It’s always risky to add new business lines in the startup sector. A business that tries to accomplish too much might end up failing in most of its endeavours. Or it can discover a product that isn’t just popular; it’s expanding more quickly than its initial, primary offering.
In Ramp’s situation, the latter seems accurate.
The corporate expenditure company expanded upon its corporate card business and accounting software solution when it debuted its bill pay function in October 2021.
According to co-founder and CEO Eric Glyman, Ramp moved from debut to more than $1 billion in yearly bill pay volume within six months of entering the market.
According to Glyman, “the speed of expansion has exceeded our corporate card business.” “As a firm, it took us a lot longer to grow our card business to $1 billion in yearly volume from inception. The bill pay solution is being used by enterprises considerably more quickly and at a quicker pace of adoption.
Bill pay was first something that current customers could access through self-service and learn about. However, its popularity increased as more individuals started using it, including sellers who were being paid using the function.
People are now coming in simply for the bill-paying service, according to Glyman.
According to him, the attractiveness is mostly due to the capability of integration with Ramp’s other products.
Glyman said to TechCrunch that when utilising a standalone solution like Bill.com, a customer must first link that product to accounting software before connecting their credit card to the reimbursement programme so you may keep using your accounting software on it. “In contrast, Ramp offers automated accounting, spending management, and invoice processing on a one platform.”
With a new product called Flex, Ramp is now including finance and overlay because to the early popularity of the bill-pay function.
Bill pay allows the business the ability to pay any manner they choose or the vendor demands, such by ACH, cheque, or card. Customers will have the option “with one click” to add financing to pay the money back up to 30, 60, or 90 days later for a charge while the vendor “gets paid right immediately.”
Many of the companies we help have a lot of working cash that becomes constrained [when paying invoices], according to Glyman. “Now they may finance any invoice through us and extend financing through various ways of payment.”
The charge paid by the business increases with the length of the financing terms. By charging these fees as well as interchange fees when invoices are paid, Ramp profits from the bill pay service. Ramp won’t truly profit from the bill pay option if the company returns the money within 30 days and did not use their card. However, the goal is that the programme will result in more devoted consumers.
As part of Ramp’s early access programme, Flex is now accessible to a limited number of clients. Though not in every state in the union, the corporation is “actively working toward a broad access” over the next months.
Ramp looks to be making an effort with the Flex function to differentiate itself in the increasingly congested corporate spend area. Brex also includes a bill-pay tool that enables users to send bills and invoices directly to the company for payment or to have their suppliers do so. Customers have the same payment options as Ramp: ACH, wire, and check. The bill pay service via ACH is free of transaction costs, but the company’s website makes no mention of flexible financing options for such payments. Although Airbase and Rho both include a function for paying bills, there is no indication on their websites that they provide financing through these services.
In general, Glyman believes that non-tech businesses that rely on working capital beyond corporate cards and have lengthy cash conversion cycles will find the option to pay bills flexibly to be “particularly helpful.” This includes businesses in the e-commerce, construction, and manufacturing industries.
We can now assist our consumers in determining how and when to pay their bills in addition to being able to know when their invoices are due, according to Glyman.
The bill-pay option is growing “quite significantly” in terms of total payments volume when it comes to the company’s overall revenue growth, he continued.
According to Glyman, “We’re powering well into billions of volume on the card.”
The decision considerably expands Ramp’s total addressable market (TAM), which it notes processes $120 trillion in B2B payments annually, of which just $1.5 trillion are made with cards.
In order to increase the value of the product itself and promote acceptance of its core offerings, he continued, “We’re examining alternative avenues of expansion.”
But Ramp isn’t concerned about the possibility of default in the current situation, is he?
With the new Flex function, according to Glyman, the corporation is “not taking incremental or net additional risk.” If a company’s credit limit is $100,000, for instance, they may load $20,000 or $30,000 onto the card and use that amount to stretch certain bill payments.
In general, he claimed that Ramp “invested in highly sophisticated credit risk and underwriting skills in its earlier days.”
Even with our current offering, we outperform our peer group, Glyman told TechCrunch. The same underwriting that we now utilise for that core product is leveraged by Flex.
Glyman did not disclose the particular default rate for the business but said that it has been “extremely satisfied with it.”
We do think we have industry-leading performance in terms of our credit, based on our understanding of the market, he added.
Of course, Ramp is not the only fintech firm expanding its product line in an effort to increase competition and provide clients with one-stop shopping. Brex indicated recently that it was making “a huge push” into financial software with an emphasis on enterprise clients, Airbase said it was expanding its corporate card programme, and Rho said it was expanding its service to include cost management.
Ramp stated earlier this year that it was also entering the tourism industry. At a value of $8.1 billion, it raised $200 million in stock in March.
