Fintech firms have thrown a curve ball into the world of financial services by providing businesses and consumers with more flexible, cheaper, and user-friendly solutions, leading to a shift away from traditional incumbents and toward younger providers. In the most recent development, a startup named Highnote is launching with the goal of making ripples in the card-issuing industry by making it simple for any business of any size to give virtual payment cards to its clients. The startup, which was founded by PayPal alumni, is coming out of stealth mode today and announcing $54 million in capital to help it get started.
The total comprises both a Seed and a Series A round, with Oak HC/FT leading the Series A and Costanoa Ventures co-leading the Seed. XYZ, SVB Capital, and WestCap were also there, as were some noteworthy personalities such as Bill Ready (former COO of PayPal and current president of Google’s commerce and payments) and Renaud Laplanche (the CEO of Upgrade). Own-branded payment cards from merchants and other businesses are far from new: they’ve been around for decades, along with their loyalty programs. Other very successful firms, such as Marqeta, have been founded on the concept of democratizing that opportunity.
The difference with Highnote is that the company believes that many current solutions take too long to provision and are ultimately uncreative as products: there is a new opening in the market to virtualize the process, a la Apple Card, to make it something that any company of any size (not just an Apple) could introduce, and to bring in significantly more flexibility into what can be offered.
“Today, there is an incredible opportunity to design a platform built for purpose, to fill the need for embedded finance, and to allow businesses to move more quickly,” said John Macllwaine, the former GM of PayPal subsidiary Braintree, who co-founded Highnote with Kin Kee, the former director of architecture at Braintree. “Marqeta is doing an excellent job of highlighting the prospects, but the platforms were established ten years ago and were intended for a certain use case. With a little shrug, he said, “They are where they are.”
The current craze for embedded finance, which involves a variety of financial services are complicated to design but simple to integrate from third parties via APIs. Traditionally, card services have been based on a small number of concepts. If you’re a retailer, the card’s purpose is to encourage customers to shop with you (rather than with someone else); if you’re not a retailer (say, an airline), the card’s purpose is to link them to loyalty points that can be redeemed with the brand or with businesses that participate in the brand’s loyalty program.