g., KYC).
One more thing worth mentioning about 3rd parties: our contracts explicitly do not allow them to use your personal information for their own purposes or for marketing.
CBW Bank - founded by an-Ex google engineer and an ex-Wall Streeter has been doing this (created a bank from bottom
Up - including purchasing an actual bank and creating the software) geared towards startups) since 2014. Don’t know how well they are doing now.
But they wouldn’t have had the in-built In go-to-market strategy, or the prestige/visibility in the funding community, of a YC Alum.
On a related note, I just moved to the USA yesterday and am not sure where to open a bank account.
I don't need anything fancy, but looking at Nerdwallet it seems the traditional banks each have different drawbacks (one or more of: monthly fees, high fees for ACH transfers to other people, fees for incoming wires, poor customer service etc.).
I see that N26 now offers a US bank account, but it's via a partner bank I've never heard of.
Where would you open your first US bank account in 2019?
You might check out Ally/Marcus/one of the other online-only banks. They're not convenient for things like cashiers checks (for getting an apartment), so I'd get an account at a bigger national bank as well, but I keep most savings in online banks, and then transfer to a national chain account when I know I'll need convenient access. And they tend to be incredibly convenient to apply for.
In my view, Capital One is the most tech savvy major bank in the US. Their banking apps are top notch, but ATM access is tough on the west coast (All Points network is withdrawal only), but have them at locations like Capital One Cafe in SF. Schwab and Ally are also good options
Are a business or as an individual? As an individual, I always prefer a credit union which is like a not-for-profit bank. With a sufficient amount in your account, you shouldn't have to pay monthly fees. Credit unions tend to have lower fees than the big banks in general.
As a foreigner you may have a problem joining a credit union unless you have a green card. I know a few of credit unions that have these kinds of restrictions.
I say go to those that know how to deal with foreigners. (The last thing that you want is to have your account locked out because a small bank/credit union did not know what to do with you, opened an account and it was flagged down the line - maybe 6 months later).
Those would be:
1) Big national banks
2) Big international banks such as HSBC
3) If you are by Chinatown, look for banks servicing Asian population
After you open one account open a second account in a different bank. You do not want to keep all your eggs in one basket, especially as a non permanent resident. Dealing with an account lock out is especially annoying without a network in a country.
Thanks for that. I'm still waiting for my physical green card; apparently it can take up to 3 months for it to arrive. But SSN takes just a few weeks apparently.
Good tip about Chinatown. I don't live that close, but don't mind going there to open an account.
I use TechCU which is more prominent in south bay. I've had good experience with them for decades. They should be able to deal with recent immigrants given that they deal with the tech community. However they have just one office in San Francisco. But do shop around as you can get great deals (like $200-$300 bonus) for new members with direct deposit of your paycheck.
SF Fire Credit Union has free accounts, and is open to anyone living or working in SF. They have great service, refund atm fees from other banks, and don't charge foreign transaction fees.
Is offering Brex's financial infrastructure as a service similar to the Bancorp Bank's offering on the roadmap (similar to Stripe considering itself financial infra)? As Pedro mentions in his top comment, "we took the approach of building our core systems from scratch, building directly on top of the payment rails (NACHA and FedWire)"; it would seem to me that this would be a superior foundation than fintech startups could acquire through traditional white label providers (ie Bancorp).
Thanks for taking the time to reply. I'd just like to note my interest in building a narrow bank type credit union for individuals on top of Brex if enough core functionality is exposed programatically. Might end up at Bancorp in the interim though.
> - checks are still a thing in business, what is remote deposit story?
You’re absolutely right - which is why are in the process of adding the capacity to send and receive checks. Remote deposit capture is what we're looking into for the "receive checks" piece.
> - ACH fraud a big thing - do you have ACH positive pay? Ie originator ID and limit?
Yes, we are able to offer ACH positive pay. Generally, per the payment network (NACHA) guidelines, if a fraudulent transaction is identified by Brex or by a customer, we are able to return it to the originating bank. This helps to prevent customers from ACH debit fraud, and allows us to keep track of potentially malicious activity for future transactions.
This may not solve your problem, but if you have a company entity registered in the US, we can support you no matter where you live or have your headquarters domesticated!
Brex earns fees, including distribution/referral fees (also known as 12b-1 fees) from money market mutual funds that are included in the Brex Cash sweep program.
I would have said because of Bre-X, one of the largest frauds in Canadian history. In 1995, they reported finding gold in one of their mines. That turned them into a $5B company. In 1997, Bre-X collapsed when it was revealed that they had salted their geological samples with gold. https://en.wikipedia.org/wiki/Bre-X
That said, I remember the name, and they're obviously unrelated. Maybe that's mission accomplished.
I was thinking it means their company will never have a "just google it" slogan attributed to them "Hey, how should we setup our startup bank accounts?" "Just Brex-it!"
We’re incredibly excited to announce Brex Cash!
Since we started Brex, my co-founder Henrique and I had much bigger plans than only corporate credit cards. Business bank accounts are a pain for virtually every company for a long time, and for the last 18 months we embarked on a journey to build a banking experience that, coupled with the Brex credit card, is 10x better than anything out there.
Alan Kay used to say that if you’re serious about software, you should make your own hardware. In fintech, I believe the equivalent analogy is: if you’re serious about financial services, you should build your own infrastructure. At Brex, we have a strong belief that great financial products innovate at the core, and not only at the UI layer. So instead of relying on existing banking systems to build Brex Cash, we took the approach of building our core systems from scratch, building directly on top of the payment rails (NACHA and FedWire). This level of autonomy with the technology stack enables us to do amazing things like instant onboarding, making funds available instantly, charging no fees on wires/ACH (given our more efficient cost structure), and deeply integrating with the Brex card. And at the UI layer, we packed all of this into a user experience that is minimal, polished and designed to save companies time and get them back to running their business.
We also wanted to make business banking better in all aspects - not only on software. We noticed our customers raised millions of dollars and kept the money parked in their checking accounts, earning no interest. A 10x better experience meant offering the highest yield on their money and, to achieve that, Brex Cash became not only a complex technical challenge, but also a financial/regulatory one. The way most fintechs offer banking services without having to be regulated as banks is by “reselling” another bank’s products and bolting a UI on top of the bank’s checking/savings account. But because traditional banks separate checking and savings accounts, customers earn a lower yield on their money as a whole. Instead, we chose a different structure: customers put their cash into Brex Treasury LLC, a registered broker-dealer affiliate of Brex Inc., that invests the cash in low-risk securities, such as U.S. Treasuries.
The reactions of our early Brex Cash customers have been overwhelmingly positive, and we believe we’re on the path to build the best bank account replacement, not only for startups but for any business in America. Personally, I’ve been dreaming about this product since I was 16 years old building my first company in Brazil, and I’m incredibly proud of the Brex team for their hard work to make this dream a reality :)
We’d love to hear your feedback!